Document of The World Bank FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION AND

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1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No LAC Public Disclosure Authorized Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL FINANCE CORPORATION PROGRESS REPORT ON THE REGIONAL PARTNERSHIP STRATEGY FOR THE ORGANIZATION OF EASTERN CARIBBEAN STATES (OECS) FOR THE PERIOD April 1, 2012 Public Disclosure Authorized Caribbean Country Management Unit Latin America and Caribbean Region International Finance Corporation Latin America and Caribbean Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank s Policy on Access to Information.

2 The last Regional Partnership Strategy for the OECS was discussed by the Executive Directors on June 8, CURRENCY EQUIVALENTS Currency Unit: Eastern Caribbean Dollar (EC$) US$1.0 = EC$ 2.70 $ in the text refers to US$ unless otherwise stated. FISCAL YEAR Antigua and Barbuda, St. Kitts and Nevis, St. Vincent and the Grenadines: January 1 December 31; Grenada, St. Lucia: April 1 March 31; Dominica: July 1 June 30 IBRD IFC Vice President Hassan Tuluy Vice President Thierry A. Tanoh Country Director Françoise Clottes Regional Director Paolo M. Martelli Task Team Leader Rolande Pryce Task Manager Eduardo Wallentin The World Bank Group appreciates the collaboration of the OECS governments and other stakeholders, including the Eastern Caribbean Central Bank and the OECS Secretariat, and the invaluable contributions of the following staff members, during the preparation of this Strategy: Hannah Kim; Ole Jorgenson; Nathalie Picarelli; Elisabeth Mekonnen; Anjali Acharya; Augusto de la Torre; Bruce Courtney; Caroline Cerruti; Chandra Shekhar Sinha; Christina Malmberg Calvo; Christine Richaud; David Warren; Edith Mwenda; Erik Bloom; Galina Sotirova; Harriet Nannyonjo; Juan Navas-Sabater; Justin Locke; Kirk Ifill; Karla McEvoy; Kathy Lalazarian; Lily Chu; Michelle Ottey; Nyaneba Nkrumah, Pedro Andrés Amo; Shiyan Chao; and Tiguist Fisseha. ii

3 TABLE OF CONTENTS ORGANIZATION OF EASTERN CARIBBEAN STATES REGIONAL PARTNERSHIP STRATEGY PROGRESS REPORT I. INTRODUCTION... 1 II. POLITICAL, ECONOMIC AND SOCIAL DEVELOPMENTS... 2 III. TAKING STOCK AT MID -TERM... 3 A. Assessing Progress Towards Outcomes... 3 B. Analyzing Portfolio Performance and Implementation... 9 IV. ADJUSTMENTS TO THE RPS... 9 V. LOOKING AHEAD VI. RISKS TABLES Table 1: Indicative and remaining IDA 16 allocations APPENDICES Appendix 1: RESULTS MATRIX for the RPS FY10-FY Appendix 2: Actual and Indicative Lending Program for the RPS FY10 - FY Appendix 3: Actual and Indicative Trust Funds/Grants Program for the RPS FY10-FY Appendix 4: Actual and Indicative AAA (ESW + TA) Program for the RPS FY10-FY Appendix 5: Actual and Indicative Lending Volumes for RPS FY10-FY iii

4 STANDARD CAS ANNEXES ANTIGUA AND BARBUDA Annex 1: Country Profile Annex A2: Country at a Glance Annex B5: Poverty and Social Indicators Annex B6: Key Economic Indicators Annex B8: (IFC) Committed and Disbursed Outstanding Investment Portfolio DOMINICA Annex 1: Country Profile Annex A2: Country at a Glance Annex B2: Selected Indicators of Bank Portfolio and Management Annex B5: Poverty and Social Indicators Annex B6: Key Economic Indicators Annex B7: Key Exposure Indicators Annex B8: Operations Portfolio (IBRD/IDA and Grants) GRENADA Annex 1: Country Profile Annex A2: Country at a Glance Annex B2: Selected Indicators of Bank Portfolio and Management Annex B5: Poverty and Social Indicators Annex B6: Key Economic Indicators Annex B7: Key Exposure Indicators Annex B8: (IFC) Committed and Disbursed Outstanding Investment Portfolio Annex B8: Operations Portfolio (IBRD/IDA and Grants) ST. KITTS AND NEVIS Annex 1: Country Profile Annex A2: Country at a Glance Annex B2: Selected Indicators of Bank Portfolio and Management Annex B5: Poverty and Social Indicators Annex B6: Key Economic Indicators Annex B7: Key Exposure Indicators ST. LUCIA Annex 1: Country Profile Annex A2: Country at a Glance Annex B2: Selected Indicators of Bank Portfolio Performance and Management Annex B5: Poverty and Social Indicators Annex B6: Key Economic Indicators Annex B7: Key Exposure Indicators Annex B8: Operations Portfolio (IBRD/IDA and Grants) ST. VINCENT AND THE GRENADINES Annex 1: Country Profile Annex A2: Country at a Glance Annex B2: Selected Indicators of Bank Portfolio Performance and Management Annex B5: Poverty and Social Indicators Annex B6: Key Economic Indicators Annex B7: Key Exposure Indicators Annex B8: Operations Portfolio (IBRD/IDA and Grants) iv

5 ABREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities ICT Information and communications technology Bank World Bank IDA International Development Association BAICO British American Company IDF Institutional Development Fund BNPP The Bank Netherlands Partnership Program IFC International Finance Cooperation CAD Canadian Dollars IFI International Financial Institution CARICOM Caribbean Community IMF International Monetary Fund CARTAC Caribbean Regional Technical Assistance LAC Latin America and the Caribbean CAS Country Assistance Strategy MSME Micro, small and medium sized enterprise CDB Caribbean Development Bank NCD Non-communicable diseases CIDA Canadian International Development NLTA Non-lending technical assistance Agency CLICO Colonial Life Insurance Company OECS Organization of Eastern Caribbean States CPA Country Poverty Assessment P4R Program for Results CPI Corruption Perception Index PPCR Pilot Program for Climate Resilience CPPR Country Portfolio Performance Review PPP Public Private Partnership DEMPA Debt Management Performance PSDP Private Sector Development Partnership Assessment DFID Department for International Development SPL Saint Lucia Labour Party DPL Development Policy Loan SDR Special Drawing Rights DVRP Disaster Vulnerability Reduction Project SIDS DOCK Small Island Developing States Sustainable Energy Initiative ECCB Eastern Caribbean Central Bank ECCU Eastern Caribbean Currency Union SEMCAR Supporting Economic Management in the Caribbean ECERA Regional Energy Regulator Program SME Small and Medium Enterprise EGRIP E-Government for Regional Integration SWAp Sector -wide approach Project EPIC Entrepreneurship Program for Innovation in the Caribbean RDVRP Regional Disaster Vulnerability Reduction Project ESMAP Energy Sector Management Assistance RPS Regional Partnership Strategy Program ERL Emergency Recovery Loan TAC Technical Assistance Credit FDI Foreign Direct Investment TFSCB Trust Fund for Statistical Capacity Building FY Fiscal Year UK United Kingdom GDP Gross Domestic Product UNDP United Nations Development Program GEF Global Environment Facility UNICEF United Nations Children s Fund GFDRR Global Facility for Disaster Risk Reduction and Recovery UN Women GNI Gross National Income US United States HDI Human Development Index WB World Bank HMIS Health Management Information System IBRD International Bank for Reconstruction and Development United Nations Entity for Gender Equality and the Empowerment of Women (previously DAW, INSTRAW, OSAGI, and UNIFEM) v

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7 I. INTRODUCTION 1. In June 2010, the Board of Executive Directors of the World Bank (Bank) discussed a joint Bank/IFC Regional Partnership Strategy (RPS or Strategy) for the six independent territories of the Organization of Eastern Caribbean States 1 (OECS) (Report No LAC). The Strategy covers a five year period which coincides with the duration of the election cycles in all six countries, although the timing of the elections in the countries is not aligned. The inter-related strategic objectives of the RPS are: (a) building resilience; and (b) enhancing competitiveness and stimulating growth over the medium term. This Progress Report assesses the implementation of the Strategy at the mid-term and outlines how the Bank will position itself strategically for the remainder of the RPS period. 2. The OECS countries were among the countries in the world hardest hit by the global financial and economic crisis and have experienced a significant lag in recovery relative to other countries in the Latin American region. Economic growth in the OECS has been severely undermined, with ripple effects across the economies, particularly through a decline in tourism activity and the FDI related construction sectors upon which these countries depend. Furthermore, the agriculture sector contracted due to pest infestation, drought and Hurricane Tomas in October The global slowdown also exacerbated existing weaknesses in the financial sector, increasing the risk of spillovers across countries. In addition, limited fiscal space, the result of high debt and debt service, severely constrained the governments ability to implement countercyclical policies to cushion the impact of the crisis. As a consequence, vulnerability across the region has increased and remains a major element of concern going forward. On the positive side, however, the OECS continued to pursue ambitious goals for further political and economic integration with the implementation of the OECS Economic Union. 3. The interventions proposed under the RPS remained valid and have targeted critical vulnerabilities that the countries face. The Bank has deployed a suite of instruments, including knowledge service coupled with development policy loans and investment loans in the following areas: (a) improving fiscal and debt sustainability; (b) protecting and improving human capital; (c) strengthening climate resilience; (d) strengthening the domestic financial sector; and (e) improving access to quality services for a more competitive business environment. 4. Progress has been slow but in most cases RPS outcomes remain achievable. For the most part, the investment projects and development policy loans programmed in the RPS are on track, albeit with adjustments in timing and level of financing to ensure effective use of IDA and leverage additional highly concessional financing from other sources. In the first half of the RPS (FY10-12), the Bank has provided record support to the OECS, with $85 million in lending projects, $32.7 million in grants and a sizeable increase in Bank-executed technical assistance. 5. While the Strategy remains relevant, going forward, increasing vulnerabilities and global economic conditions call for flexibility to permit the Bank to be responsive to client demands. In the second half of the RPS period, rising debt levels, financial sector vulnerability 1 While the OECS comprises six independent countries and three British Overseas Territories, this Strategy covers only the six independent countries, namely: Antigua and Barbuda; Dominica; Grenada; St. Kitts and Nevis; Saint Lucia; and St. Vincent and the Grenadines. Excepting St. Vincent and the Grenadines which did not join IFC, all are members of the World Bank Group. 1

8 and the impact of a possible double dip recession create a high degree of uncertainty for the OECS. Policy discussions with the authorities on these matters have intensified over the RPS period and once they mature, and the appropriate policy responses are identified, the countries will signal the type of Bank support they prefer. Whatever the outcome of that dialogue, the key objectives of fostering a regional approach to building resilience and in addressing structural constraints to growth remain highly relevant in these small and vulnerable economies, given the perverse interaction between vulnerability and small size. II. POLITICAL, ECONOMIC AND SOCIAL DEVELOPMENTS 6. Although there have been some changes in the political landscape, policies at a regional level have remained relatively consistent. Prime Minister Dr. Ralph Gonsalves of St. Vincent and the Grenadines was re-elected for a third consecutive term by a one seat majority over the opposition in December Prime Minister Dr. Kenny Anthony of Saint Lucia (hereinafter referred to as St. Lucia) triumphed over the incumbent to win 11 of 17 seats during the November 2011 elections. The Revised Treaty of Basseterre Establishing the OECS Economic Union came into force on January 21, 2011, with the ratification of five Member States: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, and St. Vincent and the Grenadines. The implementation of the Revised Treaty has been slow but steady, a daunting undertaking for any group of countries but especially for the small states of the Eastern Caribbean in light of their inherent constraints. Some Member States have not enacted the required enabling legislation to bring the Revised Treaty into effect as yet, however, the Member States have taken practical steps to implement the free movement of persons. 7. The impact of the global economic and financial crisis in 2009 was deeper in the OECS than in the rest of the Latin America and Caribbean region and there has been a significant lag in recovery. In the period , real GDP grew at an annual rate of about 5 percent average annual growth. However, in 2009, growth contracted by 5.7 percent manifested by a steep decline in tourism activity (9.2 percent) and the FDI-related construction sector (21.7 percent). Contraction persisted in most of the OECS member countries in 2010, at an average of -2.2 percent of GDP. The effect of Hurricane Tomas on St. Vincent and the Grenadines and St. Lucia in the last quarter of 2010 contributed to the slower recovery. Recovery remained subdued in 2011 as real GDP growth is expected to reach 0.6 percent owing to a weaker than expected pick up in construction and tourism activity. Growth will be spearheaded by St. Lucia and Dominica, while Grenada, St. Kitts and Nevis, and Antigua and Barbuda are expected to stagnate. Only St. Vincent and the Grenadines is still expected to mildly contract (-0.4 percent of GDP). 8. Total public debt levels surged as a consequence of the global downturn, with the overall OECS public debt rising by 13 percent of GDP between 2008 and 2010 to 85 percent of GDP at year-end 2010, thus keeping interest and debt service payments between 17 and 33 percent of current revenues in Given tight fiscal constraints, the capacity of OECS countries to implement counter-cyclical policies to cushion the impact of the crisis was limited. Most governments, guided by the Eastern Caribbean Currency Union (ECCU) Eight Point Stabilization and Growth Programme, underwent some degree of fiscal consolidation. As a result, the overall fiscal deficit in the OECS diminished from 6.9 percent of GDP in 2009 to 3.8 2

