May 25, 2009 No. 6/09-BDST. VINCENT AND THE GRENADINES TO GET CDB POLICY-BASED LOAN The Government of St. Vincent and the Grenadines is to receive a policy-based loan equivalent to USD25 million from the Caribbean Development Bank (CDB). CDB's Board of Directors has approved the loan which will support the Government's programme of macroeconomic reforms. Disbursement will be based on an agreed set of policy reforms which have been identified by the Government and are at varying stages of implementation. These include revenue policy and administration; expenditure management; debt management; public sector enterprise oversight; enhancing growth and improving competitiveness; and sustaining poverty reduction. The loan is part of a broader CDB strategy of support for St. Vincent and the Grenadines which places emphasis on strengthening macroeconomic management and policy reform; bolstering economic growth prospects through the upgrade of critical economic infrastructure; and forging output expansion in key sectors. CDB also proposes to support human resource development in that country and to tackle poverty through direct poverty interventions. In addition, the strategy includes broad support for environmental sustainability as an important cross-cutting issue in St. Vincent and the Grenadines. BORROWERGovernment of St. Vincent and the Grenadines (GOSVG)COUNTRYSt. Vincent and the GrenadinesEXECUTING AGENCY LOAN AMOUNT$25 mnSUMMARY OF PROJECT DESCRIPTIONThe Loan will be disbursed in two equal tranches. Disbursement will be based on an agreed set of policy reforms. The reforms have been identified by GOSVG and are at varying stages of implementation. These reforms cover revenue policy and administration; expenditure management; debt management; public sector enterprise (PSE) oversight; enhancing growth and improving competitiveness; and sustaining poverty reduction. The "home grown‚Äü nature of the policy reform agenda is expected to translate into timely implementation of the reforms. This should enhance the efficacy and development impact of the programme. BENEFITSThe proposed loan will support reforms that are being undertaken to strengthen economic management systems and help generate fiscal outcomes that are superior to what they would have been in the absence of these reforms. The loan will also assist GOSVG in containing borrowing costs during a period in which GOSVG has had to incur additional social safety net expenditure and forego revenue in response to the fallout from the global recession. The low-cost lending will help to mitigate the adverse debt dynamics that could result from the need to respond to the fallout. It is also expected that the programme will assist in strengthening growth prospects, sustaining income growth and improving social indicators through enhancements in the institutional arrangements that govern public sector resource management. BORROWERGovernment of St. Vincent and the Grenadines (GOSVG)COUNTRYSt. Vincent and the GrenadinesEXECUTING AGENCY LOAN AMOUNT$25 mnSUMMARY OF PROJECT DESCRIPTIONThe Loan will be disbursed in two equal tranches. Disbursement will be based on an agreed set of policy reforms. The reforms have been identified by GOSVG and are at varying stages of implementation. These reforms cover revenue policy and administration; expenditure management; debt management; public sector enterprise (PSE) oversight; enhancing growth and improving competitiveness; and sustaining poverty reduction. The "home grown‚Äü nature of the policy reform agenda is expected to translate into timely implementation of the reforms. This should enhance the efficacy and development impact of the programme. BENEFITSThe proposed loan will support reforms that are being undertaken to strengthen economic management systems and help generate fiscal outcomes that are superior to what they would have been in the absence of these reforms. The loan will also assist GOSVG in containing borrowing costs during a period in which GOSVG has had to incur additional social safety net expenditure and forego revenue in response to the fallout from the global recession. The low-cost lending will help to mitigate the adverse debt dynamics that could result from the need to respond to the fallout. It is also expected that the programme will assist in strengthening growth prospects, sustaining income growth and improving social indicators through enhancements in the institutional arrangements that govern public sector resource management.