Crisis Response
Initiatives
of the
Multilateral
Financial
Institutions
Operating in the
Caribbean
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Crisis Response Initiatives
of the
Multilateral Financial Institutions
Operating in the Caribbean
[Dollars throughout refer to United States Dollars
(USD) unless otherwise stated]
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4
Abbreviations
BNTF Basic Needs Trust Fund
BOP balance of payments
CARTAC Caribbean Regional Technical Assistance Centre
CARTFund Caribbean Aid for Trade and Regional Integration Trust
Fund
CDB Caribbean Development Bank
CFF Compensatory Financing Facility
DFIs Development Finance Institutions
DPL Development Policy Loan
ECA Export Credit Agency
ELF Emergency Liquidity Facility
ESF Exogenous Shocks Facility
FDI foreign direct investment
FY financial year
GDP gross domestic product
GTFP Global Trade Finance Program
GTLP Global Trade Liquidity Program
ICF Infrastructure Crisis Facility
IDA International Development Agency
IDA FTF International Development Agency Fast-Track Facility
IDB Inter-American Development Bank
IFC International Finance Corporation
IMF International Monetary Fund
LAC Latin America and the Caribbean
LPGS Liquidity Program for Growth Sustainability
MDBs Multilateral Development Banks
MEF Microfinance Enhancement Facility
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MIF Multilateral Investment Facility
OECS Organisation of Eastern Caribbean States 5
Abbreviations (con’t)
PBL policy-based loan
PRGF Poverty Reduction Growth Facility
SBA Stand-By Arrangements
SDRs Special Drawing Rights
SLF Short-Term Liquidity Facility
SRF Supplemental Reserve Facility
TFFP Trade Finance Facilitation Program
TSF Technical Support Facility
UK United Kingdom
US United States
WB World Bank
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The Development Finance Institutions (DFIs) Introduction
operating in the Caribbean have crafted responses
designed to assist their member countries in dealing
with the global financial and economic crisis. This
document outlines the programmes that have been
put in place by each institution. As the nature of the
programmes is determined by the effect of the crisis on
the countries, a summary of the impact of the crisis is
first provided.
The global recession is likely to be much deeper
and longer than originally anticipated. The crisis has
Impact of
evolved beyond its initial triggers in the financial sector the Crisis
to a crisis of confidence which makes it difficult to
predict its duration and intensity. Growth projections
have had to be revised downward. Signs of positive
growth are expected to be seen in 2010. Policy will
thus have to be framed in the context of a 2-year period
of low or no global growth.
Country 2008 Growth Rate (%) 2009 Growth Rate (%)
Antigua & Barbuda 2.2 3.3
The Bahamas (1.5) 3.9
Barbados 0.5 (3.5)
Belize 3.3 (3.0)
British Virgin Islands 5.2 1.7
Dominica 3.2 1.5
Grenada 2.2 (1.5)
Guyana 3.1 3.0
Jamaica (0.6) (1.0)
St. Kitts & Nevis 4.6 (5.2)
St. Lucia 2.0 (2.5)
St. Vincent & the Grenadines (0.5) 1.2
Trinidad & Tobago 3.5 1.0
Turks & Caicos Islands 3.0 2.0
Source: CDB Estimates.
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Most regional economies are likely to
experience economic contraction or slowdown as
activities deteriorate in key sectors. The GDP growth
rates anticipated in 2009 are shown on page 1. The
downside risks are very substantial:
The impact of the crisis is pervasive. However,
the intensity varies by country depending on the
relative importance of particular activities and sectors
in the overall economy of each country. The economies
based primarily on services and construction will be
particularly affected as expenditure in these sectors
is largely discretionary, compared to output from the
commodity-producing countries. The challenges posed
by this global recession are compounded by the inherent
structural weaknesses of the economies. Vulnerability
to external shocks and susceptibility to natural disasters
have left many of the countries with significant debt
overhang.
Tourist arrivals declined in most of the
economies. During the first quarter of 2009, the
Bahamas, Antigua and Barbuda, Anguilla and St.
Vincent and the Grenadines recorded double digit
declines in the number of stay-over visitors compared
to the previous year. In Jamaica stay-over arrivals
increased marginally, partly as a result of new capacity
coming on stream. But actual expenditure declined
by a similar percentage due to significant discounting.