9 percent of GDP in However, the countries fiscal position remained fragile in 2011, with a deficit of 3.9 percent of GDP. 9. The 2009 global financial crisis also aggravated existing weaknesses in the OECS financial sector. The global crisis affected the main sources of growth, in particular tourism and real estate, and resulted in difficult macro-economic conditions in the OECS. Financial sector health indicators have deteriorated, as non-performing loans have increased, putting pressure on profitability and capital levels. Further, the weakness of the real estate market makes it difficult for banks to realize real estate collateral. In July 2011, the largest domestic bank in Antigua and Barbuda which accounts for 3.2 percent of the total assets of the ECCU banking system was taken over by the Central Bank. Meanwhile, the resolution of the failed insurance companies, British American Insurance Company (BAICO) and Colonial Life Insurance Company (CLICO), is still ongoing. It is estimated that the exposure of the OECS countries to CLICO and BAICO is about 12 percent of GDP and the loss of income from these insurance policies is, among other things, weighing on growth. Going forward, financial sector instability, high vulnerability to natural disasters, a protracted demand slump in the US and a potential double dip recession due to conditions in Europe, pose significant risks to fiscal sustainability, given the OECS countries ranking as some of the most highly indebted countries in the world. 10. OECS countries rank between 60 and 85 of 187 countries and are categorized as having high human development according to the 2011 UNDP Human Development Index (HDI). At 60, Antigua and Barbuda ranked the highest of all the OECS countries and at 85 St. Vincent and the Grenadines ranked the lowest. This places the OECS above the global small island developing states average for each indicator measured: life expectancy at birth, mean years of schooling; expected years of schooling and gross national income. The HDI also places the OECS countries slightly above the Latin America and Caribbean regional average and above other Caribbean countries like the Dominican Republic, Guyana and Suriname, but below Barbados and The Bahamas. Poor school retention and achievement among boys is one of the most important gender challenges confronting the OECS Member States. Boys have on average 1.1 percentage point more drop outs than girls. Secondary dropout rates for males can impose large social cost with high rates of idleness and criminality. To generate evidence on what works to retain boys in school and perform well while there, the Bank has been implementing the Boys at Risk Initiative in the Caribbean to enhance local capacity for monitoring and evaluation of successful interventions with at-risk youth. Finding consistently compiled and comprehensive social data, including progress towards achieving Millennium Development Goals, however, is a persistent challenge that was underscored in the RPS. The Bank in partnership with the OECS Secretariat has embarked on a number of complementary initiatives targeted at enhancing the collection of social data and supporting the establishment of mechanisms targeted at capturing, tracking and analyzing social indicators and statistics more systematically. III. TAKING STOCK AT MID-TERM A. Assessing Progress Towards Outcomes 11. Progress towards RPS outcomes has been moderate; with some notable advances in protecting and improving human capital and strengthening climate resilience and slow progress on improving access to quality services, while progress has been mixed on 3

10 strengthening the domestic financial sector with significant achievements in the insurance sector and slower progress on banking. Approximately a third of the outcomes have been achieved, with the others on track to be met by the end of the RPS period. The focus of the RPS thus far has been to provide urgent remedial measures to address the crippling effects of the global and regional crisis; however, in practice this has meant attempting to institute measures to address critical vulnerabilities which, if successful, will have positive effects in the short and medium terms. The results matrix in Appendix 1 summarizes progress to date across the Bank program. 12. Implementing the sub-regional/multi-country approach, while essential to support the OECS regional integration efforts, has been challenging. OECS Member States acknowledge that deepening regional integration is indispensable to improving institutional capacity and addressing scale economy constraints thereby building resilience. In fact, the strong focus on institutional capacity building across a number of sectors including financial sector, public financial management, energy, is expected to improve governance across the region. In that connection, while highlighting the challenges inherent in this approach, the RPS proposed to focus the delivery of Bank support in lending, grant and knowledge activities on subregional/multi-country operations where consistency in policy and action would produce significant cross-border benefits, to avoid further fragmentation among what are already small units. Leading with technical assistance at the regional level to build constituency, develop action plans and share knowledge, and supporting that further with analytical work, has borne fruit but has taken time. Due to capacity constraints and the need for coordination, often times at the highest political levels, deploying sub-regional/multi-country projects has been slow. Thus, there have been delays in project preparation and effectiveness. 13. The Bank is committed to the sub-regional/multi-country approach that capitalizes on its experience in accompanying OECS Member States in the establishment of regional institutions and the successful execution of multi-country operations. The Eastern Caribbean Telecommunications Regulatory Authority was established and supported with financing and technical assistance from the World Bank. Multi-country operations in education and health, that provided opportunities for harmonization of policies, exploiting economies of scale in procurement of goods and services, and shared learning, were supported through Bank financing and technical assistance. The Bank has observed the significant benefits associated with pursuing the sub-regional/multi-country approach within the OECS, including enhancing overall development impact, permitting access to a larger pool of concessional resources through regional IDA and improving project implementation and the cost-effectiveness of Bank services, and remains committed to this course. 14. Due to small scale and related challenges unique to the OECS, there are limited opportunities for IFC investment services; however, there has been significant uptake in IFC advisory services during the first half of the RPS period. The IFC s program is based on four strategic pillars: crisis response; financial inclusion and job creation; regional integration and competitiveness; and climate change. IFC continues to scope investment opportunities in the areas of infrastructure, distressed assets and offshore medical/education services. With the support of CIDA, IFC has established an advisory services team resident in the region. The advisory services focus in the OECS includes: improving investment climate, facilitating PPPs, tourism, and access to finance. As part of IFC s crisis response and regional integration strategy, IFC invested US$175 million in two insurance companies that operate across the Caribbean 4

11 including the OECS (one Trinidad-headquartered and the other Barbados-headquartered). As part of its financial inclusion strategy, IFC is actively working on establishing a credit bureau to serve the OECS. In addition, IFC launched the SME Toolkit in the leading bank in Grenada, helped establish an SME unit and provided trade finance to the leading bank in St. Lucia. Under regional integration and competitiveness, IFC has been actively working to improve the investment climate in the OECS. It is at an early stage of looking at tourism competitiveness in St. Lucia as well as on structuring PPPs in Grenada and St. Lucia. Under the climate change pillar, IFC is engaging with Dominica to provide advisory services for the exploitation of its geothermal resources. 15. Strengthening collaboration with sub-regional organizations and development partners and leveraging significant concessional resources, has supported the successful implementation of the first half of the RPS. The OECS have leveraged highly concessional regional IDA resources significantly increasing borrowing beyond national IDA allocations. The sub-regional institutions, particularly the OECS Secretariat and the Eastern Caribbean Central Bank (ECCB), have been champions in the execution of sub-regional operations, hosting knowledge sharing and capacity building events and facilitating regional policy dialogue and constituency building. The ECCB has been the main counterpart in interventions relating to: access to finance, investment climate, the financial sector and debt management. The OECS Secretariat has taken the lead in the social sectors and on climate resilience. The OECS countries are also benefitting from large regional programs funded by CIDA (approximately CAD 70 million combined) but administered by the Bank, the IFC or World Bank Group-related agencies, such as Entrepreneurship Program for Innovation in the Caribbean (EPIC), focused on private sector development, and administered by infodev, Private Sector Development Partnership for the English-speaking Caribbean (PSDP) administered by the IFC, and Supporting Economic Management in the Caribbean (SEMCAR), focused on improving public financial management, and implemented jointly by the Bank and the IMF. Pillar One: Building Resilience Results Area 1: Promoting Fiscal and Debt Sustainability 16. OECS Member States have steadily implemented activities aimed at promoting fiscal and debt sustainability and are on track to achieve the RPS outcomes. Through a suite of complementary interventions, the countries have made progress in improving public service delivery, containing the wage bill and strengthening debt management. 17. Debt management functions have been strengthened, through capacity building and technical assistance interventions deployed at a sub-regional level, with a view to improving debt sustainability. During the first half of the RPS period, both Antigua and Barbuda and St. Kitts and Nevis have entered into Stand-by Arrangements with the IMF that included comprehensive public debt restructuring that is critical to the achievement of debt sustainability in these countries. The ECCB continues to lead capacity building efforts on various aspects of debt management including conducting Debt Management Performance Assessments (DeMPAs) and debt sustainability analysis and preparing medium term debt strategies. At the request of the Caribbean countries, the Bank has helped define a comprehensive debt reduction framework for small developing countries, the Comprehensive Debt and Growth Framework. The Caribbean Development Bank (CDB) and the International Monetary Fund (IMF) have 5

12 expressed interest in collaborating on disseminating and implementing the framework in interested OECS countries. 18. Significant steps have been taken in enhancing public sector management and the quality of public expenditures. Development policy loans to Grenada and St. Lucia were critical in supporting the Governments efforts to contain the economic and social repercussions of the global financial crisis, also helped to stimulate counter-cyclical spending. Grenada, St. Lucia, and Antigua and Barbuda conducted functional reviews and human resource audits in critical ministries as a first step to containing the public sector wage bill. The EGRIP and the SEMCAR programs, focused on reforms in public financial management, tax and customs across the sub-region, will move from the current diagnostic phase and capacity and constituency building interventions to implementing tangible reforms in the outer years of the RPS. Results Area 2: Protecting and Improving Human Capital 19. To position itself to mitigate the effects of the global economic and financial crises, the OECS pursued, as a matter of urgency, interventions aimed at strengthening social protection systems. This has provided a launching pad for informed and coordinated action within the sub-region. The OECS Secretariat led the delivery of technical workshops and seminars where government officials shared experiences and received information on best practices with a view to building consensus on the actions that could be taken at sub-regional and national levels to strengthen social safety nets systems. Simultaneously, social safety nets assessments were conducted in five OECS countries by the Bank, in collaboration with UNICEF and UN Women, and these assessments provided the basis for policy reforms that are being implemented by governments. Excellent progress has been made to rationalize social safety net programs and implement targeting mechanisms in Dominica and Grenada. 20. Slow but steady progress is being made in increasing the proportion of qualified teachers and better skilled post-secondary workers in the OECS. New policy measures for teacher development at the primary and secondary levels have been agreed and are being implemented by the authorities resulting in an increase in the proportion of qualified teachers, with a view to improving the quality of education. The demand-driven technical and vocational training program, financed by the Bank, has supported the establishment of institutions and structures required for training and certification of post-secondary workers. However, training and certification of trainees have been slower than anticipated. 21. Acknowledging that non-communicable diseases (NCDs) are the major cause of death in the sub-region, OECS Member States have taken steps to improve their ability to prevent and manage NCDs. A growing portion of health spending in the OECS is dedicated to managing NCDs and policies and programs could focus more on prevention at a lower cost and for better results. National NCDs strategies by OECS Member States will be informed by analytical work supported by the Bank that identified a variety of policy options. Data on the epidemiology of NCDs in the OECS is limited, so the OECS Secretariat, in collaboration with the Bank, has been supporting interventions to improve the availability and use of data to further inform policy making, as well as to define a set of common regional indicators to monitor NCDs. Dominica and St. Lucia are exploring mechanisms to create incentives for achieving better results in the health sector applying the principles of results-based financing. Results Area 3: Strengthening Climate Resilience 6

13 22. Good progress has been made in strengthening climate resilience and enhancing the environmental sustainability of OECS countries. The frequency with which the countries experience natural hazards underscores the critical nature of investments in this area. The fact that infrastructure investments made under a series of Bank-financed operations in St. Lucia aimed at disaster vulnerability reduction withstood the passage of Hurricane Tomas evidences the progress made. 23. Good progress is being made towards improving understanding of the vulnerability of critical infrastructure and reducing the number of communities at risk to landslides. An inventory of public buildings and critical infrastructure in Grenada and St. Vincent and the Grenadines has been created as a first step in establishing a database for the conduct of vulnerability assessments. These activities are being supported through an innovative and sizable regional program that leverages grant and highly concessional financing from the Pilot Program for Climate Resilience. Further, thirteen communities in St. Lucia that have benefitted from the implementation of drainage works and guttering to ensure stable slopes for protection against flooding also withstood Hurricane Tomas. 24. Management of priority terrestrial and marine protected areas has improved but slow progress has been made in the establishment of long-term financing mechanism for critical ecosystems. Monitoring and evaluation systems that include biodiversity monitoring at the site level have been established for six OECS protected areas (one in each member state). Initial steps have been taken to establish a Caribbean regional endowment fund (which is expected by June 2012) and national trust funds for the OECS to promote conservation of priority coastal and marine ecosystems, although the effort has suffered delays due to coordination issues and a change in project implementing arrangements. Pillar Two Enhancing Competitiveness and Stimulating Sustainable Growth Results Area 4: Strengthening Domestic Financial Sectors 25. Steady progress is being made on addressing financial sector vulnerability and strengthening the regulatory and supervisory framework for the financial sector; however, the complexity of the issues and the high level of regional coordination required make progress slow. The Economic and Social DPLs supported actions aimed at improving the regulatory environment for the insurance sector in Grenada and St. Lucia, through the implementation of national insurance legislation. Although the orderly resolution of CLICO Barbados and BAICO (two regional insurance giants that collapsed in the aftermath of the financial crisis in late 2009) has been slow, significant progress has been achieved with the support of the Bank s technical assistance, including sale of the property portfolio, completed in May 2010; reduction of BAICO s liabilities through the sale of non-oecs subsidiaries by the Judicial Managers; development of a plan for the sale of the traditional portfolio of BAICO, endorsed by the OECS Government and CARICOM in early 2011; launch of the Health Insurance Support Fund in May 2011; systemic risk assessment of CLICO and BAICO; and the preparation of an issues paper on the restructuring of the OECS insurance industry. With regard to insurance regulation and supervision, ECCU Monetary Council has endorsed recommendation of the Core Committee on Insurance to establish a single regional insurance supervisor and the elaboration of its structure is in progress. The OECS Member States have established a task force, led by the ECCB, to prepare a strategy to strengthen the bank resolution framework, 7

