Posted On: Wednesday, 30 May 2012
Basseterre, St. Kitts - The recently concluded 42nd Annual Meeting of the Board of Governors of Caribbean Development Bank held in the Cayman Islands, presented an opportunity for constructive dialogue on the serious challenges and prospective opportunities facing borrowing member states of the Caribbean Development Bank (CDB) and the CDB itself; so says Dr the Hon Timothy Harris, leader of the Federation’s delegation to the meeting. Dr Harris was accompanied by Calvin Edwards, Budget Director, Ministry of Finance.
The CDB predicts that partly as a consequence of the heavy indebtedness of member countries and the absence of fiscal space, growth for 2012 will be subdued.
The CDB President, Dr Warren Smith listed a number of challenges of which the principal challenges were
(1) the real sector is underperforming and economic growth prospects are bleak
(2) macroeconomic indicators are weak
(3) worrisome nonperforming loans in regional financial space
(4) curtailment of social expenditure
(5) antisocial behaviour especially among youths and concern for citizen security
Opportunities are predicated on a reform agenda leading to the
(1) production of internationally competitive goods and services
(2) improvement in the Ease of Doing Business in borrowing states
(3) reduction in the cost of energy by switching to alternative energy and investment in energy conservation
(4) expansion of broadband internet to drive of communication down cost of communications
(5) new industries like sports and cultural industries to be pursued.
(6) Revamping product offerings in tourism
The CDB’s approvals and disbursements were below those of 2010. Approvals including grants totalled a modest US $167 million in 2011 down from US $300 million in 2010. Disbursements followed a similar pattern; declining by an estimated 48 percent to US $168 million in 2011. Moody’s Investors Service has downgraded the CDB from a triple “A” status to Aa1 down one notch.
This was due to risk management deficiencies and over exposure of CDB’s portfolio to 4 of its borrowing member countries. Moody concluded that “a financially strong CDB is very much as function of the degree of financial and economic resilience which obtains in all of its shareholder countries both borrowing and nonborrowing. In response to Moody’s report the CDB president concluded “therefore as CDB is strengthening its internal systems, so too must our member countries move rapidly to implement structural and other reforms which lead to improved macroeconomic fundamentals”.
Dr Harris said special attention was paid to an examination of the financial sector of the OECS, with particular attention on overcoming the stresses faced by banking sector.