Recent figures for Barbados show a decline of 8.6%,
with similar results for the OECS. The offshore sector
is also declining with significant implications for public
sector revenues. The agriculture sector is not as
adversely affected, at least based on preliminary data.
Construction has also been severely affected,
as foreign direct investment (FDI) has effectively
Page collapsed. Since many of the economies exhibited
2 “construction-driven growth”, financed largely by FDI,
growth rates have slowed considerably or declined as
tourism related projects stall and workers are laid off.
Going forward, some of the slack in the sector may
be picked up by the governments as they expand their
capital works programmes. However, given relatively
limited fiscal space, the pace and extent of such
measures are likely to be restricted.
Government operations have been
characterized by worsening fiscal balances, in a
situation where many of the countries were experiencing
fiscal stress because of high debt levels even before the
crisis. Declining revenues, in an environment where
governments are still required to make the necessary
investments in infrastructure and increase social
spending to deal with dislocation, have compounded
the burden on fiscal resources. Indeed, overall deficits
are projected to widen from 2.8% to 4.9% of GDP
in 2009 as many countries implement counter-cyclical
fiscal policies to boost local demand.
The Balance of Payments (BOP) is under
significant stress, even though there has been a
narrowing of the current account deficits. Many of
the countries have experienced declines in their reserve
positions as a result of falling export earnings and
remittance flows as well as reduced FDI, increasing
capital outflows (in some countries) and limited access
to trade credits.
The financial sector is witnessing lower
savings levels and higher levels of non-performing loans.
These when combined with falling asset values and
increased perceived risks, are leading to wider spreads.
In addition, the crisis has magnified the weaknesses
inherent in some financial institutions.
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Response Summary
The types of programmes that the institutions have
Initiatives developed in response to the crisis can be divided into
three broad categories:
• Mechanisms to support fiscal and debt
sustainability;
• Support for sustaining aggregate demand and
promoting long-term growth; and
• Support for deepening and widening social
safety nets.
These areas of support are manifested in the following
instruments and/or programmes:
• Stabilisation support to address balance of
payments problems (IMF);
• Policy-based lending for budgetary support
(CDB, IDB, WB);
• Liquidity support for trade facilitation (IDB,
IFC);
• Support for micro, small and medium-sized
enterprises (CDB, IDB, IFC);
• Support for infrastructure development
(CDB,IDB, IFC, WB);
• Direct poverty reduction to address the social
dislocation issues (CDB, IDB, WB, IMF).
• Technical Assistance (CARTAC, CDB, IDB,
IFC, IMF, WB).
The depth and breadth of the crisis mean that no one
institution has the resources to provide the level of
support required. Partnering among the institutions
and with governments is thus a critical aspect of the
response.
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Caribbean Development
Bank
In the current environment, CDB considers
that one of the most appropriate lending instruments
is the Policy-Based Loan (PBL). A PBL is designed to
provide budgetary support and facilitate the necessary
fiscal and institutional reforms. PBLs are structured
to address complex medium-term structural, social
and institutional issues, thus supporting sustainable
economic development. Policy-based lending is thus
complementary to investment lending as it improves the
enabling environment for achieving the twin objectives
of economic growth and poverty reduction. PBLs are
usually provided along with technical assistance grants
and loans. Approximately $100 million is allocated to
PBLs over the next 2 years.
CDB has allocated up to $260 million over
the next 2 years in Investment loans, mainly for
infrastructure investments that:
o Optimise the blending of market and
concessionary resources to reduce
effective lending rates; and
o Reduce the fiscal burden by moving
the counterpart requirements (i.e. the
amounts the borrower is required to
contribute to the investment) from
20% to 10% of total cost.
Up to $50 million over the next 2 years is
anticipated in intermediary lending to support micro,
small and medium size enterprises and access to tertiary
education through student loans. Page
The Basic Needs Trust Fund (BNTF) will 5
provide up to $78 million in grant resources over the
next 6 years. BNTF will address social protection
issues by provision of resources for social and economic
infrastructure at the community level. Over the next 2
years the Bank will also seek, on a country by country
basis, to reduce the government contribution to BNTF
projects, when appropriate.
The UK government has established the
Caribbean Aid For Trade and Regional Integration
Trust Fund (CARTFund). CARTFund is administered
by CDB. The overall aim of CARTFund is to assist
CARIFORUM member countries in boosting growth
and reducing poverty through trade and regional
integration. The Fund has been allocated £5 million
(approximately $7 million) over 2 years.