14 restructure and consolidate the domestic banking sector and strengthen the framework for prudential supervision of banks. The CDB, the IMF and the Bank are members of the task force. The Bank s technical assistance on the financial sector is being financed in part through the support of UK Department for International Development (DFID). 26. Progress, albeit slow, is being made on the establishment of a sub-regional credit bureau as a means to increase private sector access to capital. The ECCB, with the support of the IFC, has begun elaborating draft legislation to facilitate establishment and operation of the credit bureau and engaging financial institutions to enlist their participation in the bureau. Results Area 5: Improving Access to Quality Services for a more Competitive Business Environment 27. OECS countries have taken concrete steps to improve their business environments through regulatory reforms that increase legal certainty and streamline administrative processes, however progress towards defined outcomes has been slow. The reforms focused on simplifying procedures for starting a business and trading across borders, supported by the IFC investment climate advisory services, are being implemented in parallel across the OECS in order to generate regional synergies and improve conditions for regional integration. Progress has been slow as the OECS face serious capacity constraints in legal drafting and the approval process for legislation and regulations is lengthy. Despite these constraints, draft bills and regulations have been prepared to implement business entry reforms and to regulate electronic transactions. 28. The OECS countries have sharpened their focus on leveraging private sector capital and expertise to achieve public policy objectives; in this regard, the IFC is supporting the identification, design and implementation of related projects. On the transaction implementation front, IFC is currently supporting Grenada in structuring and executing a PPP for its general hospital. Dominica is negotiating a Memorandum of Understanding with the IFC to develop the island s geothermal energy resources. This agreement contemplates a first phase to complete the necessary studies on the geothermal reserves, which, if confirmed, may lead to a second phase for the structuring of a PPP transaction. This will aid Dominica and potentially the broader OECS to reduce external vulnerability through diversification of energy sources away from fossil fuels. 29. Slow progress has been made on the establishment of a regional electricity regulator which was delayed due to deterioration in the political consensus. The Bank has successfully advocated for grant resources through the SIDS DOCK partnership (a joint initiative of the Alliance of Small Island States, UNDP and the Bank, launched with a pledge from the Government of Denmark) to lower the cost of establishment of the regulator by the OECS and secure participation of other interested countries. 30. Convinced of the importance of ICT as an enabler of growth, diversification, integration and competitiveness more broadly, OECS countries have taken steps to improve the access and quality of telecommunications and internet services. The sub-region has more than doubled the general population s access to ICT services as compared with 2005, with the financing and technical assistance of the Bank deployed through regional ICT programs. 8

15 B. Analyzing Portfolio Performance and Implementation 31. Portfolio performance has deteriorated slightly during the first half of the RPS period. Most indicators remained steady during the implementation period. However, total commitments at risk increased from 7.3% in June 2010 to 29.2% in February The large increase is due to the reduction in total number of projects from 16 to 12, while the number of projects at risk increased from two to four. The four projects currently at risk are: Grenada Public Sector Modernization TAC (P082392); Grenada Technical Assistance Credit (P101322); OECS (St. Lucia) Skills for Inclusive Growth (P097141); and St. Lucia Hurricane Tomas ERL (P125205). The disbursement rate has remained steady at about 20%. Current projections for close of FY12 keep the disbursement ratio at 19.6%. The average delay in effectiveness has improved significantly from 16.9 months in July 2009 to 8.1 months in January 2012, lower than the LCR average of 13.5 months. Most projects receive extensions, and some more than once, especially in the case of regional projects, which are extended by an average of 22 months. As a result of recurring extensions, the average project age for OECS projects is higher than the Caribbean region and LCR averages. Two projects out of the twelve operations in the OECS portfolio have moderately unsatisfactory ratings for progress towards the achievement of project development objectives. The last Country Portfolio Performance Review focused on effectiveness delays and the slow pace of implementation which leads to project extensions. Governments agreed to identify strong champions for the project early and take steps to try to maintain them throughout project preparation and implementation. The Bank committed to intensify project implementation support and provide opportunities for capacity building. Going forward, these issues will continue to be closely monitored. IV. ADJUSTMENTS TO THE RPS 32. While all aspects of the Strategy remain relevant, there have been a number of adjustments to the program occasioned by: changes in timing and financing of the operations, the introduction of emergency operations, a new lending operation to support a newly engaging client and provision for the outer years, the exercise of selectivity due to Bank resource constraints and the introduction of additional knowledge and technical assistance interventions due to strong client demand. The results matrix has been modified accordingly, by refining the outcomes and indicators, introducing new indicators where necessary and revising target dates. Appendix 2, 3, and 4 present summaries of the actual and indicative lending, trust funds and AAA programs under the RPS. Appendix 5 presents the actual and indicative lending volumes. 33. The strategic objectives, the sub-regional/multi-country approach and the five results areas of the Strategy remain valid and the Bank s mode of engagement appropriate. In fact, as the countries have been buffeted by exogenous shocks, the relevance of the Bank Group s planned interventions has been underscored. The Bank s mode of engagement has been to share knowledge and build constituency at a sub-regional level through analytical work and technical assistance and to follow with lending upon client demand. This mode of engagement is slower and more deliberate but it creates greater ownership and, in the process, encourages subregional action fostering better integration. It has been well received by the OECS countries and sub-regional institutions. The Bank has successfully consolidated its OECS portfolio; focusing on preparing larger lending operations and replicating those across a number of countries to maximize development impact and improve cost-effectiveness of Bank services by spreading the 9

16 fixed cost of preparing and monitoring programs. These large multi-country projects are inherently more time-consuming to prepare and riskier to implement, but the Bank has experience and a comparative advantage in this relative to other donors. The Bank is convinced of the indispensability of this approach for countries grappling with deepening integration and will continue on this course. 34. The investment projects and development policy loans programmed in the RPS continue to feature in the lending program, albeit with adjustments in timing and level of financing. Most of the lending operations proposed in the Strategy, with the exception of the OECS Financial Sector Strengthening and Regulation Project and the OECS Education Sector SWAp were or will be delivered. Regarding the Financial Sector Project which was envisioned as a US$6 million technical assistance project, the discussions aimed at reaching consensus for borrowing among the six countries were protracted. Rather than awaiting clarity on the issues surrounding the preparation of a lending project, the Bank responded swiftly; deploying technical assistance financed through grant resources, complemented by financing from DFID and its own resources to support technical assistance for financial sector resolution. The Education Sector SWAps will not be processed in FY12 as proposed; insufficient progress has been made in the elaboration of the national education sector strategies that would form the basis for Bank support to the sector. The Bank continues to pursue technical assistance and knowledge sharing to support the preparation of national and regional education sector strategies. To ensure effective use of IDA and to leverage additional highly concessional financing from the Pilot Program for Climate Resilience, the first phase of the OECS Regional Disaster Vulnerability Reduction Program (RDVRP) (comprising Grenada and St. Vincent and the Grenadines) was advanced to FY11. The second phase comprising St. Lucia and Dominica is scheduled to go to the Board in FY13. The Bank successfully leveraged national and regional allocations and PPCR grant and highly concessional resources, making the RDVRP projects the largest within each of the national portfolios. At the request of the St. Lucian and Vincentian authorities, the Bank team rapidly prepared US$20 million in Emergency Loans from IDA resources to support recovery and reconstruction efforts post-hurricane Tomas. A project concept note for a Global Environment Fund (GEF) Sustainable Land Use Planning and Management Project will be presented to the GEF in June The GEF/Adaptation Fund Climate Resilience Energy Provision has been dropped from the RPS. 35. Due to the challenges of coordination and complexity of multi-country operations, there have been delays in concluding project preparation for certain sub-regional/multicountry operations. Negotiations of the OECS Regional Energy Regulator Program were delayed by one year due to challenges in maintaining broad political consensus for the creation of this regional institution. Acknowledging the anticipated benefits of a regional energy regulator for the OECS, three interested countries, Grenada, St. Lucia and Antigua and Barbuda agreed to proceed with the establishment of same in FY11. The Caribbean Regional Communications Infrastructure Program is now scheduled to go to the Board in FY12 and will include Grenada, St. Lucia and St. Vincent and the Grenadines as well as the Dominican Republic. 36. The Bank program has been augmented to include the first lending operation to Antigua and Barbuda to support the government s efforts to transform its public sector and strengthen its social protection system. This loan, scheduled to go to the Board in FY13, is a follow-on to a grant that focused on enhancing the efficiency of public expenditures. During the first half of the RPS, Antigua and Barbuda engaged the Bank and other international financial 10

17 institutions (the IMF and the CDB) and sought assistance in executing its strategic response to the global financial and economic crises, the National Economic and Social Transformation Plan. The authorities successfully implemented the first year of a very stringent IMF Stand-by Arrangement, however, disbursements under the IMF program have stalled until a sustainable plan is articulated to resolve ABI Bank that was intervened by the ECCB in July Bank resource constraints required a high degree of selectivity in determining which interventions would be pursued. The selections were carried out based on expressed priorities. Internal resource constraints have affected planned analytical work and technical assistance more than lending. The analytical work that focuses on Renewable Energy and Island Interconnection was not initiated in FY11; however, discussions ensue as to the scope and financing for this work in future. The OECS PER, Debt Reduction and Public Sector NLTA and the Investment Climate Assessments, proposed for FY11 and FY12, respectively were dropped. 38. In response to strong client demand, the Bank and the IFC are providing technical assistance in key strategic areas to support the implementation of the OECS Economic Union, in close collaboration with sub-regional institutions. As part of a broader regional effort to stimulate sustainable growth in the Caribbean through informed and more inclusive dialogue, the Bank has initiated the Caribbean Growth Forum, in collaboration with the IDB, DFID and CIDA. Further, the Bank and IFC are contributing members to the ECCU Task Force for Growth and Development, along with other development partners such as the IMF and CDB. The Task Force is convened by the ECCB, and its objective is to analyze and recommend actions aimed at addressing the constraints to growth in light of the high debt levels that exist in the OECS. To help address the dearth of reliable and comprehensive social statistics, the Bank initiated activities in FY10 on an OECS Regional Statistics NLTA as a complement to the existing Trust Fund for Statistical Capacity Building (TFSCB) grant being implemented by the Secretariat to improve the compilation, analysis and dissemination of social statistics. Additional resources have been leveraged to broaden this work, and to support the OECS Secretariat in the preparation of an OECS Development Strategy and the establishment of a mechanism for monitoring and evaluating the progress of Economic Union implementation. 39. The FY RPS results framework has been revised to reflect adjustments in analytical work programs and implementation progress. RPS outcomes were refined in a few instances to reflect progress of implementation and the state of activities under implementation. For example, the outcome relating to the establishment of the electricity regulator has been scaled back to preparation of the draft treaty to enact the institution in view of delays. The outcome relating to strengthening the financial sector, now reflects both the need to restore financial sector stability and strengthen the regulatory and supervisory framework. Some indicators have been modified to account for changes in the timing of new projects, progress in program implementation and policy changes that invalidate existing indicators. For example, given delays in the implementation of OECS Skills for Inclusive Growth Projects, the indicator has been changed from percentage of trained youth employed to number of youths trained. The indicator on reduced debt levels as a proxy for improved debt management function has changed to the preparation of debt management strategies by multiple countries. While debt levels relative to GDP have reduced significantly, this is due to the GDP rebasing exercise undertaken by all OECS countries and would not be appropriately correlated with the countries efforts to strengthen the debt management function. In other cases, indicators have remained substantively 11

