GEISHA KOW­LESSAR ALON­ZO

Can T&T ben­e­fit fur­ther from its en­gage­ment with the World Bank?

This was ex­plored in a note pre­sent­ed by the Cen­tral Bank ti­tled, “T&T’s re­la­tion­ship with the World Bank.” The note out­lined that rel­a­tive­ly speak­ing, this coun­try has not ac­cessed a great deal of loan fi­nanc­ing from the World Bank to date.

The not­ed was pub­lished on May 14, the day be­fore Prime Min­is­ter Kam­la Per­sad-Bisses­sar said Min­is­ter of Plan­ning, Eco­nom­ic Af­fairs and De­vel­op­ment, Kennedy Swararts­ingh, was in Wash­ing­ton DC hold­ing talks with the World Bank and the In­ter-Amer­i­can De­vel­op­ment Bank.

One rea­son, the Cen­tral Bank gave for T&T not ac­cess­ing as much World Bank fi­nanc­ing as oth­er coun­tries in the re­gion was this coun­try’s ac­cess to oth­er fund­ing sources, in­clud­ing the in­ter­na­tion­al cap­i­tal mar­ket.

An­oth­er is the coun­try’s in­come lev­el since 2007, T&T clas­si­fies it as a high-in­come coun­try, mak­ing it in­el­i­gi­ble to bor­row from the World Bank at be­low-mar­ket in­ter­est rates based on that clas­si­fi­ca­tion.

Point­ing out that over US$2 bil­lion in World Bank fund­ing has been de­ployed across the East­ern Caribbean in a wide cross sec­tion of ar­eas, the Cen­tral Bank not­ed, “There seems to be space cur­rent­ly for T&T to ex­plore fur­ther the ex­ist­ing fa­cil­i­ties and their ap­pro­pri­ate­ness as low-cost fund­ing for our long-term de­vel­op­ment needs.”

On the el­i­gi­bil­i­ty side, it said the World Bank is re­vis­it­ing how it can in­crease its sup­port to coun­tries des­ig­nat­ed as high in­come, but are ex­treme­ly vul­ner­a­ble to cli­mate change and nat­ur­al dis­as­ters be­cause of their small pop­u­la­tion size, such as small is­land de­vel­op­ing states (SIDs).

Sev­er­al of these ini­tia­tives are al­ready be­ing sup­port­ed by T&T at the World Bank Board lev­el, in­clud­ing the re­cent cri­sis pre­pared­ness and re­sponse toolk­it, which in­volves a broad spec­trum of dis­as­ter risk fi­nanc­ing in­stru­ments.

At the same time, ef­forts to fur­ther stream­line the World Bank’s loan pro­cess­ing, to man­age the tim­ing and cost of tech­ni­cal as­sis­tance, and to low­er lend­ing rates can be ac­cel­er­at­ed.

The Sun­day Busi­ness Guardian reached out to econ­o­mists in­clud­ing Dr Mar­lene Attzs who de­scribed the note as “very use­ful” adding, “It is im­por­tant for the pop­u­la­tion to un­der­stand that in­sti­tu­tions such as the WB (World Bank) do not typ­i­cal­ly pro­vide fi­nanc­ing to plug bud­get deficits or man­age day-to-day fis­cal gaps. In­stead, they are de­signed to sup­port de­vel­op­ment out­comes.”

She agreed T&T has not ac­cessed a great deal of fi­nanc­ing from the World Bank to date, point­ing out that the in­sti­tu­tion can be a strate­gic part­ner in help­ing de­liv­er on ma­jor com­po­nents of the new ad­min­is­tra­tion’s cam­paign plat­form - par­tic­u­lar­ly in ar­eas such as ed­u­ca­tion re­form, dig­i­tal pay­ments and in­fra­struc­ture, so­cial pro­tec­tion, and cli­mate change adap­ta­tion.