CDB will continue to provide technical
assistance resources to facilitate institutional capacity
building and improved policy formulation and
implementation.
CDB will consider re-negotiating PBLs and
re-directing undisbursed balances of investment loans
should this be justified.
CDB will collaborate with development
partners in designing approaches to assist the BMCs,
including joint financing interventions.
Contact:
Mr. Carlson Gough
Director, Projects Department
Email: goughc@caribank.org
Phone: 246-431-1710/11
Fax: 246-426-7269
Dr. Denny Lewis-Bynoe
Director, Economics Department
Email: bynoed@caribank.org
Page Phone: 246-431-1660/61
6
Fax: 246-426-7269
Web address: www.caribank.org
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Inter-American
Development Bank
The IDB has responded with a range of
instruments and facilities in anticipation of increased
demand for financial resources as a result of the current
international financial crisis. Its programmes are varied,
covering a number of areas that are consistent with the
demands anticipated. There are programmes targeted
at (i) public sector borrowing or private sector borrowing
with sovereign guarantee, (ii) private sector borrowing,
including microfinance and microenterprise, and (iii)
borrowing and technical assistance for strengthening
the functioning of the financial sector to make it better
able to withstand the effects of the global financial
crisis. In addition, there are the options of negotiating
PBLs and redirecting existing loan balances to respond
quickly to urgent demands arising as a result of the
crisis. Below is an outline of specific programmes to
support the efforts of member countries to sustain
growth in the context of the crisis.
LIQUIDITY PROGRAM FOR GROWTH
SUSTAINABILITY
The Liquidity Program for Growth Sustainability
(LPGS) was established in October 2008 with the
purpose of maintaining the flow of credit to the real
economy, offsetting in part, and on a temporary basis,
shortfalls in normal credit flows to the region resulting
from the global financial crisis. Its aim is to support Page
domestic production and facilitate trade and thereby
protect employment from a temporary exogenous 7
shock, while strengthening macroeconomic conditions
in the region. The LPGS is intended to respond to an
emergency originating outside the region.
The total availability of funds under the LPGS
is $6 billion. The programme would provide up to $500
million per country to regulated financial institutions
facing reduced access to foreign credit lines and inter-
bank credit. These institutions could then provide trade
credit lines to exporters and producers for the domestic
market, and maintain firms’ access to working capital.
The national government must be the borrower or
guarantor for all loans under this programme. It is
only available for countries that are eligible to borrow
from the ordinary capital resources of the Bank. The
programme is transitory in nature, with authority to
approve operations expiring on December 31, 2009.
Use of this programme does not affect
access to the normal lending programme of the Bank
for investment and policy-based loans. The main
requirements for approval are (i) that the country has
carried out an IMF Article IV consultation within 18
months prior to Board consideration of a loan proposal,
and (ii) an assessment letter from the IMF. The Bank
will also provide complementary justification based
on review of the soundness of the financial system
and consultations with regulatory agencies and other
multilateral institutions.
First-tier financial intermediaries will retain all
credit risk of the underlying portfolio associated with
on-lent proceeds. Funds will be disbursed against credit
portfolios or to provide liquidity to a revolving fund.
First-tier financial intermediaries will freely establish
lending terms and conditions to sub-borrowers.
Page TRADE FINANCE FACILITATION PROGRAM
8 The Trade Finance Facilitation Program (TFFP)
was launched in 2005 to promote international trade
by supporting trade finance. The TFFP is the Bank’s
leading instrument for support to the private sector,
targeting banks for trade finance support. Its suitability
as a support mechanism during the current crisis derives
partly from its ability to serve a counter-cyclical role in
providing liquidity during times of economic difficulty.
It also aims to (a) help banks in Latin America and the
Caribbean (LAC) broaden their international financing
sources, reduce country and commercial exposure while
levering their trade financing activity, and (b) support
trade and global integration. It can react quickly to
a crisis targeting one specific country or the region in
general. Its role in addressing the effects of the crisis
has recently been enhanced by the decision of the IDB
Board of Directors to allow the programme to provide
direct loans to LAC Banks, in addition to the guarantees
issued for their account in favour of international banks.
