The main goal of the World Bank’s work in the OECS is to help countries boost economic growth and competitiveness as they bounce back from multiple crises, focus on their development goals for the near future, and strengthen their ability to withstand climate change and other external challenges.
Strengthened Resilience to Climate Change and Other Shocks
Preserving the marine and coastal ecosystems is vital to safeguard the foundation of economic activities and development, which relies on the richness and health of these natural assets. A proposed regional initiative for the Eastern Caribbean's blue economy seeks to promote sustainable and resilient economic growth by enhancing the sustainability and competitiveness of tourism, fisheries, and aquaculture. The COVID-19 pandemic has significantly affected economic growth and employment in these sectors, with particular hardship for marginalised groups, such as women and youth.
-To aid the revival of these sectors and simultaneously safeguard marine and ocean resources, the Bank will pursue three key strategies:
-Enhancing regional and national policies and institutions to encourage business recovery and attract new investments.
-Expanding innovative financing approaches aimed at boosting employment, productivity, and liquidity within the tourism, fisheries, and waste management sectors.
-Supporting strategic infrastructure investments to reduce risks and encourage private investment in blue economy activities, improve waste management, and enhance resilience to climate change.
The severe economic repercussions of the COVID-19 pandemic have caused a substantial increase in debt levels within the OECS countries, erasing the progress made in recent years. Prior to the pandemic, public debt levels in the OECS countries had significantly decreased. However, it's estimated that the OECS debt burden rose from approximately 69 percent of GDP in 2019 to 85.9 percent of GDP in 2021. Consequently, the region continues to have one of the highest debt-to-GDP ratios globally, which restricts the ability to use fiscal policies for economic recovery and growth.
● The Bank will provide support for the implementation of fiscal responsibility frameworks across the OECS through policy-based lending, technical assistance, and Performance and Policy Actions (PPAs) under the Sustainable Development Finance Policy (SDFP). This assistance will also enhance debt transparency through the annual publication of debt management reports. These frameworks aim to promote debt sustainability by setting limits on government spending and public debt levels. Additionally, they will establish independent oversight committees to oversee and assess the implementation of these frameworks.
● Another important area for reform involves enhancing the performance, transparency, and accountability of State-Owned Enterprises (SOEs) by publishing comprehensive financial reports on an annual basis. Additionally, the RPF (Recovery and Resilience Plan) aims to bolster fiscal reserves against external shocks by creating and funding contingency funds. These funds will have well-defined governance structures, criteria for their utilisation, and mechanisms for public accountability.
● The World Bank has allocated a total of US$56 million in financing for the Unleashing the Blue Economy of the Caribbean (UBEC) project. This initiative is aimed at assisting several Eastern Caribbean countries in harnessing the sustainable economic potential of their marine and coastal resources. Out of this funding, Grenada will receive $15 million, Saint Lucia will be allocated US$18 million, and Saint Vincent and the Grenadines will receive US$15 million. Additionally, there is an IDA grant of US$8 million provided to the OECS Commission for integrated regional initiatives.
● Furthermore, the World Bank's PROBLUE Multi Donor Trust Fund has extended grant financing of US$1 million to each of the following countries: Grenada, Saint Lucia, and Saint Vincent and the Grenadines, in addition to a US$1 million grant to the OECS Commission.
Improved Human Capital seeks to (i) strengthen the health and skills of the population for greater productivity and prosperity; and (ii) improve financial protection for the poor and vulnerable.
The ongoing Investment Project Financing (IPF) support in St. Lucia and St. Vincent and the Grenadines is expected to achieve several objectives: expanding the coverage of cash transfer programs for the poor and vulnerable and strengthening the human resource capacity to provide social protection programs and services.
● The bank plans to support the implementation of an improved tool for determining the eligibility of potential beneficiaries in St. Lucia. They also aim to enhance the coverage and efficiency of social protection (SP) systems in the other OECS countries through knowledge support and possible lending operations. Additionally, the expected COVID-19 Recovery Development Policy Operations (DPOs) for the OECS Blend countries will further strengthen income support programs, ensuring they can respond to natural disasters and protect those most affected by the COVID-19 crisis, all while maintaining fiscal and debt sustainability. Special emphasis will be placed on ensuring that social protection systems consider gender-specific needs and are inclusive, catering to the requirements of women and vulnerable groups, especially during natural disasters and other emergencies.
● Productivity growth and poverty reduction in the OECS countries have faced challenges due to poor learning outcomes in schools, a lack of skills in the population, and a mismatch between workforce skills and labor market needs. To address these issues in St. Lucia and St. Vincent and the Grenadines, the ongoing Bank-financed projects in human development and human capital resilience will take the following actions:
- Strengthen Technical and Vocational Education and Training (TVET) systems.
- Collect labor market data to inform training and labor market policies.
- Provide direct TVET training, especially for individuals with low income and unemployment.
- Establish financial assistance programs for low-income students.
- Improve the learning environment for TVET education in selected schools.
- Offer technical assistance (TA) and investments to enhance the overall institutional capacity and policy framework for a sustainable TVET and labor market system.
These efforts are intended to reduce gender inequality in economic opportunities and focus on addressing education and training gaps that contribute to this disparity.
Support more and better jobs by enhancing the enabling environment for business, and increasing digital and physical connectivity for greater innovation, efficiency, and competitiveness.
● Small and Medium Enterprises (SMEs) play a significant role in the region, accounting for more than 50 percent of employment and GDP. However, their competitiveness is hampered by limited access to financing. The Bank has collaborated with the OECS countries to establish and fund a partial credit guarantee (PCG) scheme. This scheme helps reduce the risks of lending to SMEs by absorbing some of the losses in case of default.
● Additionally, the Bank is supporting the development of the region's blue economy program. This program will provide matching grants to enhance the productivity, job creation, and capabilities of SMEs operating within the blue economy value chains, such as tourism, fisheries, aquaculture, and waste management. The program will focus on expanding women-owned and managed businesses in the blue economy through the implementation of a regional Micro, Small and Medium Enterprise (MSME) matching grants program. It will also enable women involved in the fisheries sector to access the COAST climate risk fisheries insurance, which safeguards their livelihoods in the event of extreme weather events.
● The Bank will continue to offer essential knowledge and advisory services with the aim of advancing reforms related to access to finance, which includes aspects like secured transactions, credit bureaus, and insolvency. Additionally, the WBG will work to enhance financial sector regulatory and supervisory frameworks, financial safety nets, non-performing loan (NPL) management, and the overall stability of the financial sector.
● The Bank will aid in the modernization of policy, legal, and regulatory frameworks, as well as the underlying payment infrastructure, to facilitate innovators in the Eastern Caribbean Currency Union (ECCU) to introduce new non-bank digital payment products and services. This effort will make it easier for merchants, governments, and individuals to regularly use digital payment methods and encourage the expansion of digital financial solutions for Small and Medium Enterprises (SMEs). Key areas of cooperation will include:
- Updating the Payment Systems Act and Money Services Business Act, along with their corresponding regulations.
- Developing a regulatory framework for overseeing digital financial services.
- Designing a regional Instant Payment System (IPS) accessible to banks, non-banks, and ECCU governments to reduce the costs and time involved in payment transfers.
● Continuing endeavors to enhance the legal and regulatory frameworks for cybersecurity, data protection, and privacy will establish the essential protections required for individuals and businesses to conduct digital transactions securely. To reduce gender inequality, the Bank will actively advocate for women's participation in courses focused on digital skills, broaden access to e-money accounts, and promote women's entrepreneurship through the ongoing Digital Transformation project.