“We need to adopt an MVI [Multi-Dimensional Vulnerability Index],” Prime Minister Hon. John Briceño urged during his speech at 76th Session of the United Nations’ General Assembly.
Speaking on Friday evening, Briceño joined the long list of other leaders who have been calling for the reform of the international financial architecture as it pertains to assessing small island developing states (SIDS)’s eligibility for debt relief and access to concessionary financing.
“We call on all international financial institutions and our development partners to use it!” said the prime minister, as he echoed the now international call for vulnerability to serve as a key criterion in determining access to such financing.
“The continued ineligibility of SIDS from accessing concessional finance leaves us in a vicious cycle of disaster- or crisis-recovery borrowing leading to unsustainable levels of debt,” added Briceño. “This must be disrupted. A multi-dimensional vulnerability index (MVI) is the indispensible tool for restoring rationality to accessing affordable financing. We, therefore, welcome the work of the UN and other development partners such as the Commonwealth and the CDB who are developing an MVI that does not only consider economic development but also the inherent vulnerabilities of SIDS.”
Why a Vulnerability Index?
This case is largely one that advocates for the international financial institutions (IFIs) to move beyond their reliance on income-based criteria when assessing countries’ eligibility for debt relief in favor of a system that is more in line with each country’s “structural characteristics”. At present, for example, to qualify for the zero- to –low interest loans from the World Bank Group’s International Development Association (IDA) countries need to have a GNI per capita income of less than US$ 1,185.
In the Caribbean, only Dominica, St. Vincent, Grenada, Guyana, Haiti, and Saint Lucia satisfy that standard. To make matters worse, this eligibility criterion was also extended to other facilities such as the International Monetary Fund (IMF)’s Catastrophe Containment Relief Trust (CCRT).
In 2020, Belize’s GNI per capita was recorded at approximately BZ$8,000, a figure that is almost seven times higher than the income-per-capita cutoff point. This remains the case despite the fact that Belize was recently downgraded to a Lower-Middle-Income country status as of July 2021. The country was previously classified as an upper-middle-income country by the World Bank.
The MVI, however, takes into account other non-income factors, including the countries’ susceptibility to natural disasters such as hurricanes. It also considers an economy’s level of reliance on a small number of exports (export concentration), dependence on strategic imports, and dependence on external finance.
CBD 2019 report calculated the multi-dimensional vulnerability index for CDB’s borrowing member countries.
A 2019 report produced by the Caribbean Development Bank (CDB), titled Measuring Vulnerability: A Multidimensional Vulnerability Index for the Caribbean, provides some of the more recent (updated) calculations for CDB’s borrowing member countries.
With index scores closer to 100 (or closer to one) representing higher levels of vulnerability to what economists dub “exogenous” or “external shocks”, Belize’s 2016 and 2017 MVIs were estimated to be 0.59 and 0.60, respectively, with both figures being slightly above the regional average (0.54).
The CDB study explained: “The vulnerability scoring system utilized… is: 0 to 0.33 as low vulnerability; 0.34 to 0.49 as medium-low vulnerability; 0.50 to 0.69 medium-high vulnerability; and 0.70 to 1.00 as high vulnerability.” Therefore, Belize’s scores places it in the medium-high vulnerability category.
The argument put forward, therefore, suggests that the international financial institutions and development partners should take this kind of statistic into account in addition to the conventional income-per-capita thresholds.