Under this programme, the IDB extends
credit guarantees in the form of Stand-by lines of
credit in favour of a Confirming Bank, to cover the
risk associated with eligible trade financing instruments
(documentary and stand-by letters of credit, export
and import financing funded by Confirming Banks
and international guarantees) issued by LAC Issuing
Banks. Participants may include Issuing Banks (any
private or state-owned banks incorporated in IDB
borrowing member countries) and Confirming Banks
(any international or regional bank compliant with IDB
integrity standards and with a recognized track record
in international trade finance). The programme offers
coverage of up to 100% per individual transaction.
The maximum size of the programme is $1 billion,
having recently been raised from $400 million. It
has been recently enhanced to support non-dollar
denominated trade finance transactions to address the
growing demand of transactions denominated in other Page
currencies, especially in Euros and Yen. The tenor is 360
days initially, renewable for 2 more periods of 360 days 9
each. There are no costs to join the programme. TFFP
guaranteed fees are based on market pricing, derived
from Confirming Banks’ transaction spread/fee.
LIQUIDITY FUND FOR MICROENTERPRISE
RECOVERY IN THE FACE OF EXTERNAL
SHOCKS AND EMERGENCIES
The Multilateral Investment Fund (MIF)
created the Emergency Liquidity Facility (ELF) in 2003
in response to natural disasters occurring in Central
America in the late 1990s. ELF is a Delaware-based
company with offices in San José, Costa Rica, with
multi-donor participation (including the MIF and seven
other investors) created for the purpose of responding
in crisis situations caused by natural disasters and
financial turmoil. Specifically, it was established to (i)
provide rapid emergency loan support to microfinance
institutions that are well managed but encounter
temporary liquidity problems due to unforeseen
external shocks, and (ii) to reduce the economic cost
that affected microenterprises might experience as a
result of a sudden interruption of the supply of financial
services that comes about as the result of financial
sector crises and/or natural disasters. During its 4
years of operation it has been accessed in response to
six crises, all related to natural disasters.
With the onset of the current global financial
crisis, the MIF has approved a new operation which is
essentially an enhancement of ELF. The enhanced ELF is
a multi-donor facility with an asset base of $15 million.
MIF participation amounts to $4.5 million, including
up to $500,000 in technical assistance and up to $4
million in equity and a long-term callable loan. The ELF
provides short and medium-term loans (3-24 months) to
LAC microfinance institutions under the circumstances
Page described in (i) and (ii) above.
10 An important tool for the accomplishment of
its goals is the Technical Support Facility (TSF) which
is a component of the ELF. The TSF has the goal
of preparing a group of pre-selected microfinance
institutions, strengthening their management capacity,
adopting prevention measures, and speeding up their
recovery after a physical disaster has struck. TSF’s
funds are used for ex-ante purposes, i.e., actions related
to emergency preparedness, and ex-post purposes, i.e.,
actions to address operational problems in the MFIs
that could not be solved with the preventive actions.
EMERGENCY FINANCING FOR LATIN
AMERICAN MICROFINANCE INSTITUTIONS
This new emergency financing institution for
LAC was approved by the MIF in December 2008. It
consists of a line of credit available to Latin American
and Caribbean MFIs which have been pre-selected by
ELF (see section above). It represents an extension
of the ELF, specifically geared to respond to potential
difficulties for microfinance institutions affected by
the international financial crisis. Its objective is to
provide a flexible facility for immediate, short-term
financing to assist MFIs with liquidity needs potentially
resulting from cutbacks in credit lines approved by
international and/or national banks or other lenders
that are experiencing their own liquidity problems. This
facility is intended to avoid an abrupt halt to lending
by MFIs, which could restrict credit for thousands
of microenterprises and weaken their growth. In the
present context, the operation also seeks to alleviate
liquidity problems arising from the potential effects of
the international crisis on the economies in which the
MFIs operate.
The credit facility is being executed by ELF.
Under this facility, MIF increases its contribution to ELF
by $20 million. The institutions which will be assisted
initially under the new facility were pre-selected under Page
the technical assistance component of the ELF. These
institutions, which have an aggregate microcredit 11
portfolio of $4.3 billion and 4 million microenterprise
clients, were evaluated by ELF and have been found
eligible for this emergency lending programme. At
present, the programme applies to 51 institutions,
including one in the CCB group of countries (Haiti).
Since approval of this ELF enhancement, ELF has
approved loans totalling $14.1 million, all in response
to emergencies associated with the international
financial and economic crisis. These loans are expected
to benefit 277,324 clients in six countries.