18 the same and target values or dates for achievement of targets have been adjusted to reflect implementation progress, or to text refined to better reflect the actual activities on the ground. V. LOOKING AHEAD 40. Going forward the Bank Group s engagement will remain focused on addressing the increasing vulnerabilities that confront the OECS through structural reforms supported by development policy lending. As the policy agenda is still uncertain, a high degree of flexibility in defining the Bank s future program is required to respond to changing circumstances and client demand. Rising debt levels, financial sector instability, high vulnerability to weather events and other exogenous shocks and sluggish growth place the subregion at extreme risk, particularly if a double dip recession materializes, due to very tight fiscal space and limited room to increase public debt. The policy dialogue around these challenges has intensified over the RPS period, but this dialogue has not matured to the level required to clearly outline the future program. 41. It is anticipated that the Bank will rely more heavily on development policy and results based lending instruments rather than investment loans to support key structural reforms and complement the substantial program of technical assistance that has been undertaken in the early part of the RPS period. The Bank will continue to seek out opportunities to lead with knowledge and technical assistance to define appropriate responses to existing and emerging challenges. Ongoing knowledge and technical assistance interventions across the program are reflected at Appendix 4. The Bank s technical assistance in support of financial sector stability is ongoing. It is anticipated that development policy loans will follow to support policy reforms contributing to financial sector stability and/or the implementation of the Comprehensive Growth and Debt Framework, and dialogue has commenced with the countries to this effect. The Framework is an outcome of analytical work initiated by the Bank in FY11 at the request of Caribbean countries. IT focuses on the following four pillars: i) private sector development; ii) fiscal sustainability; iii) debt sustainability; and iv) climate change resilience. The Framework has been discussed with the IMF and the CDB; both have expressed interest in partnering in its implementation in interested countries. Like Antigua and Barbuda, St. Kitts and Nevis has requested Bank support to advance the governments efforts in public sector modernization and strengthening social safety nets. If there is interest from the countries and conditions are conducive for lending, results-based lending may be utilized. The volume of lending for each operation reflected in Appendix 5 is indicative only. Table 1 below reflects the indicative and remaining IDA allocations under IDA 16 which coincides with the end of the RPS period. Actual IDA allocations will depend on: (a) the countries performance; (b) their performance relative to that of other IDA recipients; (c) the total resources available to IDA; (d) changes in the list of active IDA-eligible countries; (e) the terms of financial assistance provided (grants or loans); and (f) the amount of compensatory resources received for the Multilateral Debt Relief Initiative. Additionally, the indicative IBRD lending program is up to a maximum of $20 million for each OECS country for the period of the RPS (FY10-14). The actual volume of IBRD lending will depend on country creditworthiness, IBRD s lending capacity during the period of the RPS, and exposure management parameters. 12

19 Table 1: Indicative and remaining IDA 16 allocations Indicative IDA 16 (SDR) Remaining IDA 16 (SDR) Remaining IDA 16 (US$) Dominica Grenada St. Lucia St. Vincent and the Grenadines Total IFC advisory services will continue to provide support to: improve the investment climate in the OECS; improve the tourism strategy; focus on competitiveness and access to finance; and facilitate private sector involvement in PPPs. IFC is aiming at improving the investment strategy for industry competitiveness, particularly in the tourism industry, by: identifying competitive advantages to be exploited by countries; facilitating access to SMEs to make the most of the cruising industry, reducing transactions costs through trade facilitation and fostering dialogue between governments and the private sector to identify issues constraining competitiveness. Technical assistance by the Bank targeted at addressing the vulnerabilities facing the financial sector and strengthening the regulatory environment will pave the way for the IFC will explore options to crowd in private sector participation to help strengthen the financial sector in the OECS. In this regard, the IFC will explore potential structures that could be implemented for distressed assets and potential opportunities for the involvement of its insurance partners. In addition, IFC could provide trade finance and micro, small and medium enterprise (MSME) services (investment and advisory) as well as advisory services to enhance risk management and corporate governance within the financial sector. 43. The World Bank Group will seek opportunities to strengthen its collaboration with other development partners to maximize development impact and reduce clients transaction costs. The World Bank Group s partnership with CIDA is particularly noteworthy as the Bank is administering approximately CAD 70 million in trust fund resources to implement the SEMCAR, EPIC and PSDP programs, three Caribbean regional programs focused on private sector development and public financial management. The Bank has also leveraged resources from DFID to provide technical support to the financial sector resolution process. VI. RISKS 44. The risks highlighted in the RPS remain and have materialized to varying degrees during the first half of the RPS period. The Bank s program continues to support mitigation efforts. However, where the correlated risks identified simultaneously impact upon an outcome, as is the case with restoring financial sector stability in the OECS, mitigation is challenging and achievement of the outcome is significantly jeopardized. 45. Exogenous shocks and fiscal slippage. During the first half of the period of the RPS, the OECS have been impacted by: weather related events necessitating unforeseen public spending; swing in international prices of commodity imports; protracted recovery from the global crisis. These risks are difficult to mitigate, but the Bank s program with its focus on climate resilience, 13

20 fiscal prudence and economic diversification through support for critical industries including tourism, helps to manage these risks. 46. Debt. Public debt has surged as a consequence of the global downturn. This risk is exceedingly difficult to mitigate but the Bank s program is supporting governments efforts to reduce debt to sustainable levels or place it on a declining path, by improving debt management capacity among other things. 47. Political will. Varying levels of national ownership of regional reform agendas have led to delays in the implementation of a number of initiatives demanding a high level of regional coordination. To mitigate this risk, the Bank has continued: to engage in country dialogue and capacity building to ensure that clients have sufficient information to facilitate decision making; to empower regional change agents uniquely placed to move the reform agenda; and to strengthen coordination among developing partners to ensure coherence in approaches and consistency in advice. 48. Financial Sector. Liquidity risk, government exposures of some indigenous banks, and a deterioration of the private sector loan quality raise concerns about the vulnerability of the banking system. The collapse in 2009 of insurance sector giants exposed weaknesses in the region s regulatory framework for non-banks and highlighted the risk of spillovers both across countries and between non-banks and the banking sector. The Bank, the IMF and the CDB are collaborating with the OECS Member States in the design and implementation of a regional resolution strategy and the strengthening of regulations and supervision of the financial sector over the medium term. IFC will begin sounding out private sector interest and provide technical assistance to the OECS governments as they carry out the upstream work aimed at achieving financial sector stability. 49. Implementation capacity. The problem of finding and maintaining critical personnel for project implementation persists and is difficult to mitigate as it is inherent in small states. However, the Bank actively encourages training and capacity building efforts and intensive implementation support to help mitigate this risk. 14

21 Original RPS Outcome Debt management functions strengthened Indicator: Reduced debt levels (debt/gdp ratio) in all countries Baseline: Average % (end-2009) Target: Average 90% (2014) Fiscally sustainable wage bill ensuring key public services coverage Indicator: Public service wage bill reduced in the OECS (3 countries) Baseline (2008/9):AB 9.8; DM 12.2; GD 13.0; SKN 14.96; SLU 10.6; SVG 12.9 Target: < Baseline Improved government services across the region through the implementation of regionally integrated e-government services Indicator: Number of major new e-government services offered Baseline: 0 (2009) Target: 4 (2014) Greater linkage between public expenditures and development objectives Indicator: Integration of performance information from M&E mechanisms into the budget process in at least 3 countries by 2014 Revised RPS Outcome (If applicable) Indicator: Debt management strategy in at least 3 countries by 2014 Indicator: Establish regular reporting mechanism that contains performance information of selected government programs in at least 3 countries by 2014 Appendix 1: Results Matrix for the RPS FY10-FY14 Planned Milestones Pillar One: Building Resilience Result Area 1: Promote Fiscal and Debt Sustainability Comprehensive debt reduction framework has been implemented in at least 3 countries by end-2012 Recommendations from functional reviews and human resource audits are implemented to contain wage bill growth in at least 3 countries by end-2012 Outcome-oriented regionally focused e-government implementation plan for OECS published Baseline: 0 (2010) Target: 1 (2012) Capacity of governments for undertaking M&E of key programs and policies is strengthened Indicator: Existence of M&E Action Plans in at least 3 countries by end-2012 Progress Towards RPS Outcomes Indicator on debt management functions: GD is expected to prepare a debt strategy under the framework by SKN is expected to draft a debt strategy after the 2012 debt restructuring. SVG has a debt strategy that could be improved. Indicator on public sector wage bill: AB 7.9; DM 10.6; GD 9.0; SKN 12.3; SLU 12.6; SVG 11.9 (2010) Indicator on e-government services: Minor e-government services delivered and major ones on track. Indicator on efficiency of public expenditures: An M&E unit has been established in Grenada. Interest in dissemination of performance information is increasing. World Bank Assistance Lending: Debt Sustainability Programmatic DPLs FY13/14 Public and Social Sector Transformation (AB) FY13 Economic and Social DPLs (GD, SLU) FY10 OECS EGRIP (SVG) FY10 OECS EGRIP FY08 GD TAC (FY08) and Public Sector Management TAC (FY06) DM Growth and Social Protection TAC FY07 Non-lending: Efficiency in public spending (SKN) IDF FY12 Fiscal and Debt Sustainability NLTA (including supporting DeMPAs for remaining countries) FY12 OECS Growth and Development Strategy NLTA FY12 ECCB Debt and Growth TA FY12 Caribbean Growth Forum AAA FY12 OECS MTDS TA support to ECCB FY12 Crisis Resilience RSR TF FY12 Strengthening PFM, Tax and Customs (Caribbean-wide) SEMCAR TF FY11 Framework Solution for Caribbean Debt Restructuring AAA FY11 Efficiency in public spending (AB, GD, SLU) IDF FY10 Institutionalizing M&E in the OECS (CARICAD) IDF FY10 DeMPA (AB, GD, SKN) FY10 15

22 Original RPS Outcome Rationalized social safety net systems Indicator: Countries using objective, transparent and documented targeting instruments in cash transfer programs Baseline: 0 (2010) Target: 6 (2014) Increase in the proportion of qualified teachers at the primary and secondary levels (i.e. teachers with teacher training qualification) in the OECS (6 countries) Baseline: Average 59% (2009) Target: Average 62% (2014) Better skilled post-secondary workers in the labor force Indicator: % of youth enrolled in the training scheme employed 15 months after the start of their training Baseline : 0 (SLU, 2007); 0 (GD, 2009) Target: 75% (SLU, 2012); 65% (GD, 2013) Improved knowledge and information on the sub-region s chronic non-communicable diseases Indicator: Policy note on OECS Health disseminated in at least 3 countries by 2014 Revised RPS Outcome (If applicable) Indicator: Countries using objective, transparent and documented targeting instruments in cash transfer programs Baseline: 0 (2010) Target: 3 (2014) Indicator: Cumulative number of youth enrolled in training programs at level 1 or higher Baseline: 0 (GD, 2009); 0 (SLU, 2007) Target: 500 (GD, 2013); 870 (SLU, 2013) Progress Towards RPS Planned Milestones Outcomes Pillar One: Building Resilience Results Area 2: Protect and Improve Human Capital Number of countries with Indicator on targeting assessments of social assistance instruments: 3 (2012). programs including recommendations for improvement in targeting Baseline: 1 (2009) Target: 6 (beginning 2011) New policy measures for teacher development are agreed upon by 2012 Number of Caribbean Vocational Qualifications certifications awarded Baseline: 0 (SLU, 2007); 0 (GD, 2009) Target: 1265 (SLU, 2012); 895 (GD, 2013) A policy note on OECS Health published by mid-2012 Indicator on qualified teachers: Average 60.9% (2010). Indicator on youth enrolled in training programs: GD: 171 (2012); SLU: 299 (2012) Indicator on policy note: Representatives of all six OECS countries participated in a regional NCD policy note dissemination workshop in September World Bank Assistance Lending: Public and Social Sector Transformation (AB) FY13 Strengthening Social Safety Nets SWAp (GD) FY12 Education Sector (GD, SLU, SKN, SVG) SWAp FY12 Economic and Social DPLs (GD, SLU) FY10 IFC investments in private health and education DM Growth and Social Protection TAC FY07 Skills for Inclusive Growth (SLU FY07, GD FY09) Education Development Project (GD FY09, SVG FY03) Non Lending: Results Based Financing in Health (DM, SLU) RBF FY12 Build Capacity Through Knowledge Exchange on CCTs SSF (DM, GD, SLU) FY12 Health Policy ESW (Caribbean-wide) FY11 Education Sector (OECS) NLTA FY11 Improving Human Development Data (OECS) IDF FY11 Statistical Capacity Building (OECS) NLTA FY10 Social Protection (OECS) NLTA FY10 Teachers Career Path (OECS) ESW FY10 Making Youth at Risk Interventions Gender Sensitive (Caribbean-wide) BNPP FY10 IFC advisory services in PPPs 16

23 Original RPS Outcome Improved understanding of vulnerability of critical infrastructure Indicator: Vulnerability assessments/functions Baseline: Have been carried out for some buildings (2009) Target: Calculated for all public buildings in at least 2 sectors in at least 2 countries (2014) Number of people at high risk of landslides in SLU Baseline: Population of 4 named communities in SLU (2009) Target: 0 people living at high risk to landslides in SLU (2012) Improved management of the priority terrestrial and marine protected areas Indicator: M&E system established to monitor species and related ecosystems under the 6 OPAAL sites by 2012 Long-term financing mechanisms established for critical ecosystems by 2014 Indicator: National legislation for the establishment of country level protected areas trust funds adopted in 4 countries by 2014 Revised RPS Outcome (If applicable) Indicator: Database of public buildings established Baseline: 0 (2010) Target: 2 (2014) Reduced number of communities at high risk of landslides in SLU Indicator: Communities benefiting from landslide prevention interventions in SLU Baseline: 0 (2009) Target: 12 (2012) Planned Milestones Pillar One: Building Resilience Results Area 3: Strengthen Climate Resilience Development of exposure databases for critical public infrastructure initiated Baseline: 0 (end 2009) Target: in at least 2 countries (2011) Drainage works and guttering finalized in 4 communities in SLU (2012) Completion and approval of management plans in all 6 OPAAL sites by end 2010 Progress Towards RPS Outcomes Indicator on understanding of vulnerability of critical infrastructure: Inventory of public buildings and critical infrastructure in GD and SVG completed, including exposure data mapped to building footprints. Indicator on high risk of landslides in SLU: 13 (2012). Indicator on M&E system: M&E system established (2012). Indicator on long-term financing mechanisms: The regional endowment fund is to be established by June World Bank Assistance Lending: Disaster Vulnerability Reduction Project DVRP (Phase 2: DM, SLU) FY13 Pilot Program for Climate Resilience PPCR (Phase 2: DM, SLU) FY13 DVRP (Phase 1: GD, SVG) FY11 PPCR (Phase 1: GD, SVG) FY11 Hurricane Tomas ERL (SLU, SVG) FY11 SLU Disaster Management- FY09 Non-Lending: PPCR (Phase 2: DM, SLU) FY13 SSF Regional Disaster Vulnerability and Climate Risk Reduction Program (Caribbean-wide) FY12 Sustainable Financing of Marine Areas (OECS) FY12 PPCR (Phase 1: GD, SVG) FY11 Small Farmers Vulnerability Reduction Initiative (GD) JSDF FY11 Agriculture Risk Management (GD) NLTA FY10 IFC Private sector benchmarks in environmental standards OECS Protected Areas and Associated Livelihoods FY04 Implementation of Adaptation Measures FY07 17