Attzs added that giv­en T&T’s in­creas­ing debt lev­els, widen­ing fis­cal deficit, and the sub­stan­tial pol­i­cy am­bi­tions of the new gov­ern­ment, the re­la­tion­ship with the World Bank could be lever­aged much more strate­gi­cal­ly.

For ex­am­ple, she ad­vised gov­ern­ment may con­sid­er work­ing with the World Bank and its af­fil­i­ates - such as the In­ter­na­tion­al Fi­nance Cor­po­ra­tion (IFC) - to un­lock tech­ni­cal ex­per­tise and pri­vate in­vest­ment in pub­lic-pri­vate part­ner­ships.

This, Attzs said is es­pe­cial­ly rel­e­vant as the coun­try seeks to catal­yse pri­vate sec­tor-led growth giv­en con­strained gov­ern­ment fi­nances.

Econ­o­mist Vaalmik­ki Ar­joon al­so agreed that fi­nanc­ing from the World Bank has been quite lim­it­ed since 2007.

He sug­gest­ed that for longer term loans, like 15 to 30 years, it may be more ben­e­fi­cial to use the In­ter­na­tion­al Bank for Re­con­struc­tion and De­vel­op­ment (IBRD)- the lend­ing arm of World Bank Group-as rates are like­ly to be low­er than com­mer­cial rates, with bet­ter terms like grace pe­ri­ods, amor­tised pay­ments and tech­ni­cal over­sight to help en­sure project suc­cess.

Plus, he said in Oc­to­ber 2024 the World Bank an­nounced it is re­mov­ing or re­duc­ing some fees and charges to make loans more af­ford­able.

There­fore, Ar­joon rec­om­mend­ed that go­ing for­ward the state can con­sid­er us­ing IBRD fund­ing aligned with T&T’s de­vel­op­ment pri­or­i­ties such as tech­ni­cal and vo­ca­tion­al ed­u­ca­tion re­form, health­care tech­nol­o­gy up­grades, cli­mate-re­silient trans­port in­fra­struc­ture, util­i­ty-scale so­lar en­er­gy parks, dig­i­tal e-gov­ern­ment ser­vices etc.

He added be­yond fi­nanc­ing, IBRD en­gage­ment brings added val­ue through the World Bank’s tech­ni­cal su­per­vi­sion and safe­guards, help­ing to en­sure projects are de­liv­ered on time, with­in bud­get, and with last­ing de­vel­op­ment im­pact.

Sur­pris­ing­ly, Ar­joon not­ed the lo­cal pri­vate sec­tor has made lim­it­ed use of the IFC, de­spite it be­ing a source of US$ fi­nanc­ing that can re­duce de­pen­dence on lo­cal banks and the black mar­ket.

He fur­ther not­ed that IFC of­fers com­pet­i­tive­ly priced loans with longer re­pay­ment pe­ri­ods and grace pe­ri­ods tai­lored to project needs – fi­nanc­ing that is of­ten more flex­i­ble than what lo­cal banks pro­vide.

“How­ev­er, IFC sup­ports on­ly com­mer­cial­ly vi­able projects with clear growth po­ten­tial and de­vel­op­ment im­pact. Sec­tors with strong prospects in­clude large-scale re­new­able en­er­gy parks, broad­band and da­ta in­fra­struc­ture, high-growth tech star­tups, fin­tech, ex­port-ori­ent­ed agro-pro­cess­ing, and down­stream petro­chem­i­cals. Im­por­tant­ly, IFC can al­so co-fi­nance re­gion­al ex­pan­sion – for ex­am­ple, sup­port­ing a lo­cal man­u­fac­tur­er to es­tab­lish a plant in Guyana, help­ing to po­si­tion Trinidad and To­ba­go as a re­gion­al busi­ness hub while broad­en­ing for­eign rev­enue streams. A case in point is IFC’s pre­vi­ous US$35 mil­lion loan to TCL, which helped strength­en its po­si­tion as a re­gion­al in­dus­tri­al play­er,” Ar­joon stat­ed.