Two international lenders have expressed
interest in providing financial support to the
microenterprise sector under this programme. These
institutions are currently evaluating the project and
processing approvals from their respective decision-
making bodies. The first $10 million committed by
the MIF will be available immediately. The second $10
million committed by the MIF can be disbursed after at
least $5 million in funds contributed by other lenders
have been committed and disbursed.
LINE OF ACTIVITY: SUPPORTING BANKING
REGULATORS FOR MANAGEMENT OF CRISIS
The Bank is preparing a MIF operation
to provide support to bank supervisors in order to
strengthen their role in the achievement of solid and
sustainable financial sectors. This operation will focus
on supporting improvements in the technical and
operational capacities of bank supervisors, in order to
make financial institutions better able to withstand the
effects of the international financial crisis. The support
will be aimed at bank supervision institutions, central
banks and entities for supervision of securities markets.
This operation is intended as a complement to the IDB’s
other crisis response operations.
Page
12 It is proposed that the operation will be a
technical cooperation with a total amount of $9.2
million. The proposed MIF contribution is $7 million with
a counterpart contribution of $2.2 million. Individual
operations are anticipated to be around $600,000. It
is expected that this operation will be approved in the
second quarter of 2009.
Proposed activities under this operation include:
a. Evaluation and design of mechanisms
for implementing banking resolution
programmes in relation to best practices;
b. Review and update of early warning alert
indicators and models for the monitoring of
risk;
c. Review of crisis management schemes;
d. Introduction of modern supervision
techniques for financial groups and cross-
border entities;
e. Updating of supervision and risk management
techniques for new, sophisticated financial
instruments; and
f. Supervision of non-bank and unregulated
entities.
Contact:
Ms. Dora Currea
General Manager, Country Department Caribbean
Group
Email: dorac@iadb.org
Phone: 202-623-1591
Web address: www.iadb.org
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International Finance
Corporation
Since the global financial crisis creates
needs beyond the scope of each development finance
institution’s traditional capacity, IFC considers that
cooperation and partnership with other DFIs and
governments is a critical pillar of success of any crisis
response programme. IFC has developed a phased
approach to its crisis response and this has been
segregated into 4 broad areas:
• Liquidity
• Financial Infrastructure
• Capital
• Troubled Assets
Liquidity Support – Trade
Trade finance, the lifeblood of $14 trillion
annual global commerce, is declining. It is anticipated
that global trade will shrink in 2009 for the first time in
3 decades due to a loss of trust between banks. IFC’s
response is to swiftly aggregate resources under simple
and efficient structures that can enhance impact in the
global markets:
• Global Trade Finance Program (GTFP):
GTFP provides unfunded support in the
form of guarantees for trade transactions
in emerging markets. In response to the
crisis, GTFP has been increased from $1
billion to $3 billion.
Page • Global Trade Liquidity Program (GTLP):
14 GTLP brings together governments,
DFIs and private sector banks to provide
funded support for trade in developing
markets. Initial commitments of $5
billion from public sector sources have
been targeted. To date GTLP has
received pledges from IFC ($1 billion),
Canada ($200 million), the Netherlands
($50 million) and the UK (£300 million).
Four utilization banks participation have
been approved totalling $1.9 billion of
support.
Liquidity Support – Microfinance
IFC has established the Microfinance
Enhancement Facility (MEF) for the purpose of
instilling confidence in the microfinance industry,
catalysing funding and safeguarding deposits. IFC,
KFW, OeEB, FMO and EIB have jointly contributed
$370 million to the MEF. It is expected that MEF will
provide funding to over 100 microfinance institutions
in up to 40 countries. As of June 2009, 34 MFIs were
approved for funding under the MEF.
Liquidity Support – Infrastructure
IFC has created an Infrastructure Crisis Facility
(ICF) in recognition of the fact that infrastructure
projects under development are being delayed or
cancelled and existing projects are at risk due to
refinancing requirements. It is estimated that between
$67-$120 billion of existing and/or new projects could
be delayed or suspended due to the financial crisis. ICF
will therefore act as a substitute for commercial finance
and signal to sponsors that term credit is still available.
ICF will expand resources available to IFIs thereby
increasing the available pool of funds. A number of
countries have expressed interest in contributing to the
ICF. France and Germany has already signed MOUs
totalling over $2 billion.
