OFFICE OF THE INSPECTOR GENERAL OF FOREIGN ASSISTANCE INSPECTION REPORT (DRAFT) : AID LOANS TO THE CARIBBEAN DEVELOPMENT BANK

AID loans 538-L-001, 002, 003 support CDB development loan activities in lesser-developed Caribbean anglophone states. Inspection review undertaken to determine whether AID loan-financed activities were indeed fulfilling original, stated objs. Inspectors determined that more thorough proposal review by AID could have foreseen & overcome delays and cost overruns associated with deep water port construction in Dominica & St Lucia. In the Dominica case, cost estimates have escalated from $2.7M to $5.6M due in part to the use of an inaccurate exchange rate in a consultant"s original calculation and disregard of an initial finding on the required depth for pilings for ship berths. Now, a delay in receiving additional pilings is extending the construction schedule. With questionable prospects of a continuing market for its heavily-subsidized banana industry and no evidence of new growth in tourism, Dominica"s repayment capability is suspect. Likewise, in St Lucia, cost estimates of port facility have increased from $2.8M to $5.1M, due primarily to delays occasioned by damaged test pilings and refusal of construction firm to accept consulting firm"s specifications. Debt repayment not considered problem, but serious doubt that harbor mouth is wide enough and that harbor itself large enough to allow maneuverability of full contingent of ships. Of $6M earmarked for low-income housing under 538-L-002, CDB has executed sub-loans thus far for only $3.5M. Forced revision of unit cost estimates from $1700 to $4500/house demonstrates unrealistic nature of original estimate. Uncompleted units examined in Dominica currently running up costs of $7000/unit, raising questions of how projected number can be financed and how low-income tenants can purchase them. St Lucian govt cannot afford to purchase urban land on which housing to be built. Inspectors rec that AID provide closer review of tech & econ feasibility of CDB & other multilateral dvlp bank sub-loans.