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CDB: Caribbean must act now
President of the Caribbean Development Bank (CDB) Dr Warren Smith says the Caribbean region must act aggressively in order to stem the tide of economic decline that had been inflicted upon it since the onset of the global financial crisis and the fallout in global commodity prices.
Delivering the feature address at the bank’s annual news conference at its headquarters in Barbados on Friday, Smith noted that though the region registered some growth in 2016, the recovery was fragile and uneven.
“The big challenge for each and every one of us, then, is to reverse this pattern and place the BMC’s (borrowing member countries) firmly on to a path of sustained and inclusive income growth with discernible improvements in living standards,” Smith said.
Smith noted that in order for regional territories to achieve this result, greater attention must be paid to engaging in activities that allow for the generation of foreign exchange.
He said: “In order to realise this goal, all of our BMC’s must be earning sufficient foreign exchange to pay for the goods we import for consumption and for production.”
The CDB president pointed out that there were two main policy imperatives that the Caribbean needed to get right in order to unlock the vast potential of the region.
“First, our governments must offer services that promote efficiency and cost-competitiveness whilst fostering inclusive growth and protecting vulnerable groups in our society. The second imperative is that government activity must be financed by revenue systems that meet the sufficiency criterion while promoting equity and economic efficiency,” he said.
According to Smith however, regional fiscal performance was caught in a “vicious cycle”.
He said: “Because economic growth rates are so low, many governments are unable to generate the primary balances needed to correct adverse debt dynamics, so public debt remains unsustainably high.”
Smith noted that as a result of the inefficacy of fiscal policy across the Caribbean, tremendous wastage of resources in the state sector of the region occurred, hampering the future prospects of the territories.
“Government services are not being delivered cost-effectively, social safety nets are still not being adequately targeted, institutional and regulatory reforms for improved private sector competitiveness are lagging behind the rest of the world, and state-owned enterprises are not adhering to universally-accepted financial management policies,” the CDB president said.
Noting that some greenshoots were being seen across the region, Smith stated that territories that had begun the process of adjustment needed to stay the course.
He said: “Regional governments which have begun to take corrective measures and implement adjustment programmes are to be applauded for their efforts. But, there is still a lot of work to be done, and the risk of policy reversal or abandonment is very high. Now more than ever, regional governments cannot become distracted and relax in their resolve to stay what might appear to be a painful course.”
Smith announced that the CDB approved US$306 million in loans and grants to Caribbean countries last year, the highest approval total for the past five years.
He told reporters that Belize, St Lucia and Suriname were the three largest beneficiaries of loans and that in addition to the grants approved in 2016, the bank began implementing the United Kingdom Caribbean Infrastructure Partnership Fund (UK CIF).
UK CIF is a £300 million (US$375 million) grant programme for transformational infrastructure projects in eight Caribbean countries and one British overseas territory, which CDB administers. The bank said £16.4 million in grants was approved for projects and technical assistance in Antigua and Barbuda, Belize, Dominica and Grenada.
“We reached noteworthy milestones in deepening our strategic partnerships and successfully mobilising financial resources that our BMCs (borrowing member countries) can use to craft appropriate responses to their development challenges,” said Smith, noting that UK CIF was among the Bank’s partnership highlights in 2016.
Last year, the bank also signed a Credit Facility Agreement with Agence Française de Développement. It included a US$33 million loan to support sustainable infrastructure projects and a three million Euro (One Euro=US$1.29 cents) grant to fund feasibility studies for projects eligible for financing under the credit facility.
The CDB said that in 2016, it entered an arrangement with the Government of Canada for the establishment and administration of a five million Canadian dollar (One Canada dollar=US$0.76 cents) fund to build capacity in the energy sector, The Canadian Support to the Energy Sector in the Caribbean Fund.
Smith said these recent partnerships are part of the bank’s drive to raise appropriately-priced resources mainly for financing projects with a strong focus on climate adaptation, renewable energy and energy efficiency. Smith also announced that the CDB became an accredited partner institution of both the Adaptation Fund and the Green Climate Fund in 2016.
“The Adaptation Fund and the Green Climate Fund have opened new gateways to much-needed grant and or low-cost financing to address climate change vulnerabilities in all of our BMCs,” Smith told the media.
The president also confirmed that, in 2016, CDB completed negotiations for the replenishment of the Special Development Fund (SDF), the bank’s largest pool of concessionary funds.
Contributors agreed to an overall programme of US$355 million for the period 2017-2020, and lowered the SDF interest rate from a range of two to 2.5 per cent to one per cent.
The programme approved includes US$45 million for Haiti and USD40 million for the Basic Needs Trust Fund. This marked the ninth replenishment of the SDF, which helps meet the Caribbean region’s high-priority development needs.
In his statement, Smith also reaffirmed the bank’s commitment to drive sustained and inclusive income growth, complemented by improvements in living standards in its BMCs. This, he said, was critical, as economic growth across the Region remains uneven, with fragile recovery expected to continue into 2017.