Financial Infrastructure and Policy Page
The growing liquidity pressure results in financial
intermediaries reducing most lending activities. This 15
reduction in credit is damaging the real economy and
reducing employment with implications on poverty
levels. IFC’s response is to create an Advisory Services
Crisis Response Package to complement and support
the new investment initiatives. Currently the crisis
advisory services are focused on the financial sector by
supporting financial institutions, financial infrastructure
and business environment work critical for SME survival
and growth. The crisis advisory services are being
delivered using IFC’s well-established Advisory Services
capacity.
Re-Capitalizing Banks
IFC has established a $3 billion Capitalization Fund
designed to address the liquidity and capital needs of
banks so as to avert devastating declines in economic
activity. The fund aims to support banks considered
vital to the financial system of an emerging market
economy. It is intended to speed up economic recovery
and boost job creation while reducing the impact of the
financial crisis.
New Initiatives under Development
• Managing Troubled Assets: IFC intends to
increase its presence in the market in the next
12 to 18 months by focusing on:
o Creating a private sector programme to
assist in cleaning-up banking systems
and supporting real sector clients;
o Encouraging transparent auctions to help
governments and banks transfer non-
performing assets to the private sector
for processing; and
o Fostering sustainable and prudent work-
Page out practices.
16 • Export Credit Agency (ECA) Programme:
Establishing a programme to encourage and
facilitate the use of local banks and local
currencies in ECA guarantee programmes.
• Global Food Fund: Establishing a fund to
provide liquidity support to agribusiness. The
proposed Global Food Fund would seek to:
o Catalyze investments in agribusiness;
o Increase liquidity in the agribusiness
value chain to meet seasonal working
capital needs;
o Increase the global supply of food and
agricultural commodities; and
o Develop necessary global, regional and
local agriculture.
Contacts:
IFC Country Office, Trinidad & Tobago
Mr. Kirk Ifill
Resident Representative
Email: kifill@ifc.org
Phone: 868-628-5074
Web address: www.ifc.org
IFC Crisis Response Coordination, Washington
D.C.
Mr. Kenroy Dowers
Manager, Financial Markets Department
Email: kdowers@ifc.org
Phone: 202-473-3586
Page
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4
INTERNATIONAL MONETARY
FUND
At the Group of Twenty (G20) meeting
in London in April 2009 it was agreed to treble the
resources available to the IMF to $750 billion by:
• Immediate financing from members of
$250 billion; and
• New borrowing arrangements to facilitate
up to $500 million of additional resources.
Plans are being finalized by the IMF to
streamline the number of facilities, while strengthening
their effectiveness and flexibility. IMF has also agreed
to process requests for assistance under fast-track
emergency financing procedures.
Lending Facilities
Over the years, the IMF has developed various
loan instruments, or “facilities”, that are tailored
to address the specific circumstances of its diverse
membership. Low-income countries may borrow at a
concessional interest rate through the Poverty Reduction
and Growth Facility (PRGF) and the Exogenous Shocks
Facility (ESF). Non-concessional loans are provided
mainly through Stand-By Arrangements (SBA), and
occasionally using the Extended Fund Facility (EFF),
the Supplemental Reserve Facility (SRF), the Short-Term
Liquidity Facility (SLF), and the Compensatory Financing
Page Facility (CFF). The IMF also provides emergency
18 assistance to support recovery from natural disasters
and conflicts, in some cases at concessional interest
rates.
Stand-By Arrangements (SBA)
The SBA is designed to help countries address
short-term balance of payments problems. The amount
that a country can borrow from the Fund - its “access
limit” - varies depending on the type of loan, but is
usually a multiple of the country’s IMF quota. The
length of a SBA is typically 12-24 months, and
repayment is normally expected within 2¼-4 years.
Loans are subject to the IMF’s market-related interest
rate, known as the “rate of charge”. The rate of charge
is based on the SDR interest rate, which is revised weekly
to take account of changes in short-term interest rates
in major international money markets. Large loans
carry a surcharge.
Emergency Assistance for Natural Disasters
(ENDA)
The IMF provides emergency assistance to
help member countries with urgent balance of payments
financing needs in the wake of natural disasters or
armed conflicts. Emergency assistance loans are
usually quick-disbursing and do not involve adherence
to performance criteria. Assistance has been typically
limited to 25 percent of the member’s quota in the
IMF, although amounts up to 50 percent of quota can
be and have been provided in certain circumstances.