In ad­di­tion to loans, he said the IFC could pro­vide eq­ui­ty fi­nanc­ing by tak­ing a mi­nor­i­ty stake, typ­i­cal­ly up to 20 per cent, in projects where in­vestor con­fi­dence or ad­di­tion­al cap­i­tal is need­ed.

Mean­while, econ­o­mist Dr Vanus James said

the Cen­tral Bank’s note seems to be de­liv­er­ing both good and time­ly ad­vice to the gov­ern­ment in “sub­tle and sen­si­tive lan­guage,” stat­ing that un­der the cur­rent cir­cum­stances, it ap­pears that now is a good time for the gov­ern­ment to re­vis­it its ap­proach to bor­row­ing from the large mul­ti­lat­er­al fi­nanc­ing in­sti­tu­tions, es­pe­cial­ly the World Bank.

James not­ed the Cen­tral Bank’s as­sess­ment that “There seems to be space cur­rent­ly for Trinidad and To­ba­go to ex­plore fur­ther the ex­ist­ing (World Bank) fa­cil­i­ties and their ap­pro­pri­ate­ness as low-cost fund­ing for our long-term de­vel­op­ment needs.”

One rea­son giv­en is that “on the el­i­gi­bil­i­ty side, the World Bank is re­vis­it­ing how it can in­crease its sup­port to coun­tries which are des­ig­nat­ed as high in­come, but are ex­treme­ly vul­ner­a­ble to cli­mate change and nat­ur­al dis­as­ters be­cause of their small pop­u­la­tion size, such as small is­land de­vel­op­ing states (SIDs).”

As such, James said T&T, es­pe­cial­ly To­ba­go, would cer­tain­ly fall in­to this clas­si­fi­ca­tion of ex­treme vul­ner­a­bil­i­ty to cli­mate change and nat­ur­al dis­as­ters, adding that af­ter­all, To­ba­go sits in­side the Caribbean’s hur­ri­cane belt.

Of sig­nif­i­cant in­ter­est, James al­so not­ed that the Cen­tral Bank stat­ed the bas­ket of ser­vices pro­vid­ed by the World Bank’s Mul­ti­lat­er­al In­vest­ment Guar­an­tee Agency (MI­GA), aimed at pro­vid­ing po­lit­i­cal risk in­sur­ance and cred­it en­hance­ment guar­an­tees to in­vestors and lenders, in or­der to en­cour­age for­eign di­rect in­vest­ment (FDI) in de­vel­op­ing coun­tries, with spe­cial em­pha­sis on re­duc­ing pover­ty and im­prov­ing the qual­i­ty of life.

Sure­ly, James added the coun­try has a strong case in this re­gard.

BOX

What is the World Bank?

The World Bank, or more pre­cise­ly the World Bank Group (WBG), is the world’s largest de­vel­op­ment fi­nance en­ti­ty con­sist­ing of five in­sti­tu­tions that were es­tab­lished be­tween 1944 and 1988. In 1956, the In­ter­na­tion­al Fi­nance Cor­po­ra­tion (IFC) was es­tab­lished to pro­vide fi­nanc­ing to the pri­vate sec­tor. In 1960, the In­ter­na­tion­al De­vel­op­ment As­so­ci­a­tion (IDA) was formed to ad­dress the needs of the world’s poor­est coun­tries. In 1966, the In­ter­na­tion­al Cen­tre for Set­tle­ment of In­vest­ment

Dis­putes (IC­SID) was formed to en­gage in the me­di­a­tion of dis­putes be­tween gov­ern­ments and for­eign in­vestors. In 1988, the Mul­ti­lat­er­al In­vest­ment Guar­an­tee Agency (MI­GA) was cre­at­ed to pro­mote for­eign in­vest­ment in de­vel­op­ing coun­tries by pro­vid­ing po­lit­i­cal and eco­nom­ic risk in­sur­ance.

The ob­jec­tive of the WBG has evolved over time to meet glob­al chal­lenges.