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PM Browne tells CDB Governors to Address Challenges now to consolidate gains and secure future

BASSETERRE, St. Kitts and Nevis – May 20, 2015…………..Prime Minister of Antigua and Barbuda the Hon. Gaston Browne has told his colleague governors of the Caribbean Development Bank that there are challenges that need addressing as a matter of urgency if they are to consolidate their gains and secure their futures.

He said that one of the challenges that need addressing in order to consolidate the future of the banks members is the managing and closing of the gaps between revenue and expenditure.
“In Antigua and Barbuda, persistent underperformance of revenues and the high and structural nature of public expenditure continue to create intractable fiscal deficits.  Being cognizant of the long-term implications of these imbalances, we will redouble efforts to place Antigua and Barbuda on a more sustainable fiscal path,” Prime Minister Browne stated.
He said that his government has already identified a series of revenue enhancing and expenditure reducing interventions that will secure improved fiscal performance and underpin a bold strategy to reduce the debt stock.  He said that these interventions are being supported by a robust public financial management reform agenda that is focusing on enhancing institutional arrangements to assess and manage fiscal risks, improving the PFM legal framework, revamping arrangements for procurement and contract administration, and strengthening internal audit, among others. 
“The strategies for improved fiscal performance are expected to yield results starting in 2015 – results that will allow the Government to establish and secure a macroeconomic environment that can encourage growth and investment,” Prime Minister
Prime Minister Browne also addressed the issues of correspondent banking relationships and the growing scrutiny which these relationships are attracting from OECD countries and OECD backed agencies and the resolution in a sustainable way the longstanding, thorny issue of regional transportation.
 
We are pleased to present below the full text of Prime Minister Browne’s presentation as a Governor for Antigua and Barbuda to the Caribbean Development Bank:
 
 
Statement by The Governor for Antigua and Barbuda The Honourable Gaston A. Browne CDB Board of Governors Forty-Fifth Annual Meeting St. Kitts and Nevis May 20 & 21, 2015
 
Honourable Chairman, esteemed Governors, members of the Board of Directors, Management and Staff of the Caribbean Development Bank (CDB), let me begin by thanking our gracious hosts, the Government and People of the Twin Island Federation of St. Kitts and Nevis, for the excellent arrangements which have been made in respect of this 45th Meeting of the Board of Governors of the Caribbean Development Bank.  Further, warm congratulations are extended to our Chairperson, the Hon. Dr. Timothy Harris, on his recent victory at the polls and we welcome him into the family of Governors of the Caribbean Development Bank.

Mr. Chair, a number of significant developments have taken place in our Region since the Board of Governors last met in May, 2014.  In the Organization of Eastern Caribbean States (OECS) specifically, there have been four changes in administration – in Antigua and Barbuda; Montserrat; St. Kitts and Nevis; and Anguilla.  In this regard, I wish to congratulate all newly installed heads of government and take this opportunity to remind ourselves that our respective electorates are counting on us to progress and advance a development agenda that promotes an increasingly higher standard of living for our peoples, in countries that are safe and environmentally sustainable.

Colleague governors, we meet in Basseterre at a time when there are a number of critical developmental challenges facing us.  These challenges need to be addressed as a matter of urgency if we are to consolidate our gains and secure our futures.  I will address four of these challenges which I deem to be critical in moving forward our development agenda.

On the fiscal front, the gaps between revenue and expenditure need to be managed and closed.  In Antigua and Barbuda, persistent underperformance of revenues and the high and structural nature of public expenditure continue to create intractable fiscal deficits.  Being cognizant of the long-term implications of these imbalances, we will redouble efforts to place Antigua and Barbuda on a more sustainable fiscal path.  As such, we have already identified a series of revenue enhancing and expenditure reducing interventions that will secure improved fiscal performance and underpin a bold strategy to reduce the debt stock.  These interventions will be supported by a robust public financial management reform agenda that will focus on enhancing institutional arrangements to assess and manage fiscal risks, improving the PFM legal framework, revamping arrangements for procurement and contract administration, and strengthening internal audit, among others.  The strategies for improved fiscal performance are expected to yield results starting in 2015 – results that will allow the Government to establish and secure a macroeconomic environment that can encourage growth and investment.

The introduction of growth inducing policies, aided and assisted by a rebounding global economy are expected to result in a narrowing of overall gaps; however our fiscal fortunes remain under serious threat by high debt payments and the ever present possibility of natural disasters. With respect to debt, at the end of 2014 our debt to GDP inched higher to 98% of GDP. This has forced us to take a closer look at contingent liabilities and the threat which they pose to debt sustainability. In this regard, we will be focusing on the supervision and management of our state-owned enterprises, which account for a large portion of overall fiscal risk.

Related to our fiscal fortunes, is the condition of our financial sector.  We anticipate the imminent release of the results of the Asset Quality Reviews which are being conducted by a renowned firm of external auditors.  We expect that for Antigua and Barbuda the aggregate gap between indigenous banks’ assets and liabilities will be significant, with bleak implications for the fiscal position.  However, along with other member countries of the Eastern Caribbean Currency Union (ECCU), and under the guidance of the Eastern Caribbean Central Bank (ECCB), we have commenced the process of enacting a suite of legislation to enhance the current legal and regulatory frameworks that govern banking business and banking operations.  Under the new legislation, banks will be required to hold higher levels of capital, operate in more transparent organizational structures and adhere to much higher standards of corporate governance.  The ultimate goal of the new suite of legislation is to provide the highest level of protection possible to depositors whilst constraining fiscal exposure.  In this regard, the new Banking Act will provide protection for deposits of up to EC$200,000.  In addition, Deposit Insurance legislation is being prepared for imminent enactment, thereby strengthening the overall legal framework in respect of deposit insurance.
 
