Abstract
Over the last decade, the Eastern Caribbean Currency Union (ECCU) macroeconomic performance has deteriorated relative to the rest of the Caribbean. Tourism accounts for three-fifths of exports, and the import content of consumption and investment is high. The ECCB-operated quasi-currency board arrangement (CBA) has continued to deliver price and exchange rate stability. The region has strong social indicators, but poverty, health, and crime remain concerns. Despite the implementation of ambitious revenue reforms, limited progress has been made toward fiscal consolidation. Credit has continued to expand rapidly.
Appendix I: ECCU—Relations with the Fund
(As of December 1, 2007)
I. Membership Status: Not Applicable
II. Exchange Arrangement:
The Eastern Caribbean Currency Union (ECCU) comprises six Fund members: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines; and two territories of the United Kingdom, Anguilla and Montserrat. The eight ECCU members have a common currency, monetary policy, and exchange system. The common currency, the Eastern Caribbean (EC) dollar, has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar since July 1976. The common central bank, the Eastern Caribbean Central Bank (ECCB), has operated like a quasi-currency board, maintaining foreign exchange backing of its currency and demand liabilities of close to 100 percent.
III. Safeguards Assessment
Under the Fund’s safeguards assessment policy, the ECCB is subject to a full safeguards assessment under a four-year cycle. The most recent assessment was completed in July 2007, and concluded that the ECCB continues to have appropriate control mechanisms in place, which have strengthened since the first safeguards assessment completed in 2003. ECCB management places emphasis on good governance and sound controls, and has enhanced the bank’s transparency and accountability since the last assessment, including the publications of financial statements that comply with International Financial Reporting Standards. The assessment made some recommendations to sustain the ECCB’s safeguards framework going forward.
IV. Report on the Observance of Standards and Codes
The Report on Observance of Standards and Codes—Data Module, was completed for the ECCB in August, 2007, covered monetary statistics of the ECCB, and was published as IMF Country Report No. 07/289 on August 21, 2007.
The Financial System Stability Assessment for the ECCU was completed in April 2004, and examined the adherence of the domestic banking sector to the Basel Core Principles for Effective Banking Supervision.
In domestic banking supervision, assessors noted the need to strengthen the legislative framework to enhance the powers and autonomy of the ECCB and to generally beef up the enforcement process. More frequent and comprehensive on-site examinations are required particularly in light of the high levels of nonperforming loans and perceived gaps in data integrity. Implementation of a risk-based capital framework for banks should be a priority, which adequately reflects risk of public sector loans. Supervisory practices should develop further in the direction of risk-focused supervision that also takes into consideration ongoing communication with external auditors and overseas supervisors. The need to establish a more formal information exchange mechanism with the home supervisor was also identified as a priority, especially with regard to the consolidated supervision of significant regional banking groups.
Some of these concerns have been addressed: new regulatory guidelines for risk-weighting nonperforming public sector exposures have gone into effect in January 2006, and amendments to the uniform Banking Act have been passed and gazetted in all ECCU jurisdictions. These amendments will give the ECCB enhanced regulatory powers, particularly in regards to implementation of additional regulation and prudential guidelines.
Appendix II. OECS: Relations with the World Bank Group
(As of November 15, 2007)
World Bank Group Strategy
The World Bank Group strategy in the OECS is focused on helping these small states meet the development challenges that face them. The guiding principles of the strategy are: (a) supporting regional integration and coordination efforts; (b) partnering and harmonization in both lending and analytical work with other development partners; and (c) active pursuit of simplification and capacity building initiatives tailored to small states. The Bank will continue to take the lead on public sector reforms with a particular focus on governance, the efficiency of public spending, social expenditures (including safety nets), disaster mitigation, and environmental management.
Bank-Fund collaboration in specific areas: The World Bank Group and the IMF will continue to collaborate on the financial sector, on the medium-term structural reform agenda and in providing technical assistance on macroeconomic management issues jointly with the Caribbean Regional Technical Assistance Center (CARTAC). The Bank and the IMF will also continue to collaborate on supporting the countries of the OECS in the preparation of their Poverty Reduction Strategies (PRS).
