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BASSETERRE, St. Kitts – CMC – The board of governors of the Barbados-based Caribbean Development Bank (CDB) began a two-day meeting here on Wednesday reiterating a call for the establishment of a broad-based “Compact of Co-Operation” between Caribbean countries and the wider international community.

CDB President Dr. William Warren Smith told the meeting that such a cooperation, which he first articulated in Jamaica and St. Lucia, is intended to deal with the issue of sovereign indebtedness in the region.

“I asked for us to revisit the strongly-held view that middle-income countries, like ours, do not qualify for debt relief,” he said, noting that borrowing member countries that adhere strictly to adjustment programmes supported by the International Monetary Fund (IMF) and other financial institutions would be ideal candidates for such support.

“Mr. Chairman, I make bold to place the debt issue on the table, once again! I humbly submit that the sentiments expressed in St. Lucia and in Jamaica remain just as relevant today, and are in urgent need of a solution.

“This is not an intractable problem if we heed the UN Panel’s injunction to be “uniformly ambitious”. Mr. Chairman, I am confident that, in the not too distant future, we will begin to see encouraging developments on this initiative. Let us address this problem without further delay,” he told the governors, mainly from the Caribbean Community (CARICOM) countries as well as donor countries including Canada, China, Britain and Mexico.

Smith told the conference that the international financial crisis of 2008, and the subsequent Great Recession which quickly followed a year later were both destined to have significant implications for economic growth and poverty levels across the globe.

“Our Region, particularly the service-dependent countries, experienced a protracted period of economic downturn and are just, this year, beginning to demonstrate signs of recovery.”

He said during the last four years the CDB has worked hard to maintain a strong presence in the borrowing member countries (BMCs) even as the difficult economic environment brought new challenges for maintaining the upward trajectory of the bank’s ordinary capital resources (OCR) portfolio.

He said approvals grew by US$770 million, lower than had been anticipated and this was mainly attributable to the bank’s inability to engage in policy-based lending because it had reached its lending limit for this product.

“Despite these challenges, we exceeded target approvals of US$320 million for the concessionary window by some US$28 million. This is a testament to our BMCs’ resolve to maintain their social programmes and to provide adequate social safety nets to the most disadvantaged groups in the society.”

Smith said that OCR approvals and disbursements recovered strongly in 2013 and 2014, following the upward revision in the limits for policy-based operations, and more aggressive and focused engagement with borrowing member countries in strategic areas, such as technical vocational education and training, climate resilience, and renewable energy.

He said that as part of the bank’s reform agenda so as to maintain its relevance and credibility as the corner-stone of development assistance to its borrowing member countries, a new comprehensive risk management office and an Enterprise Risk Committee have been established to oversee and manage bank-wide risks.

Earlier this week, the CDB board of directors approved key strategic enhancements to safeguard CDB’s reputation from integrity risks, and to provide accountability for persons who may be affected by environmental and social harm from the projects it finances.

Smith said the new office to operationalise the Strategic Framework for Integrity, Compliance and Accountability is being established and that such institutional arrangements are already a pre-condition for access to certain types of financing, notably climate financing, and are likely to become a standard pre-condition for access to all development financing.

“Should this prove to be the case, CDB will be in a very favourable position. When it is fully in effect, CDB’s internal governance framework will fully assure the board that risk is being effectively managed; and that the integrity of the financial reporting process and financial statements is being safeguarded.

“The board will also be assured that the effectiveness of our interventions can be assessed; and that fraud and corruption can be prevented and detected. “

He said when completed this undertaking could prove to be of monumental importance in enabling CDB to deepen its role as a relevant and reliable partner to its borrowing member countries in the development of growth-focused and sustainable economies.

“We can showcase to our financing partners, an institution whose internal governance framework has been shifted ever so closely to the stature of “best in class” as a fiduciary!

Smith said that the region’s premier financial institution had now become a more results-focused bank and that the Development Effectiveness Report has emerged as “our principal tool for measuring performance relative to agreed targets; and for gauging our contribution to economic growth and the sustainable development of our borrowing member countries”.

He said the annual publication of this report has also become institutionalised, in keeping with the bank’s commitment to strengthen corporate governance and improve accountability and transparency.

“The positive impact of wide-ranging changes to the way in which we do business is evident in the two “outlook” upgrades we secured from credit rating agencies in the past 18 months.

