Macroeconomic PBOs represent the largest proportion (59%) of the CDB policy-based lending portfolio. They are intended to combat the low and volatile growth, fiscal imbalances, and high debt in many BMCs (Table 4.1). During 2010–2019, economic performance in the region, although positive, was slower than the global average and lagged significantly behind that of other small island developing states. During this time, real gross domestic product (GDP) growth averaged 1.5% per annum compared with 4% in other small states. Meanwhile, the average debt to GDP ratio in the region remained high and averaged 63% of GDP at the end of 2019, above the 60% sustainability threshold recommended by many economists.
Table 5.1: Types of Policy-Based Operations, 2006–2020
Type |
Number of Operations |
Amount ($ million) |
Percentage of Portfolio |
Country |
Year of Approval |
Macroeconomic |
15
|
557.8 |
59% |
BZE, SKN, SLU, ANT, GRE, SVG, ANG, BVI, BAR, BAH, JAM, TCI, TT |
All PBO years |
Sector |
4 |
177 |
19% |
SVG, T&T, ANT, SUR |
2010, 2014, 2015, 2016 |
Exogenous shock response |
4 |
179.3 |
19% |
ANG, BVI, BAH, SLU |
2018, 2018, 2019, 2020 |
Guarantee |
2 |
20.6 |
2% |
SKN |
2006, 2012 |
Grant |
1 |
10 |
1% |
HAI |
2009 |
ANG = Anguilla, ANT = Antigua and Barbuda, BAH = The Bahamas, BAR = Barbados, BZE = Belize, BVI = British Virgin Islands, GRE = Grenada, HAI = Haiti, JAM = Jamaica, PBO = policy-based operation, SKN = St Kitts and Nevis, SLU = Saint Lucia, SUR = Surinam, SVG = St. Vincent and the Grenadines, TCI = Turks and Caicos Islands, T&T= Trinidad and Tobago, VI = Virgin Islands.
Source: Caribbean Development Bank.
PBL was mainly geared toward fostering macroeconomic stability, reducing rising debt levels, and resolving internal imbalances. The reform milestones were particularly concentrated on fiscal policy in the areas of revenue and expenditure and supported by important institutional reforms to strengthen the framework for revenue collection and the management of state-owned enterprises. Examples of institutional reforms include: the implementation and strengthening of value-added tax (VAT) legislation, introduction of the United Nations Conference on Trade and Development (UNCTAD) automated system for customs data (ASYCUDA), and reviews of state-owned enterprise tariffs and fees.
Macroeconomic PBL also focused on public financial management (PFM) and audit and improved debt management. The public financial management and audit reforms were geared toward strengthening PFM and audit legislation, conducting public sector institutional assessments and expenditure reviews, supporting the transition from cash to accrual accounting, and improving government financial information government systems, among others.
The efforts to improve debt management and processes focused on milestones that aimed to reduce the stock of arrears and avoid new arrears, introduce debt management strategies, establish debt units, put in place debt advisory committees, and review institutional debt management frameworks.