24 Original RPS Outcome Improved regulatory and supervisory frameworks for the insurance sector as evidenced by the enforcement of the new insurance law in 4 countries by 2012 Creation of ECERA as the regulator of participating countries electricity markets by 2014 Increased access to ICT services for the general population Indicator: % population with access to broadband Internet services Baseline: 9% (2009) Target: 20% (2014) PPP s in relevant sectors to relieve government expenditures and improve service Indicator: Number of PPP projects undertaken in the region Baseline: 0 (2009) Target: 2 (2014) Simplified procedures for starting a business and trading Revised RPS Outcome Progress Towards RPS Planned Milestones (If applicable) Outcomes Pillar Two: Enhancing Competitiveness and Stimulating Sustainable Growth Results Area 4: Strengthen the Domestic Financial Sector Medium-term resolution At least 4 countries enacted the Indicator on financial sector strategy for the financial sector new insurance law aimed at strategy: Support to elaborate a Indicator: Draft comprehensive strengthening regulatory comprehensive strategy is strategy for restoring the stability environment by 2012 ongoing in collaboration with the of the financial sector by 2012 ECCB, the IMF and CDB. World Bank Assistance Lending: Economic and Social DPLs (GD, SLU) FY10 IFC advisory services and investments in the financial sector Improved regulatory and Indicator 1: Ministers of Finance Non-lending: supervisory framework for the agreed to establish a single Restoring Financial Stability in the financial sector regional insurance supervisor and OECS DFID EFO NLTA FY12 Indicator 1: Draft of a new the elaboration of its structure is Caribbean Insurance Crisis NLTA uniform insurance bill in progress. (BAICO/CLICO and FIRST) FY11 Strengthening supervision of the nonbanking financial sector IDF FY10 Indicator 2: Action plan to Indicator 2: Draft action plan is strengthen banking regulation and being prepared. Strengthening the Institute of Chartered supervision by 2012 Accountants of the Eastern Caribbean IDF FY10 Pillar Two: Enhancing Competitiveness and Stimulating Sustainable Growth Result Area 5: Improve Access to Quality Services for a more Competitive Business Environment Draft treaty establishing Treaty establishing the ECERA Lending: ECERA prepared for 2 countries ratified by participating countries Caribbean Regional Communications by by 2013 Infrastructure Program (GD, SLU, and SVG) FY12 OECS Energy Regulator Project (GD Launch of tenders for the Indicator on ICT access: 17% and SLU) FY11 provision of telecom services to (2012) IFC advisory services in energy and Indicator: % population with government, schools, hospitals and infrastructure (potential) access to broadband Internet rural areas by 2011 services Non-lending: Baseline: 9% (2009) Support and Expand the Caribbean Target: 15% (2014) Network of Business Incubators EPIC Required changes in law to be enacted by December 2010 in the first of the OECS countries to establish a divestment program At least 4 reports (assessments, surveys, manuals) regarding Indicator on PPPs: PPP mandate: was initiated but terminated at an advanced stage in A&B; was initiated in Grenada; is anticipated in St. Lucia. (Caribbean-wide) FY12 Renewable Energy and Island Interconnection (Caribbean-wide) AAA FY13 Regional Energy Strategy (Caribbeanwide) ESW FY11 Investment Climate Doing Business (OECS) NLTA FY11 IFC PPP advisory services opportunities for private sector investment 18

25 Original RPS Outcome across borders within the OECS by 2014 (IFC) Revised RPS Outcome (If applicable) Planned Milestones business environment in the Caribbean completed by 2011 Progress Towards RPS Outcomes World Bank Assistance Indicator 1: Reduction in the average number of days it takes to comply with business regulation related to business entry Baseline: DM:14; GD: 20; SKN: 45; SLU: 14 (2009) Target: DM: 8; GD:13; SKN: 26; SLU: 8 (2011) Indicator 1: Business entry regulations adopted in 4 countries by 2013 Indicator 1: Business entry regulations adopted in DM, SKN, and SLU (2012). Indicator 2: Reduction in the number of days to trade - Average number of days to comply with business regulation (Imports) Baseline: DM:15; GD: 19; SKN: 13; SLU: 18 (2009) Target: DM: 13; GD:17; SKN: 12; SLU: 16 (2011) - Average number of days to comply with business regulation ( Exports) Baseline: DM:13; GD: 14; SKN: 12; SLU: 14 (2009) Target: DM: 12; GD:12; SKN: 11; SLU: 12 (2011) Indicator 2: Reduction in the number of days to trade - Average number of days to comply with business regulation (Imports) Baseline: DM:15; GD: 19; SKN: 13; SLU: 18 (2009) Target: < Baseline (2014) - Average number of days to comply with business regulation (Exports) Baseline: DM:13; GD: 14; SKN: 12; SLU: 14 (2009) Target: < Baseline (2014) Indicator 2 (imports): DM: 15; GD: 15; SKN: 11; SLU: 18 (2012) Indicator 2 (exports): DM: 13; GD: 10; SKN: 12; SLU: 14 (2012) 19

26 Appendix 2: Actual and Indicative Lending Program for the RPS FY10 - FY14 RPS Pillars Bank Program FY10 FY11 FY12 FY13 FY14 Building Economic and Social DPLs (GRE, SLU) P, A Resilience P and P OECS EGRIP Project (SVG APL2) P P, A Potential Debt Sustainability Programmatic P, D DPLs Strengthening Social Safety Nets P A Project/SWAp P OECS Education Sector SWAp P,D OECS Disaster Vulnerability Reduction A P Project(Phase 1-GRE, SVG) P OECS Disaster Vulnerability Reduction Project (Phase 2 - SLU) P OECS Disaster Vulnerability Reduction Project (Phase 3 - DOM) P P R Antigua and Barbuda Public and Social Sector New Transformation Project - P Potential Framework /Financial Sector Programmatic DPLs New New Enhancing OECS Regional Energy Regulator Project P A Competitiveness and Stimulating Sustainable P OECS Financial Sector Strengthening and Regulation Project P P, D Growth Caribbean Regional Communications Infrastructure Program - P P R Note: Relevant FY is date to Board P: Proposed in RPS; A: Actual; D: Dropped; R: Revised projection; New: Not in RPS 20

27 Appendix 3: Actual and Indicative Trust Funds/Grants Program for the RPS FY10-FY14 RPS Pillars Bank Program FY10 FY11 FY12 FY13 FY14 Building Multi-Donor Trust Fund for strengthening P A Resilience PFM, Tax and Customs (CIDA s SEMCAR initiative, implemented by the Bank and IMF, Caribbean-wide) P IDF Grant to promote efficiency in public P, A spending (A&B, GRE, and SLU) (SKN) A P120474, P117873, P116859, P IDF Institutionalizing M&E in the OECS P, A (CARICAD) P IDF Grant to promote capacity building for P, A evidence-based policymaking in education and health sectors (In RPS as Improving Human Development Data) P GEF Sustainable Land Use Planning and R Management P GEF/Adaptation Fund Climate Resilient P, D Energy Provision GEF Sustainable Financing of Marine Areas P A P Pilot Program for Climate Resilience (Phase 1- A P GRE and SVG) - P Pilot Program for Climate Resilience (Phase 2 P R - DOM and SLU) - P BNPP Making Youth at Risk Interventions P, A Gender Sensitive (Caribbean-wide) P SSF Build Capacity Through Knowledge New Exchange on CCTs (DOM, GRE, and SLU) P SSF Regional Disaster Vulnerability and New Climate Risk Reduction Program P EPIC Caribbean Support and Expand P A Caribbean Network of Business Incubators P Results Based Financing in Health (DOM, New SLU) P JSDF Small Farmers Vulnerability Reduction New Initiative (GRE) P RSR Trust Fund for Crisis Resilience (supporting the preparation of the OECS Development Strategy and the M&E system for the OECS) P New Enhancing Competitiveness and Stimulating Sustainable Growth IDF Strengthening Accountability of the non- Banking Financial Sector P FIRST Strengthening Insurance Regulation and Supervision P IDF Strengthening the Institute of Chartered Accountants of the Eastern Caribbean P Note: Relevant FY is date to Board P: Proposed in RPS; A: Actual; D: Dropped; R: Revised projection; New: Not in RPS P,A P P, A A 21

28 Appendix 4: Actual and Indicative AAA (ESW + TA) Program for the RPS FY10-FY14 RPS Pillars Bank Program FY10 FY11 FY12 FY13 FY14 Building Framework Solution for Caribbean Debt P A Resilience Restructuring AAA DeMPAs (A&B, GRE, and SKN) P, A Fiscal and Debt Sustainability NLTA P,A (including supporting DeMPAs for remaining countries) OECS PER, Debt Reduction and Public D Sector NLTA OECS Education Sector NLTA P, A P OECS Health ESW The Growing P, A Burden of Non-Communicable Diseases in the Eastern Caribbean - P Social Protection NLTA (OECS) P, A OECS Teachers Career Path ESW P, A Attracting and Retaining Qualified Teachers - P Agriculture Risk Management NLTA P, A (GRE) P Renewable Energy and Island Interconnection AAA - P R OECS MTDS TA support to ECCB - New Regional Statistical work in OECS New (NLTA) P OECS Growth and Development Strategy New P ECCB Debt and Growth TA support New Caribbean Growth Forum AAA New P Enhancing Competitiveness Caribbean Insurance Crisis (name in RPS - BAICO/CLICO Resolution NLTA) P, A and Stimulating Restoring Financial Sector Stability A Sustainable Growth P Regional Energy Strategy ESW P A Caribbean Regional Electricity Generation, Interconnection and Fuel Supply Strategy (Caribbean-wide) P Investment Climate in the Caribbean (Doing Business follow-up) NLTA (OECS) P P, A Public Private Partnership: Strategies D and How To (IFC) Investment Climate Assessment AAA D (A&B, DOM, GRE, and SKN) Note: Relevant FY is date to Board P: Proposed in RPS; A: Actual; D: Dropped; R: Revised projection; New: Not in RPS 22

29 Fiscal year Appendix 5: Actual and Indicative Lending Volumes for RPS FY10-FY14 RPS Pillars* IBRD/IDA Lending Commitment in millions (US$) FY10 Pillar 1 Economic and Social DPLs Grenada P St. Lucia P OECS EGRIP Project (St. Vincent and Grenadines APL2) P FY10 Total 22.4 FY11 Pillar1 OECS Disaster Vulnerability Reduction Project (APL1) *- P Grenada St. Vincent and the Grenadines Hurricane Tomas Emergency Recovery Loans St. Lucia P St. Vincent and the Grenadines P Pillar 2 OECS Regional Energy Regulator Project P Grenada St. Lucia FY12 Pillar1 Grenada Strengthening Social Safety Nets Project P Antigua and Barbuda Public and Social Sector Transformation Project Pillar 2 Regional Communications Infrastructure Program (OECS IDA Blend)* Grenada St. Lucia St. Vincent and the Grenadines FY13 Pillar 1 OECS Disaster Vulnerability Reduction Project (APL2)*- Dominica St. Lucia Potential Framework /Financial Sector Programmatic DPLs FY11 Total FY12 Total **undefined FY13 Total 30.0 FY14 Pillar 1 Potential Framework /Financial Sector Programmatic DPLs **undefined FY14 Total FY10-14 Total Pillar 1 Building Resilience and Pillar 2 Enhancing Competitiveness and Stimulating Sustainable Growth *IDA amounts include national and regional IDA allocations 23