Emergency assistance loans are subject to the basic
rate of charge, with grace period of 3¼ years and
maturity of 5 years. Since 2005, the interest rate has
been subsidized down to 0.5 percent per year, with the
interest subsidies financed by grant contributions from
bilateral donors. Grenada (2003, 2004) and Dominica
(2008) are recent examples of Caribbean countries that
have accessed this facility.
Exogenous Shocks Facility
The Exogenous Shocks Facility (ESF) provides policy
Page
support and financial assistance to low-income countries
facing exogenous shocks (commodity price changes,
natural disasters, and crises in neighbouring countries 19
that disrupt trade or domestic economic activity). It is
available to countries eligible for the Poverty Reduction
and Growth Facility (PRGF)—(In the Caribbean, this
would include Dominica, Guyana, Grenada, Haiti, St.
Lucia, and St. Vincent & the Grenadines) —but that do
not have a PRGF programme in place. ESF loans carry
an annual interest rate of 0.5 percent, with repayments
made semi-annually, beginning 5½ years and ending
10 years after the disbursement. The ESF has two
components:
• A rapid-access component under which
a country can access fairly quickly, up to
25percent of its quota for each exogenous
shock. This component can be used on a
stand-alone basis or as a first step towards
higher access.
• A high-access component, with access up
to 75 percent of quota. Resources are
provided in phased disbursements based on
reviews, and programmes are one-to-two
years in length.
Technical Assistance
Technical assistance is one of the benefits of
IMF membership. About 90 percent of IMF technical
assistance goes to low and lower-middle income
countries. The IMF provides technical assistance in its
areas of core expertise: macroeconomic policy, tax policy
and revenue administration, expenditure management,
monetary policy, the exchange rate system, financial
sector sustainability, and macroeconomic and financial
statistics. The recipient country is fully involved in the
entire process of technical assistance, from identification
of need, to implementation, monitoring, and evaluation.
Beginning in May 2009, charges (based on a country’s
GDP per capita) will be introduced for Fund technical
Page assistance. For countries with Fund programmes and
20 for PRGF-eligible countries, technical assistance will
continue to be free of charge.
Contact:
Mr. Trevor Alleyne
Chief, Caribbean II Division
IMF/WHD
700 19th St., NW
Washington, DC 20431
Email: talleyne@imf.org
Tele: 202-623-6510
Fax: 202-589-6510
Web address: www.imf.org
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21
5
WORLD BANK
The leaders of the G20, at its April, 2009
meeting supported “a substantial increase in lending of
at least $100 billion by the Multilateral Development
Banks (MDBs)…”. The World Bank, as the largest
MDB, will be the major avenue for this increased
development lending and it proposes to use a portion
of these resources to increase financial support for its
Caribbean clients:
Development Policy Lending
The principal financing instrument that will
used by the World Bank in the crisis is the Development
Policy Loan (DPL) which provides rapidly-disbursing
financing to help a borrower address actual or
anticipated development financing requirements of
domestic or external origins. DPL aims to help the
borrower achieve sustainable poverty reduction through
a programme of policy and institutional actions, for
example, strengthening public financial management,
improving the investment climate, addressing
bottlenecks to improve service delivery, and diversifying
the economy. It supports such reforms through non-
earmarked general budget financing that is subject
to the borrower’s own implementation processes and
systems.
DPL can be extended as loans, credits or some
combination of the two depending on the country’s
IDA eligibility.
Page
• The Bank makes the funds available to the
22 client upon:
o (a) maintenance of an adequate
macroeconomic policy framework,
as determined by the Bank with
inputs from IMF assessments;
o (b) satisfactory implementation of
the overall reform programme; and
o (c) completion of a set of critical
policy and institutional actions
(conditions) agreed between the
Bank and the client.
The DPL may be customized in content and design for
country circumstances:
• A DPL deferred drawdown option (DPL
DDO) allows the IBRD borrowers to
postpone disbursement of a loan for a
defined period, instead of drawing down
funds immediately after approval.
• Catastrophe Risk DDO (Cat DDO)
provides liquidity immediately after
a natural disaster that results in a
declaration of a state of emergency.