Group strategy: The World Bank Group Management presented to its Board the Eastern Caribbean Sub-Region Country Assistance Strategy (CAS), on September 13, 2005. The World Bank Group’s strategy for the four years covered by this CAS (FY2006–09) supports the sub-region’s development agenda through two main pillars: (1) stimulating growth and improving competitiveness; and (2) reducing vulnerability, by promoting greater social inclusion and strengthening disaster risk management. Recognizing the OECS countries’ high debt ratios, Bank activities will focus on leveraging available donor grant financing. Following the recommendations of the recently completed growth and competitiveness study for the OECS, IBRD and IDA assistance would focus on providing technical and financial assistance for interventions to support the two main pillars of the CAS. The CAS proposes a total lending envelope of US$103.4 million. An indicative Base Case lending scenario consists of about US$51.3 million in IDA resources for the four OECS blend countries (Dominica, Grenada, St. Lucia and St. Vincent and the Grenadines). This envelope includes the estimated IDA country allocations for each of the four countries during FY2006–09, and an IDA Regional allocation of US$15.2 million for two regional projects: US$12 million for Catastrophe Risk Insurance and US$3.2 million for Infrastructure and Utilities Reform. The indicative high case lending scenario consists of approximately US$52.1 million in IBRD investments and development policy operation commitments for the six OECS countries, in addition to the base case lending scenarios mentioned above.
Increasing competitiveness and reducing vulnerability. In addition to stabilizing macroeconomic conditions and reducing fiscal deficits and public debt levels, the OECS countries are focusing on: (i) improving the investment climate by broadening the tax base, and streamlining the investment incentive regime and making it more transparent; (ii) improving public sector performance, by raising the efficiency of public investment and improving service delivery; (iii) reducing transaction costs, by strengthening regulation and efficiency of public utilities; (iv) promoting appropriate education and skills development to take advantage of new opportunities in the global environment; and (v) reducing vulnerability, by strengthening the social protection mechanisms and strengthening disaster risk management. The OECS authorities also are targeting to expand their positive experiences with sub-regional functional cooperation (e.g., common central bank, telecommunications regulation, pharmaceutical procurement) to other areas including energy sector regulation, as a way of better allocating the region’s scarce human and financial resources.
The Bank is supporting these efforts through a comprehensive series of recently completed, ongoing and planned analytical and advisory activities including the following: “Towards a New Agenda for Growth”—OECS growth and competitiveness study (completed), Caribbean Air Transport Rationalization Report (completed), a report on Institutions, Performance and the Financing of Infrastructure Services in the Caribbean (completed), Caribbean Financial Sector and Regulation Report (completed), Caribbean Social Projection Strategy Review (completed), and a regional study on Crime and Violence in the Caribbean (completed). The OECS will also benefit from ongoing and planned analytical and advisory activities to support the new CAS’ two main pillars including the following activities: A Caribbean Skills and Curriculum Study, a Caribbean Financial Sector and Regulation report, an OECS Private Sector Financing Study (completed), Caribbean Social Protection Strategy Review and an OECS Backward Linkages in Tourism Study (ongoing).
Managing volatility: Recent analytical work on macroeconomic vulnerabilities has shown that the frequent natural disasters in the OECS are a major cause of income insecurity and high poverty rates in the sub-region, as many households cycle in and out of poverty in tandem with these events.
Disaster Management. Despite the regularity of natural disasters, the authorities in the OECS have generally pursued reactive policy responses rather than mitigation measures. Given declining aid flows and limited institutional capacity, the countries need to move to proactive responses with greater cooperation between governments, donors and civil society at both the national and the sub-regional levels. The Bank has worked to strengthen mitigation and response planning by providing rapid response assistance to the countries in the aftermath of major catastrophes such as Hurricane Ivan with the Emergency Recovery Program in Grenada. Also, the Bank has facilitated the establishment and participation of OECS countries in the regional Caribbean Catastrophic Risk Insurance Facility (CCRIF), the world’s first regional catastrophe risk insurance pool.
Safety Nets. Despite relatively high per capita incomes, unemployment (estimated between 5–20 percent) and poverty levels (ranging 12–38 percent) are quite high in the OECS sub-region. However, current safety nets suffer from a plethora of uncoordinated programs, which lack appropriate targeting mechanisms and adequate coverage. These will need to be improved to address the impact of eroding trade preferences on the rural sector, emerging problems with youth-at-risk, an aging population, continued vulnerability to external shocks, and new vulnerabilities arising from the HIV/AIDS epidemic. Improvements to the efficiency and targeting of social safety nets were examined under the public expenditure reviews. The Bank has provided financial support for an ongoing Poverty Reduction Fund in St. Lucia, which has piloted community procurement, a Social Protection Review for Dominica (and technical assistance to improve social protection), and an IDF grant to strengthen poverty measurement in the OECS. A Caribbean Regional HIV/AIDS program, including Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines is being implemented.