30 STANDARD CAS ANNEXES ANTIGUA AND BARBUDA Annex 1: Country Profile Population: 81,799 (Preliminary results of national census 2012) GNI per capita: US$16,284 (2011 World Economic Outlook) 1. Profile. Antigua and Barbuda (A&B) is a three-island economy (Redonda is the third) which accounts for about 25 percent of the combined Eastern Caribbean Currency Union s GDP. Antigua, the largest island, has a dry climate and a large number of white-sand beaches. The cultivation of sugar that started in the late 1600 s was abandoned in Aside from tourism the island s most important industry A&B s economy depends heavily on the service sector, particularly offshore services. According to the Caribbean Development Bank s Country Poverty Assessment, A&B has a poverty rate of 18.3 percent and an unemployment rate of 4 percent in 2005/2006. Social indicators do not reflect A&B s high per capita income. Adult literacy attainment, for example, lags compared to the other OECS countries. The 2011 UNDP Human Development Index ranks Antigua 60th, out of 187 countries. 2. Political Context. Independence: 1981 Last election: In March 2009, the United Progressive Party was reelected, winning 10 of the 17 available seats. 3. Economic Developments and Prospects. Antigua and Barbuda (A&B) experienced its worst recession in a decade, contracting by 10.3 percent in 2009 and 8.9 percent in 2010, due to decreases in tourism, manufacturing, and FDI-funded construction. The contraction of economic activity resulted in a significant slowdown in private sector credit growth. Economic growth is expected to stagnate in 2011, amid lower than expected resumption of high-end tourism projects. Nonetheless, the medium-term outlook on growth remains critically dependent on the demand for tourism. 4. Fiscal stance, debt and inflation. The fiscal situation remained fragile in 2011 despite significant improvements in 2010 amid decisive fiscal reforms, such as the broadening of the base of the Sales tax (VAT), the modification of the import duties and the introduction of an excise tax on alcoholic beverages and tobacco. The wide overall fiscal deficit of 17.5 percent of GDP in 2009, fell to -0.3 percent in Yet it is expected to have broadened to -1.7 percent in 2011 amid depressed economic activity. Nonetheless the primary balance which improved by 12 percentage points to a positive 1.7 percent of GDP in 2010, remained positive at 1.4 percent of GDP in By 2012, the overall balance is expected to turn slightly negative to percent of GDP, through improved tax administration and further efficiencies on the expenditure side of the budget, including a 10 percent reduction in the government s wage bill by 2012 relative to its 2010 levels. These are extraordinary achievements which were recognized in Spring Meetings with the A&B government and the World Bank team. However, A&B restructured a significant share of public debt held by Paris Club and domestic creditors and this has contributed to the achievement of the overall balance target and reduced public debt from percent in 2009 to 89.4 percent in 2010 and further to 89.1 percent in Inflation has increased amid a jump in food and fuel prices. In 2009 and 2010, food prices rose by 8.8 percent and 7.9 percent y-o-y, pushing inflation upwards from 2.4 percent to 2.9 percent, in Pressures increased in 2011, 24

31 with headline inflation materializing at 3.9 percent for the year. CPI should stabilize at about 3 percent by the medium term. 25

32 Annex A2: Country at a Glance 26

33 Antigua and Barbuda B alance o f P ayments and T rade (US$ millions) Total merchandise exports (fob) 42.. Total merchandise imports (cif) Net trade in goods and services Current account balance as a % of GDP Workers' remittances and compensation of employees (receipts) Reserves, including gold 64.. Governance indicators, 2000 and 2009 Voice and accountability Political stability Regulatory quality Rule of law Control of corruption C entral Go vernment F inance (% of GDP) Current revenue (including grants) Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue Current expenditure T echno lo gy and Infrastructure Overall surplus/deficit Paved roads (% of total) Highest marginal tax rate (%) Fixed line and mobile phone Individual.... subscribers (per 100 people) Corporate.... High technology exports (% of manufactured exports) External D ebt and R eso urce F lo ws Enviro nment (US$ millions) Total debt outstanding and disbursed.... Agricultural land (% of land area) Total debt service.... Forest area (% of land area) Debt relief (HIPC, M DRI) Terrestrial protected areas (% of surface area) Total debt (% of GDP).... Freshwater resources per capita (cu. meters) Total debt service (% of exports).... Freshwater withdrawal (billion cubic meters).... Foreign direct investment (net inflows).... CO2 emissions per capita (mt) Portfolio equity (net inflows).... GDP per unit of energy use (2005 PPP $ per kg of oil equivalent).... Composition of total external debt, 2009 (data are not available) Energy use per capita (kg of oil equivalent) Country's percentile rank (0-100) higher values imply better ratings Wo rld B ank Gro up po rtfo lio (US$ millions) IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interest payments US$ millions IDA Total debt outstanding and disbursed Disbursements P rivate Secto r D evelo pment Total debt service Time required to start a business (days) 21 IFC (fiscal year) Cost to start a business (% of GNI per capita) 9.6 Total disbursed and outstanding portfolio Time required to register property (days) 26 of which IFC own account Disbursements for IFC own account Ranked as a major constraint to business Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account n.a..... n.a..... M IGA Gross exposure Stock market capitalization (% of GDP).... New guarantees Bank capital to asset ratio (%).... Note: Figures in italics are for years other than those specified data are preliminary. 2/25/11.. indicates data are not available. indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 27

34 28

35 Annex B5: Poverty and Social Indicators Antigua and Barbuda Social Indicators Latest single year Same region/income group Latin Upper- America middle & Carib. income POPULATION Total population, mid-year (millions) ,001.7 Growth rate (% annual average for period) Urban population (% of population) Total fertility rate (births per woman) POVERTY (% of population) National headcount index * 29.6 Urban headcount index Rural headcount index INCOME GNI per capita (US$) 2,770 6,940 12,130 7,007 7,502 Consumer price index (2000=100) Food price index (2000=100) INCOME/CONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) Education (% of GDP) Net primary school enrollment rate (% of age group) Total Male Female Access to an improved water source (% of population) Total Urban Rural Immunization rate (% of children ages months) Measles DPT Child malnutrition (% under 5 years) Life expectancy at birth (years) Total Male ** Female ** Mortality Infant (per 1,000 live births) Under 5 (per 1,000) Adult (15-59) Male (per 1,000 population) Female (per 1,000 population) Maternal (modeled, per 100,000 live births) Births attended by skilled health staff (%) Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages months who received vaccinations before one year of age or at any time before the survey. Note: Latin-America rate corresponds to 4 U$S per day weighted by countries population, Source: SEDLAC World Development Indicators database, World Bank - 15 April Caribbean Development Bank Country Poverty Assessment Reports and Annual Economic Reports *Individual Poverty Index **

36 Annex B6: Key Economic Indicators Antigua and Barbuda - Key Economic Indicators Actual Estimate Indicator National accounts (as % of GDP) Gross domestic product a Agriculture Industry Services Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS) b Imports (GNFS) Gross domestic savings Gross national savings c Memorandum items Gross domestic product (US$ million at current prices) GNI per capita (US$, Atlas method) Real annual growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Gross Domestic Income Real annual per capita growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Total consumption Private consumption Balance of Payments (US$ millions) Exports (GNFS) b Merchandise FOB Imports (GNFS) b Merchandise FOB Resource balance Net current transfers Current account balance Net private foreign direct investment Long-term loans (net) Official Private Other capital (net, incl. errors & omissions) Change in reserves d Memorandum items Resource balance (% of GDP) Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF)

37 Antigua and Barbuda - Key Economic Indicators (Continued) Actual Estimate Projected Indicator Public finance (as % of GDP at market prices) e Current revenues Current expenditures Current account surplus (+) or deficit (-) Capital expenditure Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / total credit growth (%) Price indices( YR90 =100) Merchandise export price index Merchandise import price index Merchandise terms of trade index Real exchange rate (US$/LCU) f Real interest rates Consumer price index (% change) GDP deflator (% change) a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 31

38 Annex B8: (IFC) Committed and Disbursed Outstanding Investment Portfolio Antigua and Barbuda Committed and Disbursed Outstanding Investment Portfolio As of 12/29/2011 (In USD Millions) Committed Disbursed Outstanding FY Approval Company Loan Equity **Quasi Equity *GT/RM Partici pant Loan Equity **Quasi Equity *GT/RM Partici pant 2010 Aua Total Portfolio: * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 32

39 DOMINICA Annex 1: Country Profile Population: 71,293 (Preliminary results of National Census 2011) GNI Per Capita: US$6,833 (2011 World Economic Outlook) 1. Profile. Dominica (DOM) is the most northerly and largest of the Windward Islands. Mainstream tourism is not as developed as in other OECS countries due to the small number of white-sand beaches, high rainfall and poor air connections; however, eco-tourism is being promoted. Transport along with wholesale and retail trade are the mainstay of the economy and accounts for more than 20 percent of total value added. According to the Caribbean Development Bank s Country Poverty Assessment, DOM had a poverty rate of 28.8 percent and an unemployment rate of 13.9 percent in 2008/2009. Dominica ranks 81st out of 187 countries in UNDP s 2011 Human Development Index. Dominica is the only commonwealth member of the OECS, and the only island with a substantial surviving population of indigenous people, the Caribs. 2. Political Context. Independence: 1978 Last election: December In the recent election (December 2009), the Dominica Labour Party was re-elected winning a large majority, securing 18 of the country s 21 seats in Parliament. 3. Economic Development and Challenges. During the global economic crisis, DOM s GDP contracted to -0.7 percent in Its limited dependence on tourism, a mild pre-crisis boom in investments, and fiscal policies insulated it from experiencing a more severe contraction. GDP recovered to 0.3 percent in 2010 and is estimated to have increased by 0.9 percent in Economic activity is expected to reach 1.5 percent in 2012, but will remain below potential due to poor infrastructure, lack of competitiveness, and lower tourism receipts. Compared to other ECCU countries, DOM relies heavily on public investment, which has remained at 20 percent of GDP since Growth is projected to pick up gradually to 2 percent in the medium term. DOM s economy will remain vulnerable to external shocks related to lower demand from its key trading partners, financial sector weaknesses, and weaker performance in agriculture, manufacturing, and trade. 4. Fiscal stance, debt and inflation. DOM entered the crisis with a relatively strong fiscal position. This allowed the authorities to inject a significant fiscal stimulus during at about 7 percent of GDP. Therefore, the primary balance deteriorated by 3.6 percent of GDP in and materialized at -1.2 percent of GDP in The authorities agreed on the need for fiscal consolidation, and are appropriately planning to begin withdrawing the fiscal stimulus in The current account deficit improved from a 25.6 percent of GDP peak in 2008 to around 21.5 percent in due to falling commodity prices and a slowdown in FDI-related imports. Over the medium term, the current account deficit is projected to narrow by 17 percent of GDP with the falling cost of commodity imports, as food weight in the CPI is 30.2% and a recovery in tourist source countries, since tourism still accounts for a significant portion of the country s exports. With prudent fiscal policies, DOM is expected to achieve Eastern Caribbean Central Union s debt target of 60 percent by DOM has a relatively stable debt-to-gdp ratio. It declined from 100 percent in mid-2002 to 67.3 percent in mid-2011 following a large fiscal adjustment program, debt restructuring, and two IMF programs that supported shifting public financing to grants and concessional borrowing. It is expected to lower to 66.7 percent of GDP in While the recent surge in food and fuel prices has not yet translated into much 33

40 higher inflation, CPI inflation is projected to more than double in the second half of 2011, ending the year at about 3.5 percent. It should reach 2.6 percent at year-end 2012, in line with historical averages. 34

41 Annex A2: Country at a Glance 35

42 36

43 37

44 Annex B2: Selected Indicators of Bank Portfolio and Management CAS Annex B2 - Dominica Selected Indicators* of Bank Portfolio Performance and Management As Of Date 12/27/2011 Indicator Portfolio Assessment Number of Projects Under Implementation a Average Implementation Period (years) b Percent of Problem Projects by Number a, c Percent of Problem Projects by Amount a, c Percent of Projects at Risk by Number a, d Percent of Projects at Risk by Amount a, d Disbursement Ratio (%) e Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 7 0 Proj Eval by OED by Amt (US$ millions) % of OED Projects Rated U or HU by Number % of OED Projects Rated U or HU by Amt a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 38

45 Annex B5: Poverty and Social Indicators Dominica Social Indicators Latest single year Same region/income group Latin Upper- America middle & Carib. income POPULATION Total population, mid-year (millions) ,001.7 Growth rate (% annual average for period) Urban population (% of population) Total fertility rate (births per woman) POVERTY (% of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 1,180 2,910 4,900 7,007 7,502 Consumer price index (2000=100) Food price index (2000=100) INCOME/CONSUMPTION DISTRIBUTION Gini index *.... Lowest quintile (% of income or consumption) *.... Highest quintile (% of income or consumption) *.... SOCIAL INDICATORS Public expenditure Health (% of GDP) Education (% of GDP) Net primary school enrollment rate (% of age group) Total Male Female Access to an improved water source (% of population) Total Urban Rural Immunization rate (% of children ages months) Measles DPT Child malnutrition (% under 5 years) Life expectancy at birth (years) Total Male ** Female ** Mortality Infant (per 1,000 live births) Under 5 (per 1,000) Adult (15-59) Male (per 1,000 population) Female (per 1,000 population) Maternal (modeled, per 100,000 live births) Births attended by skilled health staff (%) Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages months who received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 15 April Caribbean Development Bank Country Poverty Assessment Reports and Annual Economic Reports *2009 **

46 Annex B6: Key Economic Indicators Dominica - Key Economic Indicators Actual Estimate Indicator National accounts (as % of GDP) Gross domestic product a Agriculture Industry Services Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS) b Imports (GNFS) Gross domestic savings Gross national savings c Memorandum items Gross domestic product (US$ million at current prices) GNI per capita (US$, Atlas method) Real annual growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Gross Domestic Income Real annual per capita growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Total consumption Private consumption Balance of Payments (US$ millions) Exports (GNFS) b Merchandise FOB Imports (GNFS) b Merchandise FOB Resource balance Net current transfers Current account balance Net private foreign direct investment Long-term loans (net) Official Private Other capital (net, incl. errors & omissions) Change in reserves d Memorandum items Resource balance (% of GDP) Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF)

