Agreement reached with IMF on economic program

BASSETERRE, St. Kitts & Nevis: The St. Kitts and Nevis government and an International Monetary Fund (IMF) staff mission have reached an agreement on the key elements of an economic program that would see the Washington-based financial institution providing a US$84 million Stand-By Arrangement (SBA) over a three-year period.

Chief of the IMF mission to the twin-island federation, Alfred Schikpe, said the program is also expected to catalyze additional financing for the country from other international institutions.

The Executive Board could consider St. Kitts and Nevis’ SBA at the end of next month, following review by management.

Schikpe said that by seeking the IMF help, St. Kitts and Nevis was taking decisive action to address the legacy of the most severe recession in the country’s history.

“Declines in tourism revenue and foreign direct investment-related construction triggered a sharp contraction in economic activity, deterioration in the fiscal position and a significant increase in public debt levels,” said Schikpe.

“In 2011, the current account deficit is expected to widen due to the dual impact of a nascent economic recovery and an increase in food and fuel prices. Moreover, financing needs are increasing as a result of large imminent debt servicing obligations.”

Schikpe said the main goal of the government’s economic strategy is to foster macro-economic stability and put the public debt on a firmly declining path, which is expected to contribute to higher economic growth and improved living standards for all members of the society.

“In addition to strong fiscal measures already adopted by the government, the program would include a comprehensive debt restructuring to achieve a sustainable debt service profile and ensure fair burden sharing by all stakeholders.

“In addition, the government intends to implement a number of complementary measures to strengthen public financial management; improve the collection of revenue at the Customs and Inland Revenue departments; and develop a debt-management strategy to reduce the debt-to-GDP ratio over the coming years,” said Schikpe.

The IMF official said that, at the same time, the program will maintain social safety net spending to protect the most vulnerable, in particular programs for school meals, uniforms and text books.

Government also plans to establish a register of beneficiaries that would help to better target social assistance, and many basic commodities will continue to be exempt from the VAT.

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