Planned Operations
There are also a number of planned country specific and regional operations for the OECS, including: a Technical Assistance Project for Grenada, which supports the government in enhancing private sector-led growth. The Bank is also preparing an OECS Skills Enhancement for Inclusive Growth Project, the objective of which is to assist the Governments of the region to increase the employability of youth through the establishment of a competitive training fund that finances demand-driven training and traineeships. The Bank is also in the early stages of planning an OECS E-government and Regional Integration project that will modernize the public sector. Other operations are also planned for the environmental, utilities, and infrastructure sectors.
Financial Relations
(In millions of US dollars)
DMA = Dominica, LCA= St. Lucia, VCT= St. Vincent and the Grenadines, GRD=Grenada, KNA= St. Kitts and Nevis
Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.
Financial Relations
(In millions of US dollars)
| Operations | Original Principal | Disbursed ** | Undisbursed ** |
|---|---|---|---|
| OECS-Telecom. and ICT Development Project (DMA, GRD, LCA, KNA, VCT) * | 2.70 | 0.84 | 2.07 |
| OECS-HIV/AIDS Prevention and Control (GRD, LCA, KNA, VCT) | 20.45 | 2.37 | 14.3 |
| OECS-Education Development Project (GRD, KNA, VCT) | 19.20 | 8.43 | 11.74 |
| OECS-Catastrophe Insurance (DMA, GRD, LCA, VCT) | 14.20 | 7.47 | 7.52 |
| Total (regional projects) | 56.55 | 19.11 | 35.63 |
| Total (all projects) | 94.32 | 37.26 | 56.30 |
| Dominica | |||
| OECS-Catastrophe Insurance | 4.50 | 2.35 | 2.40 |
| Growth and Social Protection Technical Assistance Credit | 1.45 | 0.00 | 1.58 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.46 |
| Total | 6.49 | 2.52 | 4.44 |
| Grenada | |||
| Hurricane Ivan Emergency Project | 19.78 | 9.11 | 10.33 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.41 |
| OECS-Education Development Project | 8.00 | 4.87 | 3.72 |
| HIV/AIDS Prevention and Control | 3.00 | 0.03 | 2.29 |
| OECS-Catastrophe Insurance | 4.50 | 2.35 | 2.40 |
| Public Sector Modernization Technical Assistance Credit | 3.50 | 0.47 | 3.50 |
| Total | 39.32 | 17.00 | 22.65 |
| St. Lucia | |||
| OECS-Catastrophe Insurance | 4.50 | 2.35 | 2.40 |
| Water Supply Infrastructure Improvement | 9.54 | 8.57 | 1.46 |
| OECS-Skills for Inclusive Growth | 3.50 | 0.00 | 3.80 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.41 |
| OECS-HIV/AIDS Prevention and Control | 6.40 | 0.40 | 4.62 |
| Total | 24.48 | 11.49 | 12.69 |
| St. Kitts and Nevis | |||
| OECS -Telecommunications and ICT | |||
| Development | 0.54 | 0.16 | 0.38 |
| OECS-Education Development Project | 5.00 | 2.31 | 2.69 |
| OECS-HIV/AIDS Prevention and Control | 4.05 | 1.81 | 2.23 |
| Total | 9.59 | 4.28 | 5.30 |
| St. Vincent and the Grenadines | |||
| OECS-Catastrophe Insurance | 0.70 | 0.42 | 0.32 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.41 |
| OECS-Education Development Project | 6.20 | 1.25 | 5.33 |
| OECS-HIV/AIDS Prevention and Control | 7.00 | 0.13 | 5.16 |
| Total | 14.44 | 1.97 | 11.22 |
DMA = Dominica, LCA= St. Lucia, VCT= St. Vincent and the Grenadines, GRD=Grenada, KNA= St. Kitts and Nevis
Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.
