President’s Review
The operations of the Caribbean Development Bank (CDB) during 2006 took place in the context of economic growth among its Borrowing Member Countries (BMCs). Three of the fourteen countries for which estimates of economic growth are available expanded by 10-12 percent, one by 7 percent, and six by 4-5 percent. Only Montserrat, which was beset by volcanic eruptions, declined in 2006.
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The sources of economic growth were varied, including construction booms associated with expansion of tourism plants in some countries, with ICC Cricket World Cup in others, and with the energy sector boom in Trinidad and Tobago. Strong tourism demand, agriculture sector growth and an expansion of financial services were other important sources of economic growth. Several countries began the year troubled by excessive public debt and large fiscal deficits. By the end of the year, it was clear that they had embarked on significant fiscal reforms and debt adjustment programmes with consequential improvements in fiscal capacity, public expenditure management and reduction of debt service burden. CDB was very engaged in this process of regaining fiscal stability and improved debt management. In addition to technical assistance provided in relation to improvement of fiscal revenue systems and its encouragement of return to the practice of public sector investment programmes, the Bank introduced two new financial instruments, viz. policy-based loans and policy-based guarantees, to assist countries. Overall, CDB approved new loans, grants and equity contributions totalling $128.6 mn in 2006, and also approved a $8.2 mn loan guarantee for St. Kitts and Nevis. Disbursements over the same period amounted to $131.9 mn. Sixty-two percent of the new approvals were to the Bank’s LDCs, that is Belize, and the Organisation of Eastern Caribbean States (OECS) members; twenty-seven percent went to the MDCs, and the remaining eleven percent went to regional projects. In terms of areas financed, resources were approved for financial sector modernisation, tourism and business infrastructure, education and human resource development, electrical energy supply, and national planning capacity. The Bank also financed disaster risk reduction and health through support for a Feasibility Study of a Regional Health Insurance Mechanism.
Being very conscious of the fiscal pressures on its BMCs in a situation of unsatisfied demand for development finance, the Bank endeavoured to avoid any substantial increases in its loan rates of interest despite the global trend towards higher interest rates and a rise in the Bank’s own borrowing costs. To this end, the Bank introduced a new Capital Adequacy Framework for financial risk management and loan pricing. An important development which culminated in January 2007 was the completion of formalities for admission of the Republic of Haiti among the Bank’s BMCs. We hope that this will encourage Suriname, the only CARICOM country that is not yet a member, to complete the process for its own admission to the ranks of CDB BMCs. Finally, CDB maintained its active participation in the regional economic integration process, hosting meetings of the CARICOM Council for Finance and Planning and other committee meetings, and spearheading the work for the establishment of the CARICOM Development Fund. The Management of the Bank is highly appreciative of the hard work of its staff and of the contributions of the Board of Directors to the quality of the Bank’s operations in 2006.
COMPTON BOURNE, Ph.D., O.E. President
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