The World Bank’s Board of Executive Directors have approved a project to help Saint Lucia implement reforms in fiscal policy management, increase climate change resilience, and improve the business environment. The $40 million dollar investment will help Saint Lucia’s sustainable development by generating extra revenue, secure additional financial resources that can be directed towards poverty reduction efforts, as well as help the country build up its resiliency against future shocks.
The COVID-19 pandemic had significant impacts on Saint Lucia’s economy, leading to a rise in public debt and poverty. In 2020, public debt reached 94.2 percent of the country’s gross domestic product, up from 62.0 percent in 2019. Despite recent efforts to implement careful financial policies and strengthen public administration, Saint Lucia still faces fiscal challenges.
Like many small island states, Saint Lucia is also at risk of climate impacts, including gradual changes in rising sea levels and coastal erosion, as well as sudden events like hurricanes, floods, and landslides. These events can be especially harmful to tourism and agriculture, significantly impacting its economy and finances. The country also faces obstacles to private sector growth, including limited access to credit, regulatory bottlenecks, insufficient public infrastructure, and high electricity costs.
To help Saint Lucia tackle these challenges, the project will have two main pillars. The first pillar supports Saint Lucia’s reforms toward fiscal sustainability, increasing revenue and transparency, and managing resources more efficiently. This includes assistance for the implementation of new fiscal policies announced by the government, such as the introduction of a Health and Citizen Security Levy (HCSL) and raising taxes on cigarettes. Additionally, it will support the development and implementation of new regulations for public financial management, rules for public procurement, and the consolidation of the Public Debt Management Act.
The second pillar will support efforts in climate change mitigation and adaptation by helping the government implement the National Energy Policy and Climate Change Bill, which aims to speed up the shift to an economy with lower carbon emissions by promoting the use of renewable energy sources, reducing reliance on imported energy, and cutting costs. To improve the business environment, the project includes measures to help implement the Insolvency Bill and Security Interest in Moveable Property Act, which make it easier for businesses to access funds.
“The proposed operation underscores Saint Lucia’s determination to navigate challenges with resilience and innovation. Through the implementation of strategic measures, such as the Health and Citizen Security Levy and progressive fiscal reforms, Saint Lucia is taking active steps to shape a better future for its people. Commitment to green and resilient private sector growth reflects a vision where economic prosperity goes hand in hand with environmental sustainability,” said Lilia Burunciuc, World Bank Country Director for the Caribbean.
The resources will be deployed via a Development Policy Credit, a financial instrument the World Bank uses to support policy and institutional reforms to help countries achieve sustainable growth and reduce poverty.