Financial Relations
(In millions of US dollars)
| Operations | Original Principal | Disbursed ** | Undisbursed ** |
|---|---|---|---|
| OECS-Telecom. and ICT Development Project (DMA, GRD, LCA, KNA, VCT) * | 2.70 | 0.84 | 2.07 |
| OECS-HIV/AIDS Prevention and Control (GRD, LCA, KNA, VCT) | 20.45 | 2.37 | 14.3 |
| OECS-Education Development Project (GRD, KNA, VCT) | 19.20 | 8.43 | 11.74 |
| OECS-Catastrophe Insurance (DMA, GRD, LCA, VCT) | 14.20 | 7.47 | 7.52 |
| Total (regional projects) | 56.55 | 19.11 | 35.63 |
| Total (all projects) | 94.32 | 37.26 | 56.30 |
| Dominica | |||
| OECS-Catastrophe Insurance | 4.50 | 2.35 | 2.40 |
| Growth and Social Protection Technical Assistance Credit | 1.45 | 0.00 | 1.58 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.46 |
| Total | 6.49 | 2.52 | 4.44 |
| Grenada | |||
| Hurricane Ivan Emergency Project | 19.78 | 9.11 | 10.33 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.41 |
| OECS-Education Development Project | 8.00 | 4.87 | 3.72 |
| HIV/AIDS Prevention and Control | 3.00 | 0.03 | 2.29 |
| OECS-Catastrophe Insurance | 4.50 | 2.35 | 2.40 |
| Public Sector Modernization Technical Assistance Credit | 3.50 | 0.47 | 3.50 |
| Total | 39.32 | 17.00 | 22.65 |
| St. Lucia | |||
| OECS-Catastrophe Insurance | 4.50 | 2.35 | 2.40 |
| Water Supply Infrastructure Improvement | 9.54 | 8.57 | 1.46 |
| OECS-Skills for Inclusive Growth | 3.50 | 0.00 | 3.80 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.41 |
| OECS-HIV/AIDS Prevention and Control | 6.40 | 0.40 | 4.62 |
| Total | 24.48 | 11.49 | 12.69 |
| St. Kitts and Nevis | |||
| OECS -Telecommunications and ICT | |||
| Development | 0.54 | 0.16 | 0.38 |
| OECS-Education Development Project | 5.00 | 2.31 | 2.69 |
| OECS-HIV/AIDS Prevention and Control | 4.05 | 1.81 | 2.23 |
| Total | 9.59 | 4.28 | 5.30 |
| St. Vincent and the Grenadines | |||
| OECS-Catastrophe Insurance | 0.70 | 0.42 | 0.32 |
| OECS-Telecommunications and ICT Development Project | 0.54 | 0.17 | 0.41 |
| OECS-Education Development Project | 6.20 | 1.25 | 5.33 |
| OECS-HIV/AIDS Prevention and Control | 7.00 | 0.13 | 5.16 |
| Total | 14.44 | 1.97 | 11.22 |
DMA = Dominica, LCA= St. Lucia, VCT= St. Vincent and the Grenadines, GRD=Grenada, KNA= St. Kitts and Nevis
Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.
Disbursements and Debt Service (Fiscal Year Ending June 30)
As of November 15, 2007.
Disbursements and Debt Service (Fiscal Year Ending June 30)
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 * | |
|---|---|---|---|---|---|---|---|---|---|
| Total disbursements | 8.84 | 6.08 | 9.43 | 26.56 | 13.75 | 15.25 | 20.72 | 31.14 | 6.38 |
| Repayments | 0.73 | 1.10 | 1.23 | 2.27 | 3.06 | 3.64 | 4.72 | 6.38 | 3.26 |
| Net disbursements | 8.11 | 4.97 | 8.20 | 24.29 | 10.69 | 11.62 | 16.00 | 24.73 | 3.12 |
| Charges and fees | 0.05 | 0.72 | 1.44 | 2.01 | 2.22 | 2.52 | 2.70 | 3.04 | 1.35 |
As of November 15, 2007.
Disbursements and Debt Service (Fiscal Year Ending June 30)
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 * | |
|---|---|---|---|---|---|---|---|---|---|
| Total disbursements | 8.84 | 6.08 | 9.43 | 26.56 | 13.75 | 15.25 | 20.72 | 31.14 | 6.38 |
| Repayments | 0.73 | 1.10 | 1.23 | 2.27 | 3.06 | 3.64 | 4.72 | 6.38 | 3.26 |
| Net disbursements | 8.11 | 4.97 | 8.20 | 24.29 | 10.69 | 11.62 | 16.00 | 24.73 | 3.12 |
| Charges and fees | 0.05 | 0.72 | 1.44 | 2.01 | 2.22 | 2.52 | 2.70 | 3.04 | 1.35 |
As of November 15, 2007.