47 Dominica - Key Economic Indicators (Continued) Actual Estimate Projecte d Indicator Public finance (as % of GDP at market prices) e Current revenues Current expenditures Current account surplus (+) or deficit (-) Capital expenditure Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / total credit growth (%) Price indices( YR90 =100) Merchandise export price index Merchandise import price index Merchandise terms of trade index Real exchange rate (US$/LCU) f Real interest rates Consumer price index (% change) GDP deflator (% change) a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 41

48 Annex B7: Key Exposure Indicators Dominica - Key Exposure Indicators Actual Estimated Projected Indicator Total debt outstanding and disbursed (TDO) (US$m) a Net disbursements (US$m) a Total debt service (TDS) (US$m) a Debt and debt service indicators (%) TDO/XGS b TDO/GDP TDS/XGS Concessional/TDO IBRD exposure indicators (%) IBRD DS/public DS Preferred creditor DS/public DS (%) c IBRD DS/XGS IBRD TDO (US$m) d Of which present value of guarantees (US$m) Share of IBRD portfolio (%) IDA TDO (US$m) d IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net shortterm capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 42

49 Annex B8: Operations Portfolio (IBRD/IDA and Grants) CAS Annex B8 - Dominica Operations Portfolio (IBRD/IDA and Grants) As Of Date 12/27/2011 Closed Projects 8 IBRD/IDA * Total Disbursed (Active) of which has been repaid 0.00 Total Disbursed (Closed) 8.92 of which has been repaid 7.72 Total Disbursed (Active + Closed) 8.92 of which has been repaid 7.72 No Applicable Data Found Active Projects Last PSR Supervision Rating Difference Between Expected and Actual Original Amount in US$ Millions Disbursements a/ Project ID Project Name Development Objectives Implementation Progress Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd 43

50 GRENADA Annex 1: Country Profile Population: 104,487 (2010 World Bank) GNI per capita: US$7,913 (2011 World Economic Outlook) 1. Profile. Grenada (GRE), which includes the two smaller islands of Carriacou and Petit Martinique, to its north, is the southernmost of the Windward Islands. Dubbed the Spice Island, Grenada was, until late 2004, the world s second largest exporter of nutmeg and mace. On September 7, 2004, Hurricane Ivan one of the strongest storms ever to strike the Caribbean region passed directly over Grenada, severely damaging the housing stock, the nutmeg plantations and the tourism sector. Damages are estimated at nearly twice its GDP. According to the Caribbean Development Bank s Country Poverty Assessment (CPA), GRE has a poverty rate of 37.7 percent and an unemployment rate of 24.9 percent in Grenada was ranked 67th in UNDP s 2011 Human Development Index out of 187 countries. 2. Political Context. Independence: 1974 Last election: 2008 Following the Marxist military coup and subsequent US invasion in 1983, power has fluctuated between the New National Party and New Democratic Party, with the latter being elected most recently in Economic Developments and Prospects. GRE experienced a significant economic slowdown during the global economic crisis. GDP fell from 1.7 percent in 2008 to -5.7 percent in 2009, decelerating further to -1.3 percent in 2010, mainly due to contractions in tourism and FDIfunded construction. Growth is expected to have stagnated in 2011, as private sector construction activity, tourism and agricultural output remain subdued. The long-term outlook is fragile and will depend on the progress toward fiscal consolidation, structural reforms, and debt management. In the medium term, authorities identified the following key macroeconomic objectives: ensuring fiscal and debt sustainability, reducing vulnerabilities in the financial system, and enabling private sector-led growth through structural reforms. 4. Fiscal stance, debt, and inflation. The primary balance slowly improved in recent years from over 10 percent of GDP following high capital expenditures in the aftermath of Hurricane Ivan. Grenada has a high debt service of 17 percent of government revenue, a wage-to-revenue ratio of 40.2 percent and an interest-to-revenue ratio of 11.6 percent. The debt-to-gdp ratio deteriorated significantly since 2008, going from 83.3 percent to 99.5 percent in It is projected to rise slightly and fall back to just under 100 percent by Twelve-month core inflation (excluding food and fuel) rose to 3.6 percent year over year in March 2010 reflecting the introduction of the VAT in February 2010, but fell back to 2.3 percent by end For 2011, core inflation is expected to stabilize at its historical average of about 2 percent, but headline inflation will remain higher (3-4 percent) due to a rise in international food and fuel prices (which represent approximately 50 percent of CPI). 44

51 Annex A2: Country at a Glance 45

52 46

53 47

54 Annex B2: Selected Indicators of Bank Portfolio and Management CAS Annex B2 - Grenada Selected Indicators* of Bank Portfolio Performance and Management As Of Date 12/27/2011 Indicator Portfolio Assessment Number of Projects Under Implementation a Average Implementation Period (years) b Percent of Problem Projects by Number a, c Percent of Problem Projects by Amount a, c Percent of Projects at Risk by Number a, d Percent of Projects at Risk by Amount a, d Disbursement Ratio (%) e Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 6 2 Proj Eval by OED by Amt (US$ millions) % of OED Projects Rated U or HU by Number % of OED Projects Rated U or HU by Amt a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 48

55 Annex B5: Poverty and Social Indicators Grenada Social Indicators Latest single year Same region/income group Latin Upper- America middle & Carib. income POPULATION Total population, mid-year (millions) ,001.7 Growth rate (% annual average for period) Urban population (% of population) Total fertility rate (births per woman) POVERTY (% of population) National headcount index.. 32* Urban headcount index Rural headcount index INCOME GNI per capita (US$).. 2,670 5,580 7,007 7,502 Consumer price index (2000=100) Food price index (2000=100) INCOME/CONSUMPTION DISTRIBUTION Gini index ** Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) Education (% of GDP) Net primary school enrollment rate (% of age group) Total Male Female Access to an improved water source (% of population) Total Urban Rural Immunization rate (% of children ages months) Measles DPT Child malnutrition (% under 5 years) Life expectancy at birth (years) Total Male Female Mortality Infant (per 1,000 live births) Under 5 (per 1,000) Adult (15-59) Male (per 1,000 population).. 141*** Female (per 1,000 population).. 109*** Maternal (modeled, per 100,000 live births) Births attended by skilled health staff (%) Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages months who received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 15 April Caribbean Development Bank Country Poverty Assessment Reports and Annual Economic Reports *Individual Poverty Index ** Index for 1998 *** 1997 data 49

56 Annex B6: Key Economic Indicators Grenada - Key Economic Indicators Actual Estimate Indicator National accounts (as % of GDP) Gross domestic product a Agriculture Industry Services Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS) b Imports (GNFS) Gross domestic savings Gross national savings c Memorandum items Gross domestic product (US$ million at current prices) GNI per capita (US$, Atlas method) Real annual growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Gross Domestic Income Real annual per capita growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Total consumption Private consumption Balance of Payments (US$ millions) Exports (GNFS) b Merchandise FOB Imports (GNFS) b Merchandise FOB Resource balance Net current transfers Current account balance Net private foreign direct investment Long-term loans (net) Official Private Other capital (net, incl. errors & omissions) Change in reserves d Memorandum items Resource balance (% of GDP) Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF)

57 Grenada - Key Economic Indicators (Continued) Actual Estimate Indicator Public finance (as % of GDP at market prices) e Current revenues Current expenditures Current account surplus (+) or deficit (-) Capital expenditure Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / total credit growth (%) Price indices( YR90 =100) Merchandise export price index Merchandise import price index Merchandise terms of trade index Real exchange rate (US$/LCU) f Real interest rates Consumer price index (% change) GDP deflator (% change) a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 51

58 Annex B7: Key Exposure Indicators Grenada - Key Exposure Indicators Actual Estimated Projected Indicator Total debt outstanding and disbursed (TDO) (US$m) a Net disbursements (US$m) a Total debt service (TDS) (US$m) a Debt and debt service indicators (%) TDO/XGS b TDO/GDP TDS/XGS Concessional/TDO IBRD exposure indicators (%) IBRD DS/public DS Preferred creditor DS/public DS (%) c IBRD DS/XGS IBRD TDO (US$m) d Of which present value of guarantees (US$m) Share of IBRD portfolio (%) IDA TDO (US$m) d IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net shortterm capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 52

59 Annex B8: (IFC) Committed and Disbursed Outstanding Investment Portfolio Grenada Committed and Disbursed Outstanding Investment Portfolio As of 2/29/2012 (In USD Millions) Committed Disbursed Outstanding FY Approval Company Loan Equity **Quasi Equity *GT/RM Partici pant Loan Equity **Quasi Equity *GT/RM Partici pant 2002 Bel air Total Portfolio: * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 53

60 Annex B8: Operations Portfolio (IBRD/IDA and Grants) 54

61 ST. KITTS AND NEVIS Annex 1: Country Profile Population: 52,402 (2010 World Bank) GNI per capita: US$12,686 (2011World Economic Outlook) 1. Profile. St. Kitts and Nevis (SKN) lies in the Leeward Islands. The two islands are a federation: Nevis, the smaller island, has a population of 11,108, and exercises autonomy in most areas, with the exception of foreign, defense, and certain aspects of economic policy. Nevis has its own executive branch (Nevis Island Administration) and approximately one quarter of the federation s population. The economy is based on tourism and agriculture, although the agricultural sector in St. Kitts has been shrinking. Unemployment is the lowest among OECS member countries at 6.3 percent in 2007/08. According to the Caribbean Development Bank s Country Poverty Assessment, SKN has a poverty rate of 21.8 percent in 2007, which has fallen this decade from its 2000 level of 30.5 percent, and an unemployment rate of 5.1 percent in The 2011 UNDP Human Development Index ranks St. Kitts and Nevis 72nd among 187 countries. 2. Political Context: Independence: 1983 Last election: January 2010 The current administration, representing the St. Kitts and Nevis Labour Party, was reelected in January Economic Development and Prospects. Economic activity in SKN contracted by 2.7 percent of GDP in 2010, due to the global recession and sharp declines in tourism, transport, and construction. Following weak domestic demand and labor market performances, GDP stagnated in A moderate rebound of 1.5 percent of GDP is expected for In the medium-term, and provided that demand picks up and structural reforms are accelerated, real GDP growth could reach an estimated 2-3 percent. 4. Fiscal stance, debt and inflation. The fiscal situation in SKN has deteriorated significantly in 2010 due to a drop in revenue and an increase in expenditures following Hurricane Omar in 2008 and the global economic recession. The primary balance decreased to -0.8 percent of GDP in 2010 (the first deficit in five years) as a result of a decline in total tax revenues due to depressed economic activity and contraction in international trade and transactions. The overall balance deteriorated from -2.9 percent of GDP in 2009 to -7.8 percent a year later. Faced with increasing fiscal imbalances in 2010, the authorities began implementing an ambitious program, supported by an IMF Stand-By Arrangement, to bring the primary balance to 5.6 percent of GDP by 2011 and the overall balance to -4.0 percent through fiscal consolidation, comprehensive debt restructuring, and financial sector strengthening. Preliminary results for 2011, point at an improved fiscal situation with a primary balance at 4.6 percent of GDP, and the overall deficit at 2 percent. In 2010, SKN s debt-to-gdp ratio was percent the world s second highest after Japan. The debt overhang is mainly caused by fiscal deficits; the acquisition of both liabilities but also assets (mostly land); as well as exogenous shocks (mainly natural disasters). In February 2012, the authorities launched a debt exchange offer to repay debt at lower interest rate over longer periods thus providing extensive debt relief to the country. Upon the expiry of the offer, holders of 96.8% of the aggregate amount of bonds and commercial loans eligible to participate in the offer agreed to exchange their claims for New Bonds. The domestic banking sector is highly exposed to this government debt because the authorities increasingly sought recourse to domestic financing. As a result, the government is facing both financing and 55

62 solvency difficulties and is, as such, at risk of debt distress. As a result of weak domestic demand, headline inflation remained subdued by 1.4 percent year over year at end Nonetheless, the wage bill is among the region s highest, and recent increases in public sector wages have put pressure on real wages. Food prices remain volatile, after decreasing from 6.4 percent in 2008 to 1.1 percent in 2009 and rising to 5 percent at end CPI is expected to stabilize at 2.5 percent in 2011 and

63 Annex A2: Country at a Glance 57

64 58

65 59

66 Annex B2: Selected Indicators of Bank Portfolio and Management CAS Annex B2 - St. Kitts and Nevis Selected Indicators* of Bank Portfolio Performance and Management As Of Date 4/16/2012 Indicator Portfolio Assessment Number of Projects Under Implementation a Average Implementation Period (years) b 6.5 N/A N/A N/A Percent of Problem Projects by Number a, c 0 N/A N/A N/A Percent of Problem Projects by Amount a, c 0 N/A N/A N/A Percent of Projects at Risk by Number a, d 0 N/A N/A N/A Percent of Projects at Risk by Amount a, d 0 N/A N/A N/A Disbursement Ratio (%) e 35.0 N/A N/A N/A Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 5 2 Proj Eval by OED by Amt (US$ millions) % of OED Projects Rated U or HU by Number % of OED Projects Rated U or HU by Amt a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 60

