A 1970s Idea’, Gonsalves!
In a comprehensive policy critique, former Prime Minister Dr. Ralph Gonsalves has strongly condemned the New Democratic Party’s (NDP) proposal to establish a National Development Bank, labeling it an outdated “1970s idea” that is both structurally flawed and financially redundant in the modern era.
Speaking on his weekly radio program, Gonsalves drew on his extensive background as a student of economics and his 17 years on the Eastern Caribbean Central Bank Monetary Council to argue that the proposed bank is an obsolete financial instrument. Instead of driving development, he warned, history and regional precedents suggest the bank would quickly deteriorate into an insolvent political piggy bank.
A central pillar of Gonsalves’ critique focuses on the NDP’s announcement of a $2 million USD grant from Taiwan specifically earmarked to capitalize the National Development Bank, alongside $1.5 million USD for social programs.
Gonsalves openly questioned whether this $3.5 million USD sum represents genuine “new money” or is merely a redistribution of the pre-existing $4 million USD annual civic structure grant that St. Vincent and the Grenadines historically receives from Taiwan.
Gonsalves detailed that during his tenure, he had successfully negotiated to increase this annual civic grant from $1 million USD to $2 million, and eventually to $4 million, with further understandings to raise it to $5 million and $6 million in subsequent years.
If the Taiwanese government has simply redistributed the existing $4 million USD allocation into different accounts, Gonsalves warned of severe domestic repercussions. Specifically, he noted that this annual fund was previously utilized to finance vital youth empowerment and training initiatives, such as the “ON-SITE” six-month vocational training program, and the “PRIME” and “PRIME Plus” micro-enterprise grant programs.
Gonsalves’ opposition is deeply rooted in local and regional financial history, particularly the failure of the country’s previous development bank experiment in 2000.
He recalled that during the final year of the James Mitchell NDP administration, the government established a national development bank capitalized with $5 million EC. To launch the bank, the NDP transferred all outstanding loans both good and bad from the old Development Corporation (DEFCO), a one-stop investment window that had existed since the Milton Kato era.
“The bank was insolvent from its start,” Gonsalves explained, noting that DEFCO’s bad loans completely overwhelmed the bank’s $5 million EC capitalization, while high administrative overheads exacerbated the crisis. Upon taking office in 2001, the Unity Labor Party (ULP) closed the institution down to prevent it from becoming a “suck-me-well” (a continuous financial drain on the state). The ULP subsequently recovered the bad debts through a special purpose vehicle at discounted rates.
Gonsalves argued that this pattern is not unique to St. Vincent. He pointed to the Barbados Development Bank, which was shut down in the 1990s by then-Prime Minister Owen Arthur because it had devolved into a “charitable institution” rather than a functioning bank.
While the NDP maintains that their proposed institution would operate as a “serious bank and not a charity,” Gonsalves expressed deep skepticism, predicting that politicians would inevitably treat it as a personal piggy bank, mirroring past abuses of the National Commercial Bank and the marketing board.
Even international financial authorities appear to share this concern. According to Gonsalves, an IMF representative recently “paraded” by the NDP opposition openly disagreed with Friday’s team regarding the development bank, advising against locking up valuable state resources in a high-risk financial entity.
Beyond historical failures, Gonsalves asserted that a new state-run lending institution is entirely unnecessary due to the massive liquidity currently sitting in the domestic financial sector.
At the close of the 2025 financial year, financial institutions in St. Vincent and the Grenadines including the Bank of St. Vincent, Republic Bank, First National Bank, St. Vincent Co-operative Bank, and major credit unions like GECU, KCCU, and the Teachers Credit Union held an aggregate of $3.5 billion EC in private deposits and possessed over $4.3 billion EC in total assets.
Out of this massive capital pool, approximately $2 billion EC has already been loaned to the private sector for mortgages, commercial properties, tourism, agriculture, fisheries, and technology. Gonsalves broke down these private lending statistics by institution:
- Bank of St. Vincent: Close to $750 million EC
- GECU: $225 million EC
- Teachers Credit Union: $125 million EC
- KCCU: $116 million EC
“There is a lot of liquidity still—a lot of slack where they can lend,” Gonsalves observed, emphasizing that any small business or entrepreneur with a worthwhile, viable project can easily access credit through these well-regulated, highly liquid institutions.
For creative or high-risk projects that cannot satisfy strict commercial banking criteria, Gonsalves argued that government-backed grants such as the ULP’s former PRIME grants of up to $40,000 EC are a far more effective developmental tool than burdening vulnerable entrepreneurs with debt they may struggle to repay.
Addressing arguments that national development banks work successfully in neighboring islands like Dominica and Grenada, Gonsalves dissected their balance sheets. He pointed out that the bulk of the funds disbursed by the development banks in Grenada and Dominica are concentrated in just two areas: housing mortgages and university education loans.
Gonsalves argued that St. Vincent and the Grenadines already has superior, highly specialized mechanisms for both sectors without needing a standalone development bank:
- The Economically Disadvantaged Student Loan Program: Established by the ULP in 2002, this specialized student loan company has disbursed over $100 million EC in educational loans, backed by a government guarantee and supported by an annual $500,000 EC recapitalization.
- Targeted Development Entities: St. Vincent manages targeted risks through entities like the Farmer Support Company, which was capitalized with $5 million EC specifically to aid agriculture, despite facing a high rate of non-performing loans
Refuting Friday’s parliamentary taunts that Gonsalves is “yesterday’s man” who cannot comprehend the “genius” of the development bank, Gonsalves turned the accusation back on his political opponents.
“National Development Bank is a 1970s idea for heaven’s sake; is not a mid-21st century idea,” Gonsalves retorted, arguing that the NDP’s plan represents a regressive step toward failed economic structures.
He stated that instead of building a new state bank that ordinary citizens will ultimately have to bail out when loans fail, the state should focus on supporting existing credit unions, maintaining fiscal discipline, and providing targeted grants directly to the people.