Appendix III. Caribbean Development Bank: Overview of Activities in the OECS
The Caribbean Development Bank (CDB) has as one of its core mandates, the mobilization of resources to finance projects and programs that contribute to the development of its 17 borrowing member countries. In this regard, the CDB has played an important role in the development of the OECS sub-region. Since inception, the CDB has approved US$2.7 billion to its borrowing member countries, with the OECS as a whole accounting for approximately 38.8 percent. To date, most of the CDB’s interventions in the OECS have been directed towards infrastructural development, and is in part directly related to the incidence of natural disasters in the region, and the need to ensure adequate infrastructural support for investments in tourism and other productive sectors. Resources approved for physical and social infrastructure have, on average, accounted for 57.6 percent of overall lending to the sub-region, and comprised mainly of upgrading transportation and communication, educational services, power and energy, and housing. Interventions in the productive sectors account for 20.6 percent of total activity, and have focused largely on manufacturing and agriculture—the two sectors most severely impacted by developments in the external environment. Multisectoral interventions have also been an important element of the CDB’s activities in the OECS and may take the form of inter alia natural hazard management, lines of credit, and activities of the Caribbean Technological Consultancy Services (CTCS) Unit, which provides technical assistance to the private sector, institutional strengthening of government departments, feasibility studies, and the assessment and implementation of transactions-based taxes. In 2006, this category was expanded to include policy-based lending, which is a new product being offered by the CDB to support policy reforms and/or institutional changes, either at the macro-level or in a sector or sub-sector. Multisectoral interventions to date represented 21.8 percent of all interventions to the sub-region.
St. Lucia has been the largest recipient of CDB activity in the OECS, accounting for approximately 25 percent of approvals to the OECS. Most of the projects currently ongoing in St. Lucia are in the areas of physical and social infrastructure development, with interventions to improve the water supply, road rehabilitation, natural disaster mitigation and solid waste management (which forms part of a wider OECS solid waste management programme). Within the productive sectors, CDB has been involved mainly in tourism and stimulating the recovery of banana production. In 2005, an additional US$22.6 million was approved for the road development programme, and in 2006, US$0.03 million was approved for the CTCS.
The CDB has also played an extremely critical role in helping Dominica pursue its development objectives. Projects underway in Dominica are in the areas of education sector enhancement, natural disaster management, waste management and the upgrading of ecotourism sites. In addition to the CDB’s capital project-related interventions, the Bank has actively assisted Dominica in its economic reconstruction effort through the provision of stabilization/structural adjustment loans. In 2005, CDB approved US$5.9 million to assist in road rehabilitation and improvement and the development of a strategic plan for the tourism sector, while in 2006 US$0.05 million was approved for CTCS activities. For the period January to October 2007, US$0.1 million was granted for emergency relief following the passage of Hurricane Dean and a further US$0.05 million for institutional strengthening of the Ministry of Finance, Industry and Planning.
Approvals to St. Vincent and the Grenadines amounted to US$167.3 million over the period 1970 to 2005. In 2006, a further US$0.05million was approved in 2006 for institutional strengthening of the Ministry of Finance. For the first ten months of 2007, US$5.4 million was approved for the Windward highway reconstruction project while an additional US$5.2 million was approved for the LIAT transformation process. The main areas of CDB ongoing involvement are road rehabilitation, basic education, solid waste management, and natural disaster management.
Ongoing activities in St. Kitts and Nevis are mainly in the areas of disaster rehabilitation and natural disaster management, with some emphasis on improving the provision of education services and enhancing waste management. In 2006, US$8.4 million was approved to enhance the electrical power supply as well as improve operational and administrative effectiveness of the Nevis Electricity Company. The CDB’s first policy-based guarantee of US$8.2 million was also approved in 2006 for St. Kitts and Nevis to assist in the orderly adjustment of its fiscal framework. This was followed by the approval of a policy-based loan for US$20 million and a CTCS grant for US$0.1 million
Resources approved to Grenada account for 17.3 percent of total resources allocated to the sub-region. The development of physical infrastructure has been the main focus of ongoing activities in this island, with significant emphasis being placed on bridge and road improvement, the rehabilitation of schools, waste management improvement, and natural disaster management. In 2006, a loan of US$11 million was approved for the Grenville Market Square Development Project and US$0.08 million for assistance in CTCS activity. For the year-to-date US$7.5 million has been approved for schools rehabilitation and reconstruction.
CDB approvals to Antigua and Barbuda account for only 4.6 percent of sub-regional activity. Education sector enhancement has been the main focus of recent assistance along with security improvements to the air and sea ports. In 2006, multisectoral interventions through the CTCS in the amount of US$0.04 million were approved for Antigua and Barbuda. In the first ten months of 2007 however, US$21.8 million was approved for the transformation of LIAT, while an additional US$0.1 million was granted for institutional strengthening of the Antigua Public Works Authority.
