With Lagarde on the phone, Mottley made her pitch. Barbados, she said, was going to default on the debt it owed to private banks and investors. She wanted Lagarde’s support in persuading them to renegotiate its terms. The IMF is both the assessor and the enforcer of global economic policy, the de facto gatekeeper to the world’s capital markets. Mottley knew that banks and investors would work with her only if Barbados were participating in a formal IMF program for economic reform — and it had to start immediately.
Mottley told Lagarde that Barbados was prepared to do voluntarily what most countries have to be coerced to do: cut its budget and raise taxes. But she needed something in return. With the effects of climate change bearing down on the region, the kind of austerity the IMF demanded from developing nations — slashing the size of government agencies and firing thousands of public employees while auctioning off real estate and other national assets — would no longer work. Mottley wanted Lagarde to endorse an economic program that would still allow her to raise salaries of civil servants, build schools and improve piping and wiring for water and power. “Before you carry people on a long journey,” she told Lagarde, “you have to give them a little breakfast.”
Barbados, while considered relatively wealthy by World Bank standards, hadn’t been able to borrow on the international market since 2013, and it had no capacity to pay for essential programs and projects. The concern was immediate, Mottley explained: Hurricane season was about to begin. The room fell quiet. No one was sure how Lagarde would respond. Would she trust Mottley to spend on Barbados first? Or demand — as the IMF usually did — deference to debtors? Then, as Mottley’s advisers recall, came the director’s surprising reply: She was extremely supportive of what Mottley was proposing.
The next day, Mottley declared that Barbados would stop making its payments on the nation’s debts. “Today, my friends, we pry off the hands that have been strangling us,” she said. Some of the business leaders she had gathered to stand behind her at the lectern winced. The value of Barbados’ bonds on the global markets crashed. S&P Global downgraded the island’s credit. The country teetered on the edge of financial chaos. With that, Mottley’s adventure onto the global stage of financial and climate activism began.
What Mottley sought would not be easy. She would have to untangle the relationships connecting the IMF with the financial institutions that invest in countries like Barbados — a global financial system that simultaneously helps and preys upon countries at their moments of greatest need. She would have to challenge the rules of that system and its powerful figures, who often struggle to recognize how climate change is altering the traditional dynamics of debt and development. Mottley would come to see the traps of that system as fundamentally unjust, born from generations of colonial rule. Just as outsiders once pillaged the Caribbean for wealth created by the hands of slaves, investors in those former imperial powers now squeezed former territories for their assets, for access to markets, for interest on loans. And she would have to contend with all of that waiting for the next storm, knowing she governed a dot of land isolated in one of the most vulnerable places on Earth.
And here’s some larger context on the Caribbean:
Droughts, meanwhile, are growing longer and drier, threatening drinking-water supplies and making it difficult to grow food. Barbados, a teardrop-shaped island of 290,000 people, is among the half of Caribbean islands the United Nations already describes as water-scarce, with seawater seeping into its aquifers and rainfall that might drop by as much as 40% by the end of the century. The droughts will lead to wildfires, killing more vegetation and crops. When it does rain, it is projected to rain heavily and all at once, causing precipitous landslides, which will wipe out roads, rip up electrical grids and cut off energy supplies. At the same time, rising and warming seas are eroding shorelines and killing off reefs and fisheries. According to the IMF, roughly two-thirds of the 511 disasters to hit small countries since 1950 have occurred in the Caribbean, taking more than 250,000 lives.
These islands have another dubious distinction: They carry more debt, relative to the size of their economies, than almost anywhere else on the planet, a fiscal burden that makes it virtually impossible for them to pay for the infrastructure necessary to protect them from the climate disruptions to come. Barbados, which in 2017 had the third-highest debt per capita of any country in the world, was spending 55% of its gross domestic product each year just to pay back debts, much of it to foreign banks and investors, while spending less than 5% on environmental programs and health care.This is true beyond the Caribbean too. In poor nations around the world — from the deserts of North Africa to the low-lying islands of the Pacific and the Caribbean — rising sovereign debt is becoming a hidden but decisive aspect of the climate crisis. According to the United Nations Conference on Trade and Development, external debt for what are called Small Island Developing States, or SIDS, more than doubled between 2008 and 2021. The IMF projected that three-quarters of emerging-market economies would pay a third or more of their tax revenue just on debt service in 2021. In the zero-sum game of budgets, that means less money for shoring up infrastructure that is already in shambles. A recent analysis by Eurodad, the European debt-and-finance advocacy organization, found that over the last six years, Latin American and Caribbean countries have slashed what they pay on anything non-debt-related by 22%. As Mottley explained to me, “We always have to put aside debt money first.”
The warming planet has turned this into a self-perpetuating cycle: Were it not for the disasters worsened by climate change, much of the region’s debt might not exist in the first place. Jamaica’s debt, for example, can be tied to the response to Hurricane Gilbert more than three decades ago. Grenada’s is in part because of Hurricane Ivan in 2004. Dominica’s 2017 loss, relative to its GDP, was the equivalent of a $44 trillion hit to the U.S. economy.
The whole thing, as they say, is well worth reading, etc.