Exclusive Investigation · Governance & Public Finance
DEVCO, the Development Bank, and the History SVG Should Remember Before Creating Another One
St. Vincent and the Grenadines has walked this road before. The documentary trail from IFAD, the IMF and the Auditor General shows why the warnings matter now.
As the New Democratic Party government moves towards establishing a new National Development Bank in St. Vincent and the Grenadines, much of the public discussion has treated the proposal as though the country were embarking on unexplored territory.
It is not.
St. Vincent and the Grenadines has travelled this road before.
There was DEVCO, the Development Corporation. There was subsequently the St. Vincent and the Grenadines Development Bank. There were bad loans, government intervention, portfolio restructuring, an asset recovery exercise and, eventually, the disappearance of the Development Bank as a standalone institution.
And for more than a decade, former Prime Minister and current Opposition Leader Dr. Ralph Gonsalves has been warning Vincentians about precisely this history.
A Vincypowa News review of records from the International Monetary Fund, the Auditor General, the International Fund for Agricultural Development, official government budget documents and Bank of St. Vincent and the Grenadines shows that the problems surrounding DEVCO and the former Development Bank were not merely political allegations.
There is a documentary trail.
The DEVCO Years
DEVCO operated as a state development institution involved in industrial development, investment promotion, industrial estates and lending.
The 2004 Budget Address states that DEVCO had been established in 1976 to promote manufacturing and industrial development through incentives available under the CARICOM fiscal regime. (2004 Budget Address)
But long before the ULP government came to office in 2001, serious weaknesses had emerged in DEVCO’s lending operations.
An independent 1996 evaluation by the International Fund for Agricultural Development, IFAD, examined an agricultural credit programme involving DEVCO.
Its findings were troubling.
According to IFAD, the credit component had suffered some of the project’s most severe implementation difficulties. DEVCO was hesitant to make additional loans because of bad loans and repayment problems. The evaluation also identified borrowers’ misunderstanding of loans as something resembling grants, losses suffered by DEVCO on the IFAD line of credit and the high administrative costs associated with small agricultural loans. (IFAD Independent Office of Evaluation)
This finding is important historically because it predates Ralph Gonsalves becoming Prime Minister by approximately five years.
The difficulties with DEVCO’s loan portfolio therefore cannot reasonably be dismissed as a problem invented by the ULP after taking office.
They were being documented independently while the NDP was still in government.
The NDP Creates a Development Bank
In 2000, the NDP administration established the St. Vincent and the Grenadines Development Bank.
An IMF report published in December 2000 records that the institution had been established in mid-2000 to undertake long-term lending and was expected to begin operations by the end of that year. (IMF eLibrary)
The IMF supported the development-finance objective but sounded an important note of caution.
It said credit should be extended at market rates and any subsidies should be made explicit to avoid administrative difficulties and minimise the potential for abuse. (IMF eLibrary)
More than two decades later, that warning deserves renewed attention.
Gonsalves: The Bank Was Troubled From Birth
Dr. Ralph Gonsalves has maintained for years that the fundamental mistake occurred when the Development Bank was capitalised.
Speaking in 2026, Gonsalves said the loans held by DEVCO, both performing and non-performing, were transferred into the newly created Development Bank while only EC$5 million in capital was provided.
His assessment was severe:
“The bad loans exceeded the good loans by far.”
He said the institution was “insolvent ab initio”, meaning insolvent from the beginning. (iWitness News)
That precise conclusion about insolvency is Gonsalves’ assessment, and Vincypowa News has not located the Development Bank’s opening audited balance sheet to independently calculate its initial solvency position.
But several important elements of his broader argument are independently supported by the historical record.
DEVCO unquestionably had bad-loan and repayment problems before the Development Bank was formed. The Development Bank itself subsequently had non-performing loans. Government later restructured its portfolio. And the institution eventually disappeared through amalgamation with the National Commercial Bank.
The Auditor General’s EC$8.099 Million DEVCO Entry
One of the most striking pieces of evidence appears in the Auditor General’s Report for 2004 and 2005.