67 Annex B5: Poverty and Social Indicators St. Kitts and Nevis Social Indicators Latest single year Same region/income group Latin Upper- America middle & Carib. income POPULATION Total population, mid-year (millions) ,001.7 Growth rate (% annual average for period) Urban population (% of population) Total fertility rate (births per woman) POVERTY (% of population) National headcount index * 21.8*** 29.6 Urban headcount index Rural headcount index INCOME GNI per capita (US$) 1,700 5,460 10,150 7,007 7,502 Consumer price index (2000=100) Food price index (2000=100) INCOME/CONSUMPTION DISTRIBUTION Gini index ** 0.397***.... Lowest quintile (% of income or consumption) ***.... Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) Education (% of GDP) Net primary school enrollment rate (% of age group) Total Male Female Access to an improved water source (% of population) Total Urban Rural Immunization rate (% of children ages months) Measles DPT Child malnutrition (% under 5 years) Life expectancy at birth (years) Total **** Male **** Female **** Mortality Infant (per 1,000 live births) Under 5 (per 1,000) Adult (15-59) Male (per 1,000 population) Female (per 1,000 population) Maternal (modeled, per 100,000 live births) Births attended by skilled health staff (%) Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages months who received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 15 April Caribbean Development Bank Country Poverty Assessment Reports and Annual Economic Reports *Individual Poverty Index ** Only for St. Kitts, for Nevis is *** 2007 ****

68 Annex B6: Key Economic Indicators St. Kitts and Nevis - Key Economic Indicators Actual Estimate Indicator National accounts (as % of GDP) Gross domestic product a Agriculture Industry Services Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS) b Imports (GNFS) Gross domestic savings Gross national savings c Memorandum items Gross domestic product (US$ million at current prices) GNI per capita (US$, Atlas method) Real annual growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Gross Domestic Income Real annual per capita growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Total consumption Private consumption Balance of Payments (US$ ) Exports (GNFS) b Merchandise FOB Imports (GNFS) b Merchandise FOB Resource balance Net current transfers Current account balance Net private foreign direct investment Long-term loans (net) Official Private Other capital (net, incl. errors & omissions) Change in reserves d Memorandum items Resource balance (% of GDP) Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF)

69 St. Kitts and Nevis - Key Economic Indicators (Continued) Actual Estimate Indicator Public finance (as % of GDP at market prices) e Current revenues Current expenditures Current account surplus (+) or deficit (-) Capital expenditure Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / Total credit growth (%) Price indices( YR90 =100) Merchandise export price index Merchandise import price index Merchandise terms of trade index Real exchange rate (US$/LCU) f Real interest rates Consumer price index (% change) GDP deflator (% change) a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 63

70 Annex B7: Key Exposure Indicators St. Kitts and Nevis - Key Exposure Indicators Indicator Actual Estimated Projected Total debt outstanding and disbursed (TDO) (US$m) a Net disbursements (US$m) a Total debt service (TDS) (US$m) a Debt and debt service indicators (%) TDO/XGS b TDO/GDP TDS/XGS Concessional/TDO IBRD exposure indicators (%) IBRD DS/public DS Preferred creditor DS/public DS (%) c IBRD DS/XGS IBRD TDO (US$m) d Of which present value of guarantees (US$m) Share of IBRD portfolio (%) IDA TDO (US$m) d IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net shortterm capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 64

71 ST. LUCIA Annex 1: Country Profile Population: 174,000 (2010 World Bank) GNI per capita: US$7,521 (2011 World Economic Outlook) 1. Profile. St. Lucia (SLU) is the most densely populated of the four Windward Islands. The soil is generally fertile and the banana industry (and other agriculture products) makes SLU the biggest exporter of agricultural products among the OECS member countries. The pleasant climate and the sandy beaches have encouraged the development of tourism, particularly in the honeymoon sector which has become the main foreign exchange earner in the economy. According to the Caribbean Development Bank s Country Poverty Assessment, SLU has a poverty rate of 28.8 percent and an unemployment rate of 13 percent in 2005/2006. The 2011 UNDP Human Development Index classifies St. Lucia as 82th out of 187 countries. 2. Political Context. Independence: 1979 Last elections: 2011 The current administration, representing the St. Lucia Labour Party (SLP) was returned to office in December 2011, gaining 11 of the 17 contested seats. The remaining seats were taken by the United Workers Party. 3. Economic Developments and Prospects. SLU experienced a significant economic slowdown during the global economic crisis. Growth decreased from 5.8 percent in 2008 to -1.3 percent in 2009 as a result of downward pressures exerted on tourism arrivals, FDI, and exports. It bounced back to 4.4 percent in 2010, with the expansion in construction, trade, transport, and tourism. The outlook for 2011 reveals a positive growth rate of 2 percent and average of 2.5 percent in the medium term, but will depend on the recovery of SLU s main trading partners, implementation capacity, and external shocks. 4. Fiscal stance, debt, and inflation. The fiscal stance shows deterioration in the overall deficit of 5.8 percent of GDP in 2010, and the outlook for 2011 indicates an even bigger widening of the deficits (-8.1 percent according to projected estimates). These fiscal deficits are mainly structural in nature; warranting further structural reforms to which the government has stressed its commitment through fiscal consolidation. Over the medium-term, some improvement in the fiscal position can be expected from the forthcoming introduction of the VAT by April 2012, preparations for which are underway with assistance from CARTAC, and from the withdrawal of the reconstruction-related spending. SLU has one of the lowest debt-to-gdp ratios among OECS Member States and its risk level for debt distress is moderate. However, it has been in a deteriorating trajectory since The debt-to-gdp is estimated to have increased in 2010 to 65.3 percent, and is expected to have reached 71.8 percent in 2011 it is expected to further deteriorate to 87.6 percent over the medium term (in 2016). Despite the increasing debt numbers, the government has stressed its commitment to placing debt on a firm downward trajectory by running primary surpluses. In line with the strong recovery, domestic credit to private sector is estimated to have increased by 1.5 percent in A pick up in domestic demand has pushed inflationary pressures, with CPI inflation estimated to increase by 3.5 percent y-o-y in 2011, after printing a 4.3 percent y-o-y increase in Preliminary estimates of the balance of payments indicate that the current account deficit worsened in 2011, reaching percent of GDP, from percent in

72 Annex A2: Country at a Glance 66

73 67

74 68

75 Annex B2: Selected Indicators of Bank Portfolio Performance and Management CAS Annex B2 - St. Lucia Selected Indicators* of Bank Portfolio Performance and Management As Of Date 12/27/2011 Indicator Portfolio Assessment Number of Projects Under Implementation a Average Implementation Period (years) b Percent of Problem Projects by Number a, c Percent of Problem Projects by Amount a, c Percent of Projects at Risk by Number a, d Percent of Projects at Risk by Amount a, d Disbursement Ratio (%) e Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 10 4 Proj Eval by OED by Amt (US$ millions) % of OED Projects Rated U or HU by Number % of OED Projects Rated U or HU by Amt a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 69

76 Annex B5: Poverty and Social Indicators St. Lucia Social Indicators Latest single year Same region/income group Latin Upper- America middle & Carib. income POPULATION Total population, mid-year (millions) ,001.7 Growth rate (% annual average for period) Urban population (% of population) Total fertility rate (births per woman) POVERTY (% of population) National headcount index.. 25* Urban headcount index *.... Rural headcount index *.... INCOME GNI per capita (US$) 1,460 3,570 5,190 7,007 7,502 Consumer price index (2000=100) Food price index (2000=100) INCOME/CONSUMPTION DISTRIBUTION Gini index **.... Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) Education (% of GDP) Net primary school enrollment rate (% of age group) Total Male Female Access to an improved water source (% of population) Total Urban Rural Immunization rate (% of children ages months) Measles DPT Child malnutrition (% under 5 years) Life expectancy at birth (years) Total Male Female Mortality Infant (per 1,000 live births) Under 5 (per 1,000) Adult (15-59) Male (per 1,000 population) Female (per 1,000 population) Maternal (modeled, per 100,000 live births) Births attended by skilled health staff (%) Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages months who received vaccinations before one year of age or at any time before the survey. Note: Latin-America rate corresponds to 4 U$S per day weighted by countries population, Source: SEDLAC World Development Indicators database, World Bank - 15 April Caribbean Development Bank Country Poverty Assessment Reports and Annual Economic Reports *Individual Poverty Index **

77 Annex B6: Key Economic Indicators St. Lucia - Key Economic Indicators Actual Estimate Indicator National accounts (as % of GDP) Gross domestic product a Agriculture Industry Services Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS) b Imports (GNFS) Gross domestic savings Gross national savings c Memorandum items Gross domestic product (US$ million at current prices) GNI per capita (US$, Atlas method) Real annual growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Gross Domestic Income Real annual per capita growth rates (%, calculated from 2006 prices) Gross domestic product at market prices Total consumption Private consumption Balance of Payments (US$ ) Exports (GNFS) b Merchandise FOB Imports (GNFS) b Merchandise FOB Resource balance Net current transfers Current account balance Net private foreign direct investment Long-term loans (net) Official Private Other capital (net, incl. errors & omissions) Change in reserves d Memorandum items Resource balance (% of GDP) Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF)

78 St. Lucia - Key Economic Indicators (Continued) Actual Estimate Indicator Public finance (as % of GDP at market prices) e Current revenues Current expenditures Current account surplus (+) or deficit (-) Capital expenditure Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / total credit growth (%) Price indices( YR90 =100) Merchandise export price index Merchandise import price index Merchandise terms of trade index Real exchange rate (US$/LCU) f Real interest rates Consumer price index (% change) GDP deflator (% change) a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 72

79 Annex B7: Key Exposure Indicators St. Lucia - Key Exposure Indicators Actual Estimated Projected Indicator Total debt outstanding and disbursed (TDO) (US$m) a Net disbursements (US$m) a Total debt service (TDS) (US$m) a Debt and debt service indicators (%) TDO/XGS b TDO/GDP TDS/XGS Concessional/TDO IBRD exposure indicators (%) IBRD DS/public DS Preferred creditor DS/public DS (%) c IBRD DS/XGS IBRD TDO (US$m) d Of which present value of guarantees (US$m) Share of IBRD portfolio (%) IDA TDO (US$m) d IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net shortterm capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 73

80 Annex B8: Operations Portfolio (IBRD/IDA and Grants) 74

81 ST. VINCENT AND THE GRENADINES Annex 1: Country Profile Population: 109,333 (2010 World Bank) GNI per capita: US$6,447 (2011 World Economic Outlook) 1. Profile. St. Vincent and the Grenadines (SVG) consists of 32 islands. St Vincent, the northernmost island, is the country's commercial and political center, accounting for 90 percent of both the land area and population. The volcanic island is lush and green, its deep valleys cultivated with bananas, coconuts and arrowroot. The others belong to the Grenadines, a chain of about 800 islets extending between St. Vincent and Grenada, which attract a large number of yachting tourists. According to the Caribbean Development Bank s Country Poverty Assessment, SVG has a poverty rate of 30.2 percent and an unemployment rate of 18.8 percent in 2007/08. SVG ranks 85st out of 187 countries on the 2011 UNDP Human Development Index. 2. Political Context. Independence: 1979 Last election: 2010 The current administration, representing the Unity Labour Party was re-elected in December They have been in power since 2001, when 15 years of rule by the New Democratic Party came to an end. A constitutional referendum was held in SVG on 25 November 2009, which would have abolished the monarchy of SVG, headed by Queen Elizabeth II, and would have given power to the opposition. However, the proposal was supported by only percent of voters in the referendum, well short of the required two-thirds threshold. 3. Economic Developments and Prospects. The torrential rain in April 2011 that led to landslides, flooding, and extensive damage to infrastructure was the second natural disaster to hit SVG in less than six months. The estimated costs of the damages are around 3.6 percent of GDP. This event exerted further strain on an already challenging growth situation where the global economic crisis led to a contraction in growth of 2.3 percent in 2009 and Hurricane Tomas caused estimated damages of 5.3 percent of GDP, reducing growth further by 1.8 percent in Growth is estimated to have slightly contracted by 0.4 percent in 2011, but is projected to reach2.5 percent over the medium term, depending on increases in tourism and FDI. 4. Fiscal stance, debt and inflation. The central government s fiscal operations in 2010 and 2011 deteriorated due to Hurricane Tomas. Overall deficit is expected to increase to 5.8 percent of GDP in 2010 from its level of 3.2 percent in The 2011 budget, announced in late January 2011, included additional spending of about 1 percent of GDP for rehabilitation and reconstruction activities in the aftermath of Hurricane Tomas. Additional activities, about 0.6 percent of GDP, are expected to be executed by state-owned enterprises. The Government is aiming for a primary surplus of percent of GDP over the medium term so they can improve the capacity to respond to unfavorable exogenous shocks. Fiscal revenues have fallen and capital expenditure risen in 2011 leading to a projected primary deficit of 0.3 percent of GDP and an overall balance of -3.2 percent of GDP. Due to the persistent primary deficit, public debt keeps accumulating and the debt-to-gdp ratio is projected to hit 70 percent of GDP in 2011, which remains one of the lowest among the OECS countries. Given the commitment of the authorities for fiscal consolidation, and the upward revision in the GDP series, the risk of external debt distress is moderate. Increases in food and commodity prices will hurt the poor since 54 percent of the consumption basket is accounted for by food. After a year of deflation in 2009, inflation 75

82 has slightly picked up in 2010 to 2 percent and 4.7 percent in 2011, mainly reflecting the increase in food prices. 76

83 Annex A2: Country at a Glance 77

84 78

85 79