STATEMENT BY THE GOVERNOR FOR ST. KITTS AND NEVIS DR. THE HONOURABLE DENZIL DOUGLAS
Madam Chair, Fellow Governors, Mr. President, Directors and Officers of the Bank, Distinguished Observers and Guests, Ladies and Gentlemen. It is with extreme pleasure that I address you on the occasion of the Thirty-Eighth Annual Meeting of the Board of Governors of the Caribbean Development Bank (CDB) and officially greet you on behalf of my Delegation, as well as the Government and People of St. Kitts and Nevis. I wish to express our profound appreciation to the Government and People of Canada and in particular Halifax, Nova Scotia for the warmth and hospitality which has been extended to us since our arrival and to congratulate the Management and Staff of the Bank for once again displaying a high level of efficiency and thoughtfulness in the preparation and conduct of this meeting. This Meeting is indeed of historical significance for several reasons. Firstly, this event is being held in historic, Halifax, Nova Scotia, a Region with which we have shared sustained economic ties for many years not only through the financial ties established by the Bank of Nova Scotia but also through the long established trading in other goods and services, and secondly, because the plethora of issues with which our nations are grappling at this time is unprecedented. We therefore come to Halifax, Nova Scotia, expecting that it will not be just business as usual but anticipating that we will be able to arrive at practical ways in which our own Caribbean Developmental Institution can assist us in dealing with these issues. There is a distinct need for urgency at this time Madam Chair. I am not usually one to spread gloom and doom because my country has weathered many storms. The most recent being the successful closure of our sugar industry. We are a resilient and hopeful people, we embrace challenges and we are not afraid to be pioneers. However, I wish to warn that if we fail to come out of this Meeting with at least a plan to deal with our current challenges, history will indeed condemn us as leaders in the Region. Now is the time when we must combine all of our financial, intellectual and other resources in arriving at workable strategies to address the threats which we face in order that we may either mitigate these threats or turn them into opportunities. I will, therefore, elaborate on the expectations of St. Kitts and Nevis for CDB as I proceed. The reality of our situation in the Caribbean at this time is that we are faced with astronomical oil prices which continue to climb; rising food prices, and in some cases shortages in essential items; increasing debt burdens coupled with declining access to concessionary funding; environmental concerns, in particular, the impact of climate change; as well as rising crime and its impact on our economies. These are coupled with the widely acknowledged problems of small size and our inherent vulnerability to natural disasters with which we continue to grapple. I will examine some of the responses which we should look at in relation to these challenges. However, before dealing with these more negative or unpleasant aspects, I would
-2wish to share with you some good news about the performance of the economy of St. Kitts and Nevis in 2007. My country continues to diversify its economy following the closure of the sugar industry in 2005. As a result, in 2007 economic growth was attributed mainly to Agriculture; Construction; Distributive Trades; Banking; Wholesale and Retail; and Government Services. Real Gross Domestic Product (GDP) in the economy was estimated at 3% for 2007. In addition, the fiscal position of the Central Government improved significantly in that year. The unaudited position reflects a current account surplus of EC$2.7 million. The overall balance also showed considerable improvement recording a deficit of EC$11.2 million at the end of 2007. The primary balance also recorded positive improvement, ending at 6.2% of GDP. The debt-to-GDP Ratio of the Central Government stood at 89.6% of GDP while total public sector debt stood at 169.1% of GDP. This commendable performance can be attributed to increased efficiency in revenue collections, in particular taxes on Corporation Income and taxes on International Trade as well as expenditure controls, some of which are outlined in our Adaptation Strategy in Response to the new European Union (EU) Sugar Regime. Madam Chair, we remain committed to maintaining strong performance in 2008 and beyond. With respect to debt, I wish to thank the Government of Canada for its valuable assistance in financing the debt management review which is currently being undertaken in my country. The result of this exercise, I am certain, will provide us with several options for managing our debt situation more effectively. While we focus on domestic issues, we cannot ignore the very formidable challenges with which we are faced arising from events in the external environment. One of the most alarming of these challenges is the high cost of oil and the double whammy effect that it brings in terms of the direct impact on the cost of goods and services as a result of the transportation component of pricing; but also its indirect impact on rising global food prices produced by the Western push to use “bio fuels” made from grain, especially corn, to reduce the world’s dependence on fossil fuels. With respect to the increases in grain prices, the lead economist of the World Bank’s Development Prospects Group, Don Mitchell, says that this is not caused by short-term supply disruptions, as is the normal case, and it will likely take several years for supplies to increase to rebuild stocks and allow prices to fall. The United Nations Special Rapporteur for the right to food, Jean Ziegler, has said that bio fuels are “a crime against humanity” because they raise global food prices. This unfavourable phenomenon has invaded all sectors of our economy and its impact on the more vulnerable in our society can prove to be devastating if we do not monitor its effects carefully. This will impact our efforts at poverty reduction, undermine our outstanding social gains and prevent the attainment of the Millennium Development Goals. We must therefore discuss how the Bank can play its usual leading role in support of Borrowing Member Countries (BMCs) as we grapple with these issues. I will now outline some of the responses that I believe that we should consider in developing a strategy for dealing with issues associated with rising oil and food prices: 1. We should devise an integrated response to rising fuel and food prices that looks at the impact on our overall fiscal and economic policy framework.