Activity in Anguilla is also relatively small, representing 3.2 percent of total approvals since 1970. Ongoing projects in Anguilla are predominantly in natural disaster management. In 2005, US$11.1 million was approved in the directly productive sectors of agriculture and manufacturing, as well as infrastructural development in the energy sector, housing and education services. In 2006, a further US$0.06 million was approved for CTCS activities.
Approvals to Montserrat have also been minimal, accounting for a mere 1.6 percent of total approvals to the sub-region over 1970–2006. Most of the recent work in Montserrat involves improvements to the education sector. Multi-sectoral assistance through the CTCS was the only new intervention approved for Montserrat in 2005 and totalled US$9,000. In 2006 the CDB approved a grant in the amount of US$98,000 for a diagnostic review of a commercial bank, and US$7,000 for the CTCS.
CDB Operations Loans, Contingent Loans, Equity and Grants (Net)
(In millions of U.S. dollars)
A negative number is recorded where cancellations exceed approvals.
Numbers reflect approvals between January and October 2007.
Includes US$8.2 million limit approved for policy-based guarantee.
CDB Operations Loans, Contingent Loans, Equity and Grants (Net)
(In millions of U.S. dollars)
| Approvals 1970–2005 | Disbursements 1970–2005 | Approvals 2006 1 | Disbursements 2006 | Approvals 2007 2 | |
|---|---|---|---|---|---|
| Anguilla | 34.4 | 23.2 | 0.0 | 6.2 | -0.4 |
| Antigua and Barbuda | 49.2 | 36.4 | 0.0 | 0.4 | 21.9 |
| Dominica | 169.5 | 149.7 | 0.1 | 2.7 | 0.1 |
| Grenada | 173.2 | 125.9 | 11.0 | 16.8 | 7.3 |
| Montserrat | 17.1 | 13.6 | 0.1 | 0.3 | 0.0 |
| St. Kitts and Nevis | 149.8 | 115.1 | 28.4 * | 7.7 | 0.0 |
| St. Lucia | 266.6 | 214.9 | -0.9 | 17.6 | -0.1 |
| St. Vincent and the Grenadines | 167.3 | 114.3 | -3.1 | 10.7 | 10.6 |
| Total | 1,027.0 | 793.1 | 35.5 | 62.4 | 39.6 |
A negative number is recorded where cancellations exceed approvals.
Numbers reflect approvals between January and October 2007.
Includes US$8.2 million limit approved for policy-based guarantee.
CDB Operations Loans, Contingent Loans, Equity and Grants (Net)
(In millions of U.S. dollars)
| Approvals 1970–2005 | Disbursements 1970–2005 | Approvals 2006 1 | Disbursements 2006 | Approvals 2007 2 | |
|---|---|---|---|---|---|
| Anguilla | 34.4 | 23.2 | 0.0 | 6.2 | -0.4 |
| Antigua and Barbuda | 49.2 | 36.4 | 0.0 | 0.4 | 21.9 |
| Dominica | 169.5 | 149.7 | 0.1 | 2.7 | 0.1 |
| Grenada | 173.2 | 125.9 | 11.0 | 16.8 | 7.3 |
| Montserrat | 17.1 | 13.6 | 0.1 | 0.3 | 0.0 |
| St. Kitts and Nevis | 149.8 | 115.1 | 28.4 * | 7.7 | 0.0 |
| St. Lucia | 266.6 | 214.9 | -0.9 | 17.6 | -0.1 |
| St. Vincent and the Grenadines | 167.3 | 114.3 | -3.1 | 10.7 | 10.6 |
| Total | 1,027.0 | 793.1 | 35.5 | 62.4 | 39.6 |
A negative number is recorded where cancellations exceed approvals.
Numbers reflect approvals between January and October 2007.
Includes US$8.2 million limit approved for policy-based guarantee.
Appendix IV. CARTAC: Capacity Building in the ECCU
The Caribbean Regional Technical Assistance Center (CARTAC) was established in November 2001 as a regional resource, based in Barbados, to provide technical assistance (TA) and training to beneficiary countries, currently 2136. CARTAC’s core areas of TA include financial management, which includes tax policy and administration, public finance management, macroeconomic management and financial programming, financial sector supervision (including capital markets) and economic and financial statistics. It is a multi-donor project with the IMF as executing agency. 37 An active Steering Committee consisting of representatives from the participating countries, the donor agencies, CARICOM and the CDB, provides strategic guidance and ensures ownership and commitment.
