Title page
Contents
OECD Development Co-operation Working Papers 2
Abstract 3
Foreword 4
Acknowledgements 5
Abbreviations and acronyms 9
Executive summary 10
1. Organisation of Eastern Caribbean States and its development financing mix: Vulnerability on the edge of ODA-graduation 12
1.1. The Organisation of Eastern Caribbean States: institutional and political context 12
1.2. Key OECS development and macroeconomic features 15
1.3. The transition finance mix of middle-income OECS countries shows an excessive reliance on ODA 20
2. Overcoming development financing challenges in middle-income OECS countries 25
2.1. Mobilising private investment while preserving quality and stability of financing 25
2.2. Mobilising domestic resources while avoiding negative impacts in neighbour countries 33
2.3. Addressing the debt sustainability challenge in a context of financing crunch 38
2.4. Responding to the OECS countries' transition challenges with a more effective use of official development finance 46
2.5. Harnessing the potential of green transition to mobilise additional resources aligned with OECS countries' national priorities 56
3. Recommendations for the DAC to support a smooth transition in middle-income OECS countries 60
3.1. Graduation is not the end of the story 60
3.2. The DAC could adopt a number of measures to smoothen OECS countries' transition and ODA graduation 61
References 69
Annex A. Citizenship by Investment schemes 75
Notes 77
Table 1.1. Development indicators 22
Table 2.1. In 2019 direct and indirect tourism contributions to GDP amounted on average to 36.4% in OECS countries 29
Table 2.2. The Inter-American and the Caribbean Development Banks provide eighty-five per cent of total non-concessional flows to ODA-eligible OECS 33
Table 2.3. The few OECS countries with sovereign credit ratings are considered to be low investment grade or below 41
Table 2.4. Multilateral organisations are the leading donors in terms of volumes 48
Figure 1.1. OECS members and associates 13
Figure 1.2. Eastern Caribbean region 14
Figure 1.3. OECS countries rank high in their human development 15
Figure 1.4. OECS countries are highly dependent on tourism and financial services (left) and significantly indebted (right) 16
Figure 1.5. From seeing rates of growth over 5% on average per year in the middle of the '80s, growth in ODA-eligible OECS countries has since slowed 17
Figure 1.6. OECS countries must overcome several obstacles to return to a path of sustainable and resilient growth 19
Figure 1.7. After reaching HIC level, the growth rates of Anguilla and St. Kitts and Nevis declined 20
Figure 1.8. OECS countries have a relatively high reliance on ODA but receive little OOF 23
Figure 1.9. ODA-eligible OECS countries are highly unequal in their ability to attract private flows 24
Figure 2.1. Remittances are less important in OECS countries than in peer countries 26
Figure 2.2. Private sector flows constitute a higher share of GDP in OECS countries than peers 27
Figure 2.3. FDI or Portfolio Investment inflows show high volatility in OECS countries 28
Figure 2.4. Access to finance in OECS countries is an impediment to private sector development 29
Figure 2.5. OECS countries depend heavily on fossil fuels as a source of electricity 31
Figure 2.6. St. Kitts and Nevis has seen FDI and Portfolio Investment slightly increase after its ODA graduation 32
Figure 2.7. Tax revenues in OECS countries lag behind peer groups 34
Figure 2.8. CBI revenues are a large share of OECS countries' financing mix 36
Figure 2.9. In 2021 OECS-eligible countries' public debt represents on average 77% of GDP 39
Figure 2.10. Antigua and Barbuda present unsustainable public debt levels and Grenada is in debt-distress 40
Figure 2.11. Public and publicly guaranteed debt represents more than half of total domestic debt 41
Figure 2.12. ODA to OECS peaked throughout the pandemic before returning to pre-crisis levels in 2021 42
Figure 2.13. OECS countries receive more and more ODA in the form of loans rather than grants 43
Figure 2.14. Saint Lucia's government faces a hardening of financing conditions to meet public investment needs 43
Figure 2.15. Including off-the-radar Chinese debt, Dominica's external debt could reach close to 80% of GDP 45
Figure 2.16. ODF to OECS countries amounted to USD 794 million on average per year in 2020-21 46
Figure 2.17. Recent trends show a regular increase of ODF to OECS countries 47
Figure 2.18. Agriculture has phased out as a common focus of international assistance to OECS countries, replaced by infrastructure and, in most recent years,... 51
Figure 2.19. In 2020-21 ODF to OECS countries channelled through regional projects represented on average USD 38.8 million of additional commitments per year,... 52
Figure 2.20. At most, technical assistance to ODA-eligible OECS countries could have reached USD 6.1 million per year in 2018-19 54
Figure 2.21. Technical assistance was not prioritised before ODA graduation 55
Figure 2.22. Climate-related events have produced higher amounts of damages in recent decades 56
Figure 2.23. In 2019-20, seventy-four per cent of climate-related assistance to ODA-eligible OECS countries targeted adaptation 57
Figure 2.24. Although OECS countries have been relatively successful in accessing climate finance, it is heavily focused on adaptation 58
Figure 3.1. Cruise ship passengers represent the majority of tourists in OECS countries but are characterised by low expenditure per visitor 65
Boxes
Box 1.1. Small Island Developing States particular vulnerabilities 16
Box 1.2. The choice of benchmarking peers 18
Box 1.3. OECS economies show convergence in growth rates, and higher income countries were more impacted by the COVID-19 crisis 20
Box 1.4. Transition finance at the OECD 21
Box 1.5. The case of Montserrat 22
Box 2.1. OECS countries are disproportionately affected by international subsidies to fisheries 30
Box 2.2. The case of St. Kitts and Nevis through the Transition Finance lens 32
Box 2.3. Barbados' change in tax policies in response to evolving international tax rules 35
Box 2.4. Despite the positive role CBI schemes can play, relying on them can involve significant risks 36
Box 2.5. Incorporating the 'off-the-radar' Chinese debt 45
Box 2.6. Despite being the largest donor in Saint Lucia, Chinese Taipei faces challenges in co-operating with other donors 48
Box 2.7. Fostering alignment and co-ordination to maximise the collective impact of development efforts 49
Box 2.8. Tightening donor principles require a rethinking of multilateral initiatives and approaches 53
Box 2.9. SIDS face challenges in accessing green funds 57
Box 2.10. Canada supports the Climate Finance Access Network to build capacities to better access climate finance 58
Box 3.1. Vulnerability Indicators 63
Box 3.2. Highlighting some OECS business opportunities 65
Box 3.3. Development Strategy Assessment of the Eastern Caribbean - Opportunities and priorities for action in the OECS 66
Annex Tables
Table A A.1. Citizenship by Investment schemes 75