The report lists a DEVCO account balance of EC$8,099,317.59.
The Auditor General explains that the balance represented the repayment of several DEVCO loans by Central Government. (Auditor General’s Report, 2004–2005)
This does not establish that the entire EC$8.099 million was the exact pool of bad loans transferred into the Development Bank in 2000. The records reviewed by Vincypowa News do not support making that leap.
What the Auditor General’s report does establish is that the financial consequences associated with DEVCO loans were substantial enough for millions of dollars in repayments to appear on the Central Government’s accounts.
By 2003, the Development Bank Was Being Restructured
Only a few years after the Development Bank was established, the IMF was already reporting restructuring.
Its 2003 country report stated that the authorities had begun restructuring the portfolios of both the National Commercial Bank and National Development Bank in an effort to improve their efficiency. (IMF eLibrary)
The same IMF report contains another significant disclosure.
Central Government had assumed EC$23 million in debt from several public enterprises, and the Development Bank was specifically included among those entities. (IMF eLibrary)
The EC$23 million cannot properly be described as Development Bank debt alone. The figure covered several entities.
Nevertheless, the Development Bank’s inclusion demonstrates that its financial difficulties had already created exposure for Central Government.
IMF Confirms Non-Performing Loans at the Development Bank
Perhaps the clearest independent confirmation of the former Development Bank’s lending problems comes from the IMF’s assessment of the financial system.
The IMF reported that both the National Commercial Bank and the Development Bank had sold non-performing loans to an asset recovery company.
The disposal reduced the stock of non-performing loans, although the IMF noted that bank profitability suffered. (IMF eLibrary)
That finding matters.
It moves the historical discussion beyond partisan accusation. Whatever disagreement may exist over who was politically responsible or how severe the problem was at the institution’s birth, an independent international financial institution recorded that the Development Bank ultimately possessed non-performing loans serious enough to be transferred to an asset recovery mechanism.
What Happened to DEVCO?
DEVCO itself did not continue indefinitely.
The 2004 Budget Address explained that its functions had been redistributed. Management of the industrial estates was transferred to National Properties Limited, while the banking function had earlier been transferred to the Development Bank.
With its major functions transferred, the government concluded that DEVCO was no longer required. It was formally closed on September 30, 2003. (2004 Budget Address)
This should not be confused with the closure of the Development Bank. They were different institutions. The Development Bank continued operating after DEVCO disappeared.
The Development Bank Moves Towards a Merger
By 2006, the future of the Development Bank was becoming increasingly clear.
An IMF report noted government plans to merge the Development Bank with the National Commercial Bank. At the time, the Development Bank represented only about 1 per cent of SVG’s total financial-system assets.
The IMF also stated that regulation and supervision of non-bank financial institutions, including the Development Bank, needed strengthening. (IMF)
The proposed merger eventually became reality.
Bank of St. Vincent and the Grenadines’ audited financial statements record that on June 19, 2009, the National Commercial Bank and the St. Vincent and the Grenadines Development Bank were formally amalgamated and continued under the NCB name. (Bank of St. Vincent and the Grenadines)
The Development Bank therefore ceased to exist as a separate standalone institution.
Gonsalves Had Been Warning About This for Years
The criticism being made by Dr. Gonsalves in 2026 is not new.
In August 2010, while Prime Minister, Gonsalves challenged then Opposition Leader Arnhim Eustace over the creation of the Development Bank.
His description was memorable:
“The very moment of its birth, it was bankrupt.”
The statement was reported by Searchlight at the time. (Searchlight)
Five years later, during the 2015 general election campaign, Gonsalves again raised the Development Bank’s history after the NDP proposed establishing a national development bank.
He said the previous bank had been established with approximately EC$5 million in equity, which he maintained was less than the bad loans transferred from DEVCO.
His description then was:
“At birth his bank was strangled.”
Gonsalves argued that a standalone national development bank represented what he considered an outdated model and promoted regional or specialised development-financing mechanisms instead. (Searchlight)
Then, in Parliament in April 2026, the issue returned.
