Montserrat No Longer Eligible for Basic Needs Trust Fund

Montserrat has been notified that it is no longer eligible to receive financial support under the regional programme Basic Needs ‎Trust Fund (BNTF).

According to a letter sent to the Hon. Financial Secretary Colin Owen from the Caribbean Development Bank (CDB), which runs BNTF “Montserrat has made commendable developmental strides and now exceeds the per capita income band for Group 2 Countries. This has resulted in the territory being reclassified as a Group 1 Country under the country groupings.

“As a consequence of there classification, Montserrat will no longer qualify for a [Special Development Fund] SDF country allocation nor be eligible for financing under the Basic Needs Trust Fund (BNTF),” the letter read.

According to Montserrat’s Country Strategy Paper 2012 -15 as published by the CDB in 2016 “Government aims to graduate from aid dependency for recurrent operations by promoting private enterprise as the main economic driver, and has devised medium-term plans and milestone targets toward attaining this outcome by 2020.”

As of 2017, Montserrat is still heavily dependent on UK DFID aid, and recently wrapped up meetings to design a new package of support moving forward.

The report noted that the national goals include, “the attainment of a stable and diversified economy with sustained economic growth; a well developed and effective education and training system; and equipping graduates to function effectively in the job market. Related targets include: (i) increasing the contribution of agriculture, tourism, mining and quarrying to Gross Domestic Product (GDP) by at least 100%; (ii) producing 60% of national electricity requirements from renewable resources; (iii) a population of 9,000; and (iv) reducing the population that lives below the poverty line to 6%, all by 2020.

“The progress to date towards achieving these outcomes has been mixed. Those related to increasing the population, tourism contribution, and reform of the public services have lagged.”

The same report also highlighted that the island’s need for ongoing loan and grant support could not be evaluated solely on its per capita GDP, which is used for classifying countries.

“Montserrat’s per capita GDP of $34,011 (2011) is well above the Eastern Caribbean Currency Union (ECCU) average and ranks the country as an upper middle-income country. Notwithstanding the country’s economic collapse following the volcanic devastation, the high per capita income reflects a peculiar characteristic of Montserrat, an extremely small population. GDP is generated, in large measure, by grant-funded, Government-led economic activity. The per capita indicator is therefore not representative of Montserrat’s economic strength, progress or its development status. Neither is it a useful representation of the welfare status of the average citizen.”

However, it is believed that Montserrat’s per capita GDP has further increased due to the large number (80+) of technical consultants now on the government payroll. This may have contributed to the regional bank’s recent decision to reclassify the island.

Montserrat, which is now considered a Group I country “can still benefit from SDF 9 funding for regional projects; support for Regional Public Goods and capacity-building initiatives; and for poverty reduction-focused projects such as Country Poverty Assessments and/or the preparation of a National Poverty Reduction Strategy; and emergency assistance in the event of a natural disaster. The financing amounts would not normally exceed the contribution to SDF 9, except in the case of emergency disaster assistance.”

Hon. Minister of Finance Donaldson Romeo confirmed in the Tuesday March 7th Legislative Assembly that they had been notified of changes by the CDB and were negotiating a way forward.

Montserrat has benefited from the BNTF since its inception in 1979, with projects designed to reduce poverty. In December, the island received a six-month extension to complete all outstanding projects financed under SDF 7, including the installation of a new water tank in Hope, Salem, Banks Road Rehabilitation and the Drummonds Sewerage Replacement sub-project.