Investment Lending
The Bank will continue to utilize traditional
investment and technical assistance loans. Investment
loans may be used:
• To support and strengthen social safety
net programmes, such as targeted,
conditional cash transfers (distributed to
poor families, provided the families keep
their children in school and keep health
visits up to date), school feeding, nutrition
programmes focused on children under
two and pregnant and nursing mothers Page
23
(the groups most vulnerable to chronic
malnutrition).
• To support temporary employment
programmes, sometimes called cash-
(or food-) for-work or labour-intensive
public works, that provide temporary
employment opportunities to unemployed
and disadvantaged people. By paying low
wage rates—below market levels—the
programmes “self-target” those who do
not have other employment opportunities.
Jobs are usually on labour intensive
infrastructure projects (such as road
construction and maintenance, irrigation
infrastructure, and soil conservation),
as well as community activities and civic
projects. Programmes may be adapted to
focus on specific groups (such as women,
young adults, urban populations, etc.).
• In some cases, additional financing may
be requested to expand a programme
supported by an active Bank loans (or
credits). For instance, if appropriate, an
existing programme could be extended to
reach additional beneficiaries. Operating
guidelines might be adapted so that the
programme better reaches people who
have fallen or are at risk of falling into
poverty due to the crisis
IDA Financial Response Fast-Track Facility
The IDA Financial Crisis Response Fast-Track Facility
(IDA FTF), was endorsed by the Board in December
2008. IDA FTF will enhance IDA’s ability to help poor
countries respond to the financial crisis. The Facility will
operate within the IDA15 framework for the period
FY09-11 and will fast-track an initial $2 billion of the
IDA15 resources. The funds are to be used for safety
Page nets, infrastructure, education and health. The Facility
24 will ensure faster delivery of financial and technical
support to IDA and blend countries anticipating the
potential negative effects of the global crisis on their
economies. This will be achieved by up-to-date country
diagnostics, accelerated processing and approval
procedures, and (whenever needed and justified) a
greater degree of frontloading of IDA resources.
Other Initiatives
The Bank will continue to provide technical analysis
and advice, at the request of its Caribbean clients,
on strategies to assist in managing the fall-out of the
crisis, for example with contingency planning for small
banking systems.
The Bank will also assist in developing strategies, in
partnership with its Caribbean clients, to ensure that
they maintain and implement medium-term goals which
focus on competitiveness and growth, and that these
goals are supported in parallel with the crisis response.
Contact:
Mr. Benu Bidani
Lead Economist, Caribbean Country Management Unit
Email: bbidani@worldbank.org
Phone: 202-473-5616
Web address: www.worldbank.org
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25
6
CARIBBEAN REGIONAL
TECHNICAL ASSISTANCE
CENTRE (CARTAC)
What is CARTAC?
The Caribbean Regional Technical Assistance Centre
(CARTAC), located in Barbados, is one of six regional
technical assistance centres of the International
Monetary Fund around the world. It comprises a staff
of twenty advisers and administrative staff who support
the work of the centre, with the IMF providing quality
control of the products delivered to member states.
The centre is managed by the Programme Coordinator.
CARTAC’s operations are funded by a pool of resources
from donors, including members. The main donors are
Canada and the IMF. CARTAC is governed by a Steering
Committee representing donors and member countries.
What does CARTAC do?
CARTAC provides capacity building, training and
assistance to all member countries through direct
training in-country workshops, seminars and regional
meetings/conferences. CARTAC works with regional
groupings to provide technical support (e.g. the
Caribbean Group of Bank Supervisors, the Caribbean
Association of Insurance Regulators). CARTAC focuses
on six areas: public financial management (tax/customs
administration, public expenditure management);
economic statistics (national accounts, CPI, tourism,
Page
balance of payments); macroeconomic management;
26 financial sector supervision and capital market
development.
How does CARTAC operate?
Countries make direct requests to CARTAC for
consideration and CARTAC Advisers work with country
officials to undertake the assistance either directly
or with the support of additional short-term experts.
CARTAC collaborates with international and regional
partners to co-host workshops and seminars.
Contact:
Ms. Therese Turner-Jones
Programme Coordinator
Email: tturnerjones@imf.org
Phone: 246-434-2840
Fax: 246-437-3159
Web address: www.cartac.org
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27
Compiled, Designed and Printed by
Page Caribbean Development Bank
.O.
P Box 408, Wildey, St. Michael, Barbados,W.I.
28 Tel: (246) 431-1600 • Telefax: (246) 426-7269
Homepage: www.caribank.org • Email: info@caribank.org