Abstract
The Caribbean has one of the highest emigration rates in the world and the region is the largest recipient of remittances in relation to its GDP. At the same time, many Caribbean countries have seen a dramatic reduction in flows of official development assistance (ODA) and have been encountering difficulties in obtaining private financing using traditional financial instruments, a situation which jeopardizes their prospects for long-term growth and employment generation. Inevitably, the Caribbean will need to adopt innovative financing mechanisms to target previously untapped investors. Diaspora bonds are one such mechanism that can enable the region to borrow from its diaspora community. For diaspora investors, these bonds offer the opportunity to help their country of origin while also providing an investment opportunity. This paper investigates how best the Caribbean can tap into the wealth of its diaspora during difficult times to obtain a stable and cheap source of external finance. Section 6.2 discusses the rationale for origin countries to issue and for diaspora communities to purchase diaspora bonds. Section 6.3 highlights some lessons for the Caribbean from the experiences of India and Israel, two countries which have successfully issued over US$35 billion in diaspora bonds. Section 6.4 presents the external financing needs of Caribbean countries and puts forward some ideas on the potential for issuing diaspora bonds to help narrow these gaps. Finally, Section 6.5 concludes with a summary of findings anddirection for future research.
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Notes
- 1.
In this study, the Caribbean refers to members of the Caribbean Community (CARICOM), all of which, with the exception of Belize and Guyana, are island economies that form part of the archipelago of the Caribbean Sea. CARICOM member countries comprise the OECS Group - Antigua & Barbuda, Dominica, Grenada, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines – as well as the Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Suriname, and Trinidad & Tobago. The average numbers presented are simple arithmetic means, so as to give equal weight to each country, irrespective of the population or size of economy.
- 2.
Guyana reached the Enhanced HIPC (E-HIPC) Completion Point in December 2003 qualifying for US$329 million of debt relief in NPV terms, additional to the debt relief of US$256 million in NPV terms obtained under the original HIPC in May 1999. In 2006–7 under the Multilateral Debt Relief Initiative (MDRI), about US$611million of Guyana’s debt was written off by the IMF, the World Bank and the Inter-American Development Bank. In November 2006, Japan finalized its bilateral debt cancellation agreement and, in July 2007, there was a write-off US$15 million of outstanding debt to China. Finally, in 2008 Guyana again benefited from debt reduction when Venezuela cancelled US$12.5 million in debt.
- 3.
Norway has already pledged up to US$250 million over 2010–2015, as payments for forest preservation. A trust fund – Guyana REDD-Plus Investment Fund (GRIF) – administered by the World Bank will receive these payments and disburse funds to projects identified under the LCDS through the IDB. Annual payments will be made after Guyana’s forest preservation performance is independently assessed and verified against agreed benchmarks. These resources would be governed by the relatively strong PFM framework currently operational in Guyana.
- 4.
The World Bank and IDA partial risk guarantees of some US$3 billion were successful in catalysing US$12 billion in private financing in 28 operations in developing countries during the last decade (Gelb et al. 2006). Political risk guarantees by MIGA have helped alleviate political and other risks in agribusiness, manufacturing and tourism.
- 5.
The first-ever IDA partial risk guarantee in Sub-Saharan Africa in 1999 for the Azito power project in Cote d’Ivoire catalysed private financing of US$200 million while keeping IDA support to US$30 million, or 15 % of the project (World Bank 1999).
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Rambarran, J., Ramlakhan, P. (2014). Diaspora Bonds and Caribbean Economic Development. In: Sahoo, S., Pattanaik, B. (eds) Global Diasporas and Development. Springer, New Delhi. https://doi.org/10.1007/978-81-322-1047-4_6
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