Grenada has described as 'unfortunate and untimely' the downgrading of the credit rating of the Barbados-based Caribbean Development Bank (CDB) by the ratings agency Moody's Investors Services.
CDB's rating was cut by one notch from Aaa to Aa1.
Grenada Finance Minister Nazim Burke, addressing the annual CDB board of governors meeting that ended Thursday in the Cayman Islands, said the rating action comes at a time when many borrowing member countries (BMCs) were "fighting to nurture a very fragile economic recovery".
"To that end, BMCs are looking to the bank for resources for key infrastructure and social development projects. The possibility of higher borrowing costs is a major concern. Indeed, for countries like Grenada, whose borrowing is constrained to very concessionary financing, this is a very worrying development," Burke told the governors comprising mainly finance ministers from the English, French and Dutch-speaking Caribbean.
On Wednesday, CDB president Dr Warren Smith said that the downgrade followed a routine examination of the region's premier development bank.
He said the bank was "disappointed at the decision", but accepted that, given the current climate of uncertainty, its risk management practices need to be strengthened.
"To that end, we are undertaking an in-depth examination of our risk management framework and we will implement appropriate recommendations as we build resilience to the more dangerous world which we now occupy," Smith said.
Burke said Grenada was "deeply concerned about the prospect of CDB cutting its planned lending in half from the levels contemplated in the bank's strategic plan.
"We urge that this issue be revisited and the original levels contemplated be maintained. Lest we forget, CDB is the premier development finance institution for BMCs, such as those in the Organisation of Eastern Caribbean States," he said.
Smith said it was noteworthy that Moody's had also concluded that a financially strong CDB "is very much a function of the degree of financial and economic resilience which obtains in all of its shareholder countries, both borrowing and non-borrowing".
The non-borrowing countries include Canada, China, Germany, Italy, United Kingdom, Colombia, Mexico and Venezuela.
Figures released at the CDB meeting show that while the region stepped up efforts to contain fiscal deficits and burgeoning debt as economic growth stagnated, there had been a 'steep' reduction in CDB's approval and disbursement levels.
The bank said that approvals, including grants, totalled a modest US$167 million last year, down from US$300 million the previous year, and that disbursements followed a similar pattern, declining by an estimated 48 per cent to US$168 million in 2011.
"Therefore, the net transfer of resources between CDB and its borrowing member countries amounted to only US$15 million in 2011, considerably below net resource transfers of US$180 million in 2010," the bank said.