“These upgrades are more significant given the high level of concentration risk inherent in the loan portfolio, and the acute economic challenges that several large borrowers who are also implementing very difficult economic adjustment programmes face. “

Smith told the governors that the last four years of his presidency represented a period of adjustment, adaptation and renewal.

“We are convinced that our efforts have created a solid platform from which we launched, earlier this year, our Strategic Plan for 2015 – 2019 and from which we will tackle the “unfinished agenda” he said, adding that the work that has to be accomplished in the post-2015 period on a global scale has been eloquently articulated in a report prepared by the United Nation’s high-level panel of eminent persons.

He said prior to the international financial crisis many Caribbean countries were making good progress in reducing poverty levels, especially extreme poverty.

But he noted in spite of strong recovery in North America, Caribbean economies have been emerging slowly from the crisis, in part because of their vulnerabilities to climate impacts; the continued sluggishness of the European economies; and the lack of resilience in the fiscal and debt frameworks.

“Our principal instrument for directly targeting the poorest in our borrowing member countries is the Special Development Fund and, more specifically, our community-based programme, the Basic Needs Trust Fund.

“Our goal is to change the lives of as many people as possible in our poorest communities. We are now into the 35th year of the Basic Needs Trust Fund programme; and we are proud of our track record in responding to the needs of the poor through this programme. Despite several recent changes and improvements in commitment levels, the speed at which beneficiaries continue to be directly impacted remains somewhat disappointing. “

The CDB president said that a recent mid-term review of performance suggests that the administration of the Special Development Fund and the BNTF programmes needs to be radically reformed so that disbursement rates can be improved and more poor people can be assisted.

He said several proposals for faster project implementation and disbursement of BNTF funds have been tabled.

“Perhaps, though, the time is right for a paradigm shift, so that the BNTF’s outreach can become more effective. The Public-Private Partnership (PPP) model of collaboration between the state and the private sector to finance productive infrastructure investments is gaining popularity worldwide,” he said, adding that the CDB will launch its own PPP later on Wednesday.

“Rather than seeking to move social and economic infrastructure investments off their balance sheets, governments and government agencies in many developed countries are now deploying the PPP model with the explicit objective of getting greater “value for money”.

Smith said that at the same time, many large private enterprises in the Caribbean are recognising the value of corporate social responsibility. They are increasingly using their own foundations to channel social services to the poor.

“This mechanism of public/private collaboration is one which CDB might well consider,” he said, noting “if the PPP modality could similarly be used to improve the efficiency and speed of execution of BNTF projects, then more people could be reached and the distribution of benefits could be done more expeditiously.

A pilot project would certainly help to verify the efficacy of such an approach.

He said the pricing of the bank’s concessionary resources is also one which merits in-depth analysis and discussion with contributors to the Special Development Fund.

“The current discrepancy between our lending terms and those of the larger international financial institutions needs to be addressed urgently, especially in an international environment of very low interest rates. Indeed, the terms and conditions for each of our lending instruments are now undergoing rigorous examination as we look for new ways to improve our competitiveness.”

He said directly targeted poverty reduction mechanisms are an indispensable part of the arsenal of responses to redressing stubbornly high and seemingly intractable levels of poverty. The development community also understands that these social safety nets are necessary but hardly sufficient answers to the poverty challenge.

“There is now a broad consensus that rapid, sustained and equitable economic growth is crucial for ending extreme poverty. Much of our economic work and the policy conditionalities of our policy-based operations are focused on creating environments suitable for increased local and foreign investments in our borrowing member countries.

“We believe firmly that governments must set aggressive timelines for implementing reforms that create more “business-friendly” environments.

“We want fiscal management to become more predictable in our borrowing member countries. Fiscal rules, backed by tough legislation, must become the norm rather than the exception. And, building fiscal buffers must also become an integral component of every national sustainability strategy.

“It is widely known that we live in one of the regions of the world that is most susceptible to climate change. Already, we have begun to experience the damaging effects and associated economic losses of rising sea levels and an increase in the number and severity of natural hazards.”

But he said to participate effectively in climate change adaptation and mitigation, including exploiting the region’s vast renewable energy resources, CDB must be able to access climate finance from the various windows, which are emerging worldwide.

These institutions, understandably, have set the access bar extremely high, he told the conference.