Now Opposition Leader, Gonsalves told Parliament that the old Development Bank had received DEVCO’s good and bad loans and had been inadequately capitalised.
He again questioned the financial mechanics of the NDP government’s new proposal. Where would the new bank obtain money cheaply enough to lend at concessional rates? How would it cover administrative expenses? And how would it absorb the inevitable non-performing loans associated with higher-risk development lending? (iWitness News)
These are not trivial questions.
They go to the heart of whether a development bank can remain financially sustainable without repeatedly requiring taxpayers to rescue it.
Now the IMF Is Warning the NDP Government
The debate has taken on additional significance in 2026 because the International Monetary Fund itself has questioned whether SVG should create another national development bank.
Following its 2026 Article IV review, IMF staff stated plainly that although it supported the government’s goal of improving access to finance, establishing a new national development bank was not recommended.
The IMF cited SVG’s elevated fiscal risks and regional experience. It warned that such an institution would require upfront capitalisation, could create ongoing fiscal costs, and could expose the state to additional contingent liabilities. (IMF)
The IMF Executive Board subsequently urged careful consideration of the proposal because of the associated fiscal risks. (IMF)
This warning comes at a particularly sensitive time for the country.
The IMF’s 2026 debt sustainability analysis assesses SVG’s overall public debt path as unsustainable and its risk of debt distress as high. (IMF eLibrary)
That does not mean a development bank can never work. It means the government must demonstrate why this particular institution, under these particular fiscal circumstances, will succeed where the previous standalone institution encountered serious difficulties.
The Questions the Government Must Answer
Supporters of the new Development Bank frequently describe it as a mechanism for financing young entrepreneurs, agriculture, small businesses, housing and productive investment.
Those are worthy objectives. But worthy objectives do not guarantee sound banking.
History demonstrates that development lending involves a difficult balance. If a bank lends only to the safest borrowers at commercial rates, it risks becoming little different from an ordinary commercial bank. If it lends cheaply to borrowers commercial banks consider too risky, non-performing loans can rise. If those losses become too large, somebody must recapitalise the institution.
In a state-owned bank, that somebody is ultimately the taxpayer.
The NDP government therefore owes Vincentians detailed answers:
What will be the initial capitalisation of the new Development Bank? Where will the capital come from? At what cost will the bank obtain additional funding? What lending rates will it charge? What percentage of its portfolio will be reserved for higher-risk developmental lending? What loan-loss provisions will be required? Who will supervise the institution? What political safeguards will govern lending decisions? What happens when loans become non-performing? And what maximum financial exposure will taxpayers be expected to carry?
These questions are especially important because SVG has already experienced the consequences of problematic state-backed lending.
History Is Not an Argument Against Development
The lesson from DEVCO and the former Development Bank should not be that government must never help farmers, students, entrepreneurs or small businesses obtain financing.
Development finance can play an important role in a small economy where commercial banks may be reluctant to finance new or risky enterprises.
The lesson is different.
Development finance must be properly capitalised, professionally managed, transparently governed and disciplined about credit risk. Otherwise, today’s easy loan can become tomorrow’s non-performing asset and eventually the taxpayer’s liability.
SVG has already lived through one version of that story.
IFAD documented DEVCO’s bad loans and repayment problems. The Auditor General recorded more than EC$8 million in government repayments associated with several DEVCO loans. The IMF documented restructuring of the Development Bank, government assumption of public-enterprise debt including Development Bank liabilities, and the transfer of Development Bank non-performing loans to an asset recovery company. The institution was ultimately merged with the NCB in 2009.
Dr. Ralph Gonsalves warned about that history in 2010. He warned again in 2015. He is warning again in 2026. And now the IMF is warning the current NDP government about establishing another national development bank.
Before St. Vincent and the Grenadines goes down this road again, Vincentians deserve more than the assurance that “the Development Bank is coming.”
They deserve to know whether the lessons from the last Development Bank have actually been learned.
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