Canada's Prime Minister Stephen Harper at the podium Sunday at the conclusion of the 5th Summit of the Americas in Port-of-Spain, Trinidad and Tobago. - ap

The Canadian government has pledged US$4 billion to the Inter-American Development Bank (IDB) which will help the IDB to increase its lending capacity in response to the economic effects of the current financial crisis in the Americas.

Canadian Prime Minister Stephen Harper made the announcement last Saturday at the Fifth Summit of the Americas in Port-of-Spain, Trinidad.

The new funds will temporarily double Canada's lending capital to the IDB, which is the largest and oldest regional development bank in the Americas providing assistance for economic, social and institutional development throughout the region.

Canada is a non-borrowing regional member of the bank.

Increase ordinary capital

Its pledge comes against the background of a recommendation by a high-level commission to the 50th annual meeting of the IDB board of governors held in Medellín, Colombia, in late March that they should sharply increase the ordinary capital of the bank from its current authorised level of US$101 billion to US$250-280 billion.

At the meeting, IDB President Luis Alberto Moreno indicated that as the global economic crisis worsens, the countries of Latin America and the Caribbean need further assistance from the IDB.

And in this regard "the IDB can and must do more," he stated. He indicated that the main challenge facing the bank is to close the gap between the unmet need of the region and the availability of funds.

Currently, the IDB can lend around US$8 billion a year on average.

However, in response, to the financial crisis in 2008, the bank approved a record distribution of US$11.2 billion.

In late March, the bank said in a statement that this year, "in an unprecedented effort, approvals could rise to $18 billion, including loans for a special emergency liquidity fund of US$6 billion created last year".

The last capital increase of the IDB took place in 1994, when member countries agreed to increase the ordinary capital of the bank by US$40 billion.

Recapitalisation

It is expected that the governors will eventually approve the current recapitalisation effort. Canada is therefore playing a leadership role in jump-starting the process.

This is all welcome news for the Jamaican government. Initially, it was anticipated that Jamaica would be able to borrow a further US$150 million from the IDB for budgetary support this year, as well as a possible additional US$200 million under the special facility for on-lending to the private sector.

However, with this pledge from Canada, the IDB will be able to provide additional financing to the GOJ. The exact amount will be communicated to the Jamaican officials in the next few weeks.

renee.shirley@gleanerjm.com