The ECCU countries have been among the most active countries in requesting TA and training in all of CARTAC’s core areas. As in previous years, the largest areas of CARTAC involvement in the ECCU countries have been in VAT implementation and in building capacity to undertake improved macroeconomic management. This TA support has represented a significant addition to the Fund’s TA to the ECCU region. Some examples and highlights of CARTAC’s TA to the ECCU countries in the various core areas are provided below.
In the area of tax and customs policy and administration, CARTAC and FAD conducted a comprehensive review of the OECS tax systems and administrations. Most of the ECCU countries have started to implement the recommendations of the review. The following countries have introduced a VAT; Dominica (March 1, 2006), Antigua and Barbuda (January 29, 2007), St. Vincent and the Grenadines (May 1, 2007), while Grenada (mid 2008) is actively working to introduce a VAT within the noted time period and St. Lucia late 2009; St. Kitts and Nevis may follow with a late 2009 or early 2010 implementation date. Training has been provided in customs valuation to three OECS countries in coordination with CCLEC and with support from the Canadian and US Customs agencies, while Antigua and Barbuda has established a customs reform program with CARTAC assistance and USAID is assisting to implement the reforms. CARTAC has assisted the ECCB in the estimation of VAT and excise tax revenue yields for Anguilla, Antigua and Barbuda, Grenada, Dominica, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines. CARTAC has also provided technical assistance to establish a personal income tax system in Antigua and Barbuda, and significant TA and training has been provided in Antigua and Barbuda, Dominica, Grenada and St. Vincent and the Grenadines related to their VAT implementation. CARTAC has also undertaken full revenue assessment missions to St. Lucia and St. Kitts and Nevis recently. CARTAC will, during the remainder of the 2008 fiscal period: (1) continue to provide pre- and/or post-VAT technical assistance to Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines and start VAT technical assistance in St. Kitts and Nevis; (2) undertake a full revenue administration assessment mission in St. Vincent and the Grenadines; (3) deliver targeted short-term customs oversight technical assistance to Grenada and St. Vincent and the Grenadines in their respective customs reform program providing strategic and modernization recommendations; (4) provide regional training courses with the ECCB and CARICOM on the IT accounting system and the CARICOM Tax Treaty; (5) provide a regional workshop with the ECCB and CARICOM on tax administration future IT applications and systems to address the Caribbean region’s needs in 2012; and (6) continue work with St. Lucia and CARICOM in the establishment of a regional Custom ASYCUDA IT service center. Further, CARTAC will continue to assist five OECS countries build their capacity in the area of collections enforcement and taxpayer services through formal training, on the job coaching, enhanced operational manuals and the establishment of a Regional Tax Tribunal.
In public finance management, CARTAC and the ECCB assisted ECCU countries in diagnostic exercises as part of the Fiscal Machinery Project to draw up action plans to address public expenditure management weaknesses. Following up on these diagnostic assessments, CARTAC has focused on improving cash management, budgeting procedures and debt management in the ECCU countries, with both seminars and short-term missions. A review of the Treasury function in September 2006 and of the Budget function in November 2007 has been conducted in Antigua and Barbuda and reports were presented to the Minister of Finance. An analysis of St. Lucia’s budget system was undertaken in October and recommendations submitted to the authorities. CARTAC has funded the attachment of a budget officer from Grenada to the ECCB for the purpose of addressing Grenada’s consolidated public sector accounts. Funding for IT attachments from Anguilla and Grenada to Barbados was provided to improve their financial reporting capacities. CARTAC has also been helping in establishing an internal audit unit in St. Lucia. A training manual and a training program have been developed and were delivered on November 20, 2006 with participation from Dominica. Internal audit training was delivered in St. Vincent with participation from Grenada in June 2007. St. Kitts and Nevis and Anguilla received training in early November 2007. Advanced internal audit training is scheduled for St. Lucia/Dominica late November 2007 and St. Vincent/Grenada in January 2008. Revenue Forecasting and Modeling Workshops were done in St. Lucia and St. Kitts and Nevis with participation from Anguilla. In order to support a coordinated regional approach to public finance reform, CARTAC has supported the establishment of the Caribbean Public Finance Management Association (CAPFA), in which the ECCU countries have been active.
At the request of the ECCB, CARTAC has provided TA to the ECCU member countries in developing and implementing their own home-grown programs aimed at achieving a set of fiscal/debt targets by 2007. 38 A key aspect of the program has been to help these countries to build capacity at the level of both the ministries of finance and the ECCB to undertake consistent macroeconomic projections. As a result, the primary focus of CARTAC’s MAC TA is to build capacity in macroeconomic analysis, forecasting and performance monitoring within the ministries of finance and central banks. CARTAC consultants worked with small teams across the ECCU to prepare macroeconomic projections under a baseline scenario; identify imbalances and formulate policy measures to address them; and prepare a framework to monitor the key quarterly targets of the program.
