2011 saw drastic loan cuts at CDB

By Al Edwards in Christchurch, Barbados

Wednesday, February 01, 2012

The Caribbean Development Bank (CDB) drastically cut the approval and disbursement of loans to borrowing member countries (BMCs) in 2011 as many countries of the Caribbean continue to experience contractions of their economies.

Speaking yesterday at a press briefing held at the CDB's headquarters in St Michael, Barbados, the President of the CDB, Dr Warren Smith said that in the Caribbean, economic growth has been lacklustre and borrowing programmes have been trimmed as many governments struggle to contain widening fiscal deficits and burgeoning debt.

"Approvals in 2011, therefore totaled a modest US$165 million, including grants amounting to US$21 million. In comparison, total approvals reached almost US$300 million in 2010, including grants of US$30 million.Disbursements followed a similar pattern, declining by an estimated 48 per cent to US$167 million in 2011.

"Both approvals and disbursements showed elevated levels in 2010 as a result of significant activity taking place under the Bank's Policy-Based Loan (PBL) Programme. In contrast, no PBLs were approved in 2011 and PBL-related disbursements were relatively low when compared with the previous year," said Dr Smith.

Twelve countries were direct beneficiaries of funding approved during the year. In addition, other BMCs benefited from CDB's resources through a number of technical assistance approvals for regional initiatives.

The CDB boss pointed out that loan approvals were predominantly in support of national natural disaster management programmes being implemented by several BMCs following a series of hurricanes, torrential rains, flood and extreme weather events. The British Virgin Islands, Dominica, Grenada, Jamaica, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines were the main receipients of funding for rehabilitation and reconstruction.

The two largest loans were made to Barbados and St Kitts and Nevis The CDB is providing a US$35 million loan to the Government of Barbados for an Education Enhancement Sector Enhancement project. The Board of Directors approved a package of exceptional financial assistance for the Government of St Kitts and Nevis, including a guarantee of around US$12 million on a portion of the government's restructured debt.

Dr Smith was of the view that the global recovery may have been underway since late 2009, but with the lingering weakness in the region's main trading partners - advanced economies, the recovery in CDB borrowing member countries lagged behind, finally gaining momentum in 2011.

"Preliminary estimates indicate that 12 of the 18 BMCs registered expansions in real output during the year. Among the 12, growth was modest in Barbados, the British Virgin Islands, the Cayman Islands and St Lucia, but stronger in the Bahamas, Belize, Dominica, Grenada, Jamaica and Monstserrat, while Guyana and Haiti both achieved growth rates above 5 per cent.

"Of the five BMCs recording contractions ( Anguilla, Antigua and Barbuda, St Kitts and Nevis, St Vincent and the Grenadines and Trinidad& Tobago), the downturn in Trinidad& Tobago deepened, but the declines in the other four were moderate relative to previous years,"declared Dr Smith.

There were some encouraging signs the President of the CDB added, noting that the fledgling recovery was mainly underpinned by moderate increases in tourism or in the case of less tourism-dependent, more commodity-based BMCs - improvements in agriculture and mining as well as related manufacturing activities.

Dr Smith continued: " The general recovery in economic output and implementation of policy reforms mostly resulted in improved fiscal performances. This notwithstanding many BMCs confronted stubbornly high debt ratios that, together with still high unemployment rates and weak indicators of financial sector activity and stability, showed the lingering impact of the recession. They were also a reflection of pre-existing structural vulnerabilities, including susceptibility to natural disasters and concentration on a narrow range of goods and services such as tourism and commodity exports, as well as BMCs failure to implement critical policy reforms in the past.

In conclusion the President of the CDB maintains that international developments will continue to shape regional outturns in 2012, with prospects for the region closely mirroring the global outlook.

"The recovery in regional tourism is therefore expected to remain soft, in line with expectations for global demand, while no material pick-up in foreign direct investment is anticipated, reducing the likelihood of a boost to the balance of payments and, indirectly to construction and other real sector activity.Consequently, most BMCs are projected to grow modestly by 1-2.5 per cent in 2012, " said Dr Smith.

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2011 saw drastic loan cuts at CDB