Funding Economic Development and the Role of National Development Banks - The Case of Cyprus

John Deutsch International Development Discussion Paper, Queen's University, DDP 2019-09

31 Pages Posted: 8 Nov 2019 Last revised: 20 Nov 2019

See all articles by Helen Kavvadia

Helen Kavvadia

University of Luxembourg

Savvakis C. Savvides

Queen's University - John Deutsch Institute for the Study of Economic Policy

Date Written: September 10, 2019

Abstract

The paper draws on previous research on the role of Multilateral Development Banks (MDBs), Regional Development Banks (RDBs) and National Development Banks (NDBs). It examines the role of the Cyprus Development Bank (CDB), prior its privatisation in 2008, in the economic development of the country and, specifically, its intermediation of international finance from multilateral and regional development banks. Currently, this function is undertaken by the commercial banks, which are however limited by a balance sheet fatigue, resulting from the excessive levels of private debt, as shown in this paper. Moreover, the commercial banks lack necessary elements in successfully executing this key role. They do not have the professional competence as well as the discipline and culture for executing such a highly demanding role in the economy. Last but not least, and judging from the experience of the CDB it is imperative to have a totally independent and competent financing institution, which will lead by example. Further to the analysis of the current macroeconomic and institutional context in Cyprus, there is a void of institutional capacity to fund projects and offer valuable advice to state and private decision-making bodies on decisive development projects. This paper recommends the establishment of an NDB or a National Development Finance Agency (NDFA), and proposes an appropriate model.

Keywords: National Development Banks, International Finance, Regional Development Banks, Multilateral Development Banks

JEL Classification: F45, D61, G17, G21, G32, G33, H43

Suggested Citation

Kavvadia, Helen and Savvides, Savvakis C., Funding Economic Development and the Role of National Development Banks - The Case of Cyprus (September 10, 2019). John Deutsch International Development Discussion Paper, Queen's University, DDP 2019-09 . Available at SSRN: https://ssrn.com/abstract=3477858 or http://dx.doi.org/10.2139/ssrn.3477858

Helen Kavvadia

University of Luxembourg ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

HOME PAGE: http://www. uni.lu

Savvakis C. Savvides (Contact Author)

Queen's University - John Deutsch Institute for the Study of Economic Policy ( email )

Canada

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