We must examine social safety nets and their appropriateness in light of the Bank’s ultimate commitment to the reduction of poverty. In addition to looking at alternative sources of energy for the medium to long term, we must devise contingency arrangements for dealing with larger and longer than expected interruptions in the supply of oil and food. We must commission studies on our food supply to determine how adequate, dependable and affordable it is and look at ways to improve the identified short comings. Madam Chairlady we are all aware that the long-term solution lies in being able to feed ourselves better as a Region. Efforts must be made to boost domestic and regional production of staples such as rice, bananas, yams, potatoes and cassava. This is an opportune time to become engaged in agricultural research to identify virus resistant strains of staple foods for example, improved technologies as well as infrastructure projects in roads and irrigation to assist farmers. More support is needed for farmers in terms of subsidies, training, and business advise at the incubation level so that they may be able to operate as successful commercial enterprises. We must look at ways of reorienting the thinking of our people to see farming as a business. We must encourage savings for a rainy day. People must begin to seriously examine their spending patterns and realign these to deal with the current realities. Public education programmes in the area of managing finances and other relevant issues both local and global, must increase. We must look at ways of making the wholesale and retail trades more competitive and therefore drive down prices as a result. We must examine how we can sensitize the private sector to the realities of the times in which we are living and have them join forces with government and the society in general towards the betterment of our people.
Madam Chair, I have sought to briefly outline some of the priorities of my Government and I am certain that these issues have been the preoccupation of all leaders at this time. I am enquiring as to what home grown programmes and projects a developmental finance institution such as our very own CDB can strategically put in place or in some cases expand and strengthen existing programmes to assist Governments at this time as a matter of urgency. The issue of crime and violence is also large on my Government’s agenda. We recognise that whatever progress we are able to achieve economically does not amount to anything if we are unable to provide an environment where these fruits can be peacefully enjoyed. I would therefore like to use this opportunity to encourage our partners to continue to work with the Governments of the Region to address the challenges that crime and violence pose to our economies. Madam Chair, I would like to congratulate the Bank on the fundamental role which it continues to play in the transformation of the economies of our Region. St. Kitts and Nevis has benefited immensely from the financial and technical resources that the Bank has been able to successfully mobilise over the years. In particular St.Kitts and Nevis has benefited from the two new instruments that the Bank recently introduced: A Policy-Based Guarantee for the EC$150
-4million bond issue which, due to the favourable terms which we were able to obtain as a result of the Bank’s guarantee, has assisted us in reducing interest rate on short-term domestic debt. We are also the recipients of a Policy-Based loan for which we have met all the requirements for the disbursement of the first tranche. The impact of this type of lending has been significant strategic focus on policy reform in support of fiscal and debt stabilization. This is in part responsible for our improved fiscal performance having set a Central Government Primary Balance target of no less than 3.5% of GDP as one of the conditions precedent to the first disbursement of the loan. It is my firm belief that the trend toward the delivery of aid in this manner will not just provide immediate or temporary relief for countries but will assist Governments in addressing fundamental policy issues which need to be changed in order for aid to result in sustained impact. I would like to emphasise also that given the current development needs of the BMCs coupled with the high debt situation and other related challenges it is important that grants constitute a significant portion of the SDF. This would offer the very critical support that countries now need in particular those of us who are undergoing fiscal stabilisation programmes at this time. This blending of loan and grant funding, in the absence of pure grant funding, could be the answer in addressing the need for countries to continue development to enhance economic growth while at the same time making efforts to reduce debt and stabilise the fiscal situation. I would therefore like to use this opportunity to thank the contributors to the SDF for their continued commitment to the support of the Region. Before I conclude I must congratulate the Bank on its performance in 2007. With Total Assets amounting to US$1016.4 million and Net Income of US$ 23 million before adjustment for derivatives it is clear that the Bank’s finances continue to move in the right direction. The Total Loans approved at the end of 2007 was US$ 140 million more than the amount approved as at the end of 2006. This demonstrates the Bank’s commitment to assisting its BMCs in fulfilling their development goals. An examination of the Bank’s profitability and other indicators also provides the assurance that our Bank is financially sound. Added to this, the work that is ongoing with respect to the Bank’s Strategic Planning process and its human resource management capacity building initiatives, substantiates the view of my Government that this is an institution with a viable future and which will be able to successfully meet the development needs of its BMCs. The Bank continues to meet the needs of its BMCs in an environment that is rapidly changing and therefore one which necessitates continuous upgrade in the services which it provides. In addition to its financing and technical assistance to individual countries, the Bank also plays an important role as a regional advocate by which it exerts influence far beyond its role as a Regional Development Bank. This is evidenced by its involvement in the design of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and the Regional Development Fund. I would, therefore, like to commend the President and his staff on the performance of this critical role. Madam Chair, in concluding, I would like to once again congratulate President Bourne and the Management and Staff of the Bank for once again meeting our expectations for excellent performance. I also wish to recognise all those countries, institutions and individuals who have contributed to the success of the Bank over the years, including but not limited to both past and present fellow Governors, Directors, Management and Staff, Non-Borrowing Members and Partners as well as the BMCs. I wish to encourage the President to continue his firm commitment to assisting the Region in the attainment of our noble goals for better standards of living for our Caribbean People. Madam Chair, I thank you.