Mr. Chair, Antigua and Barbuda is also concerned with the matter of Correspondent banking relationships and the growing scrutiny which these relationships are attracting from OECD countries and OECD backed agencies.  This ramped-up attention and the adoption of attendant mandatory regimes for reporting and information gathering by the North, come at a time when a number of our countries are unfairly labeled as major money laundering and drug trafficking centres and when there is downward pressure being exerted on our sovereign ratings by Moody’s, Standard and Poor’s and others.  The correspondent banking relationship is a critical one for our banks, representing an important element of the financial infrastructure which links our local economies to the global one.  If this relationship is impaired there would be serious implications for the conduct of cross-border transactions and the brokering of international agreements and ultimately for the growth and development outlooks for our countries.  This challenge we need to confront and manage as a matter of extreme urgency.

In addition to the foregoing, Chair, we need as a matter of exigency to resolve in a sustainable way the longstanding, thorny issue of regional transportation.  In any serious and strategic discussion on this matter, the subject of LIAT must arise.  Antigua and Barbuda acknowledges that serious and tough decisions need to be made with respect to the operational efficiency of the airline.  Operational efficiency, however, is arguably simply a necessary condition for the realization of a more profound vision, that is, Regional Integration.  We all agree that a more integrated Caribbean is desirable in securing the viability and sustainability of our relatively small economies.  Regional integration translates into regional aggregation: aggregation of land; aggregation of marine resources; aggregation of institutions; and aggregation of our human among other resources.  In this process of integration and aggregation, LIAT as the main bridge between our respective islands and countries, must remain a going concern and accorded due pride of place among other august Caribbean institutions such as the Caribbean Development Bank and the University of the West Indies. In this regard and towards this end, Antigua and Barbuda calls for frank and transparent discussions between and among shareholder governments on the strategic direction of LIAT.  We also call for due consideration to be given to a broadening of the shareholder base and invite other governments who benefit from the service that LIAT provides to become shareholders.

Mr. Chair, please permit me to reflect briefly on CDB’s financial performance.  We note with delight that the CDB continues to operate as a profitable entity, this despite the rigorous accounting and risk-based standards being applied.  Indeed, we applaud the high level of probity, accountability and performance of this institution and extend congratulations to the Board of Directors in the conduct of its strategic oversight role on behalf of the Board of Governors, and to the management and staff as they execute their functions accordingly.  Specifically, we are pleased that the Bank has returned for fiscal year ending December 2014 an operating profit of US$21.7 mn, an 87% increase over fiscal year 2013.  We are also pleased that for the year under review, Gross Approvals were up 61% to US$269.5 mn and included a number of projects with Renewable Energy (RE) and Energy Efficiency (EE) components.   We note, however, that disbursements at US$180.9 recorded a 5.7% decline from last year.  In this regard, we encourage the CDB, along with Borrowing Member Countries (BMC’s) to consider the factors that are necessary to improve this particular outcome. 

More generally, we congratulate the Bank on securing a revised “stable” rating from Standard and Poor’s in the Agency’s latest report, which also affirmed CDB’s “double A” status on its foreign currency rating.  We are fully aware that one of the considerations that go into the final rating is the debt servicing performance of Borrowing Member Countries (BMC’s).  In this connection, I wish to assure Governors, as well as the Board of Directors, Management and Staff of the CDB, that Antigua and Barbuda shall continue to accord CDB “most favoured creditor” status, irrespective of our fiscal challenges at home. 

Turning to membership, I take this opportunity to recognize and applaud the on-going efforts of the President and his staff in the pursuit of expanding membership.  Their work has been tireless and hopefully shall soon evidence further fruit with the conclusion of discussions and all attendant arrangements for the accession of Sint Maarten and Curacao as BMC’s, and Brazil as a Non BMC.

With specific reference to Antigua and Barbuda, I extend much gratitude and appreciation to the Bank for its assistance in completing our Medium Term Development Strategy (MTDS).  This process was beleaguered by the unavailability of private consultants but gained momentum with the direct involvement of the CDB and the able staff of the Ministry of Finance.  As a result, we can declare that very shortly the MTDS will be completed and Cabinet-approved.
In concluding, Chair, I wish to sound a note of determined optimism.  I am confident that we have within our region, the resources and the alliances to successfully negotiate what remains a very challenging period in our history.  We have proven time and time again that we can make the difficult choices; that we can put aside short term expediency for strategic advantage; that we can work together for the good of all and rise above individual considerations. These attributes are readily evident in an environment of trust, transparency, cooperation and visionary leadership.  On these pronouncements the CDB, from the Board of Governors to Staff, bears me out.  The story of the CDB is, to a significant degree, the Region’s story.  Whilst we cannot claim perfection, we can claim a track record of great achievement; and it is my considered view that, as a Region and as an Institution, our best days are ahead of us.
Thank you, Honourable Chairman.
 

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