Small states seek Commonwealth backing for cheap credit at Sri Lanka meet

Nov 17, 2013 (LBO) – Small states are seeking endorsement from Commonwealth leaders at a in their bid to regain access to cheap finance from multilateral lenders, at a summit meeting in Sri Lanka. Without the ability to depreciate the currency, rulers lose the principle ability to impoverish the population and their path is clear to move out of poverty and become rich.

Currency depreciation, in addition to destroying real wages and discouraging private enterprises from moving to areas of greater labour productivity also destroys the value of debt and savings.

While a strong currency can push the state to default and only hurt the holders of government debt, currency depreciation destroys the wealth of all private saver-lenders including those with domestic currency bank deposits.

Denzil Douglas, Prime Minister of St. Kitts and Nevis said many island states had been locked out of concessionary finance by international lenders like the World Bank and International Monetary Fund because they are classified as high income countries.

But he said small nations were exceptionally vulnerable to natural disasters and man-made shocks such as economic downturns.

Small nations are the