Over the last year, CARTAC has focused its efforts at reinventing the work in the MAC area. This has become a priority in light of the apparent weakening of the local financial programming teams in a number of countries and the subsequent loss of institutional capacity. Efforts at building capacity continued with financial programming missions to Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.
In the past year, the financial sector supervision advisors have focused on upgrading the legislative framework for the nonbank sector. Efforts are underway to finalize a harmonized insurance act for the ECCU jurisdictions. CARTAC, with the assistance of the Legal Department of the Fund (LEG), has completed a new Money Services Business Act for the ECCU jurisdictions. It now rests with jurisdictions for enactment. The offshore insurance legislation is being upgraded for St. Lucia and for St. Vincent and the Grenadines. Upgrades to the legislative framework for credit unions have been undertaken. A model credit union legislation is being finalized. In an effort to gauge the level of activity and risks in the operations of credit unions and to inform the development of relevant regulations, CARTAC conducted limited scope inspections of five credit unions in Dominica and a similar exercise in St. Kitts and Nevis, and St. Lucia. Those inspections included the local supervisory authorities, which helped them to apply the training they had previously been provided. An insurance supervision workshop was also conducted for all ECCU members. In Dominica, a feasibility study of the offshore financial sector was conducted to aid the authorities in determining the strategy for that sector. An inspection of an agricultural, industrial and development bank of Dominica was conducted with bank examiners from the Caribbean and outside experts.
Other efforts to build capacity within the supervisory offices include a CARTAC-sponsored attachment of Barbados insurance supervisors to St. Lucia, to conduct the first ever insurance company inspection; and a CARTAC sponsored attachment from Dominica to conduct the first ever inspection of a credit union in Montserrat. A draft Financial Services Commission Act in Montserrat, sponsored by CARTAC, has been submitted to the authorities. CARTAC is currently assisting Grenada with the setting up of the Grenada Authority for the Regulation of Financial Institutions (GARFIN). CARTAC has assisted with the development of prudential reports for nonbanks in the ECCU and recently conducted training on the supervision of offshore mutual funds for St. Kitts and Nevis and St. Lucia and on the supervision of securities firms for the ECSRC.
The CARTAC program to improve economic and financial statistics in the ECCU continues to concentrate mainly on national accounts, prices and external sector statistics. During 2007 CARTAC stepped up its TA for strengthening national accounts statistics in two areas. First, work on compiling supply and use tables (SUTs) intensified in Dominica, St. Lucia and St. Vincent and the Grenadines. It is estimated that the SUTs for these countries will be completed by the end of 2007. At the same time work on SUT compilation in Anguilla and Grenada continued to be hampered by staff shortages in the national statistical offices. Second, in response to requests for assistance, CARTAC launched a project in the last quarter of 2007 to compile tourism statistics in member countries. The project is designed primarily to improve the measurement of tourism in the national accounts. TA in this area will also support the work being undertaken by the CARICOM Secretariat, CDB and the OECS Secretariat in developing tourism satellite accounts and other tourism data sets. Initial missions on tourism statistics were undertaken to Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines. In the areas of prices, work on the development of export-import price indices (XMPIs) continued in Montserrat. XMPIs for Grenada were finalized for the four quarters of 2006 and prepared for publication. In the area of external sector statistics, Grenada and St. Vincent and the Grenadines benefited from professional attachments for training in the use of EUROTRACE for processing data on external trade and the preparation of revised balance of payments survey instruments, respectively. Other areas of training in 2007 constituted the mounting of two regional training courses hosted by CARTAC and conducted by the IMF. Participants from the ECCB and three ECCU countries attended the three-week training course in monetary and financial statistics (MFS) held in July, while the ECCB and six ECCU countries participated in the two-week seminar on government finance statistics (GFS) undertaken in November/December. Both training courses assisted participants in compiling the MFS and GFS in keeping with international methodology and standards.
Bermuda joined CARTAC in November, 2007 bringing the total number of members to 21.
CIDA and DFID provide over 50 percent of CARTAC’s total funding, with CDB, EU, Ireland, IMF, UNDP, the World Bank, and CARTAC member countries contributing the remainder.
The original targets were replaced in 2006 by a ceiling on the public sector debt/GDP ratio of 60 percent by 2020.