ARTICLE - CDB - REALITIES & CHALLENGES

THE CDB: REALITIES AND CHALLENGES
(Jamaica Observer) - By Rickey Singh

INDICATORS of likely worsening of the Eurozone economic crisis in 2012 could have a negative impact on funding resources for the Caribbean Development Bank (CDB) just when it needs to be in an improved position to better assist its borrowing member countries (BMCs) to cope with a combination of heavy indebtedness, fragile economic growth and expanding joblessness.

With Guyana and Haiti being the two outstanding exceptions in economic performance, the general scenario varied from modest growth to contractions among the bank's 18 BMCs (among them Jamaica and Trinidad and Tobago), as emerged from a candid assessment by President Warren Smith at his first annual media conference last Tuesday at the CDB headquarters in Barbados.

Smith, who became the fifth president of the 43-year-old premier regional development bank last May, and the first Jamaican to hold that position, said: "The latest predictions are for key Eurozone economies to slip back into recession in 2012... There is also the potential for more spill-overs from the Eurozone debt crisis to global financial markets..."

Among the affected European Union member states are those that have long been providers of funding for the CDB to enable it to fulfil its mandate as this region's primary institution for facilitating economic development. The hope, therefore, is that there would at least be no reductions in aid flows and that adjustments in new financial resources could yet be realised for specific projects.

Dr Smith blended some firm warnings with assurances on the way forward for regional economies, amid the lingering global financial crisis, when he addressed regional journalists at the bank's main conference room and explained some of what needs to be done by its borrowing member countries.

Guyana and Haiti

While praising the noteworthy growth rate of Guyana and Haiti of above five per cent in 2011 -- and set for similar repeat performances this year -- he lamented the prevailing twin ills of a high-level of indebtedness and unemployment across the region, as well as the "extremely limited" fiscal space for growth .

He went on to underscore three areas for action by regional policymakers, identifying these as:

* The "urgent pursuit" of reforms to economic management, including public financial management and the development of statistical capacity, in order to ensure "efficient, evidence-based allocation and use of resources";

* Giving 'priority' to development and maintenance of well-targeted social safety nets to minimise the fallout from fiscal consolidation and external shocks for the most vulnerable in society"; and

* Seeking to create an environment in which the private sector can emerge as "the new engine of economic growth, job creation and poverty reduction..."

And what of new initiatives by the CDB as the major regional facilitator of development with financial and technical assistance from donor nations via the vital aid flows from Western Europe, Asia, North America and Latin America?

New approaches

Smith's response was an unavoidable recognition for changes in the functioning of the regional institution itself so as to be "nimble and creative" in efforts to help the current 18 borrowing member countries to do things differently that reflect an understanding of the critical challenges of our time.

Well, as the CDB's fifth president -- after Sir Arthur Lewis, Dr William Demas, Sir Neville Nicholls and Dr Compton Bourne -- Dr Smith knows that the devil would be in the details of policymakers' responses to the "should-do" initiatives he has identified, as well as his allusion to the "nimble and creative" changes envisaged for the CDB. After all, like the University of the West Indies, the CDB stands as a key pillar of the Caribbean Community.

Perhaps in consideration of "changes" to deal with some of the domestic challenges they currently face, the policymakers of borrowing member countries should themselves reassess how to better utilise independent intellectual resources of the CDB, which last year disbursed US$167 million, including grants, to the BMCs.

The prognosis for 2012, according to the CDB president, is that the BMCs will continue to face "binding constraints, including under-diversified economic structures; underdeveloped infrastructures and a lack of private sector competitiveness, as well as weaknesses in the area of financial regulation and supervision..."

As he sees it, the "real threat of credit downgrades" facing some borrowing members of the CDB should, hopefully, infuse them with the discipline to stay the course of reforms.