Public Information Notice: IMF Concludes Article IV Consultation with Antigua and Barbuda

March 22, 2001

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On March 7, 2001, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Antigua and Barbuda.1


After a period of slow growth in the first half of the 1990s (2 percent in 1990-95), due in part to a decline in large public sector investment and tourism-related projects, economic growth averaged 5 percent during 1996-99. The recovery was led by post-hurricane reconstruction activity and increased stayover visitor arrivals. However, the tourism performance was held back by Hurricanes Georges in 1998 and Lenny in 1999. Real GDP growth is estimated to have slowed to 3½ percent in 2000 owing to weakness in the tourism sector.

The central government's overall fiscal deficit rose to 9¼ percent of GDP in 1999, from 5 percent in 1998, owing to a sharp decline in revenues caused mainly by a one-time exemption of selected import duties and increases in both current and capital expenditures. The overall deficit of the consolidated public sector increased less than that of the central government reflecting the reduction in interest obligations as a result of debt restructuring. In 2000, the central government's overall deficit is estimated to have risen to 12 percent of GDP, because of delays in implementing revenue measures and a boost in expenditures related to increased public employment and higher capital spending. However, the overall deficit of the consolidated public sector declined to 7½ percent of GDP, reflecting efforts to improve the operating performance of public enterprises.

The external current account deficit narrowed to 15½ percent of GDP in 1999, from 16¼ percent of GDP in 1998, as large insurance payments were made for hurricane damage. With imports of automobiles declining sharply after the expiration of the temporary duty exemptions in 1999, a further narrowing in the deficit to 13 percent of GDP is estimated for 2000.

Following large reschedulings in 1997 and 1998, the restructuring of official bilateral external debts with France in 1999 and the United Kingdom in 2000, and of a large commercial debt in 2000, further reduced Antigua and Barbuda's external arrears to an estimated 16¼ percent of GDP. In the area of external policies, import monopolies were removed for sugar and rice, although not for vegetables and petroleum products.

Broad money grew by 10½ percent during 1999, considerably faster than nominal GDP but not as fast as domestic credit. In 2000, broad money is estimated to have grown by 4¼ percent in line with GDP while credit to the private sector rose by an estimated 10¾ percent. To meet credit demands from the public and private sectors, commercial banks borrowed from ECCB area banks and head offices. The quality of bank loan portfolios deteriorated in 1999 but improved somewhat in 2000 as most government loans being serviced with earmarked revenue have become current.

Following the issuance in 1999 of unfavorable financial advisories by the United States and the United Kingdom, laws and regulations governing the offshore financial sector were revised with a view to improving supervision and management. Increased enforcement has resulted in the reduction in the number of offshore banks to 25, from 52 in 1998. The authorities intend to participate in a self-assessment of the quality of offshore regulation and supervision in the subregion.

Executive Board Assessment

Executive Directors noted that despite the negative adverse effects of recent hurricanes which put a damper on tourism, the economy grew moderately in 2000, inflation was nil, and unemployment declined. Directors commended the authorities for reaching agreement with major creditors which has significantly reduced the stock of external arrears, and urged further bilateral negotiations to resolve remaining arrears.

Directors viewed with concern, however, the continued deterioration in the central government finances. They emphasized that substantial adjustment is needed in 2001 to avoid the emergence of new arrears, and to pave the way for higher and sustained growth over the medium term. They saw the generation of public saving as key for supporting the investment needed to expand and diversify the economy. In this regard, Directors called for a reorientation of the government's approach to fiscal management including both revenue and expenditure.

Directors commended the recent measures to control spending, including a hiring freeze in the public sector, and improved training programs to facilitate the movement of government workers to the private sector. They viewed these measures as an important first step in addressing redundancy in the government's payroll, and in moving towards a leaner, more efficient civil service over the medium term. Directors urged the government to become current on its obligations to the social security system, to avoid incurring arrears again, and to put the system on an actuarially sound basis. They also encouraged further adjustments of public utility tariffs to help recover costs, and endorsed the authorities consideration to privatize some public enterprises including hotels, as conveyed in the 2000 budget presentation.

Noting that Antigua and Barbuda has the lowest tax ratio among ECCB countries, Directors considered tax reform to be crucial. Directors urged the authorities to take steps to improve budgetary procedures and thus increase fiscal transparency. It was considered important to reduce reliance on special warrants that supplement expenditure authorization, and to avoid further recourse to revenue earmarking to raise financing. Directors also called for a reexamination of the rationale for discretionary tax waivers, and urged that the scope for access to these be sharply curtailed and eligibility established by clearly defined statutory criteria. Directors encouraged the authorities to implement the final phase of CARICOM's common external tariff.

Directors commended the authorities for recognizing the need to revise the laws and regulations governing the offshore financial centers with a view to meeting international standards. They welcomed the various improvements in the legal and enforcement regime in the area of money laundering, and they encouraged the authorities to participate, in close collaboration with the Eastern Caribbean Central Bank, in the FSAP exercise for the subregion, and in the Fund's assessment of offshore regulation. They also recommended closer collaboration with the ECCB to regulate and supervise the financial sector.

Antigua and Barbuda's statistical database is inadequate for purposes of surveillance. Directors encouraged the authorities to improve the coverage, quality and timing of the reporting of economic statistics. To achieve these objectives, they urged the authorities to develop an appropriate work program, and seek technical assistance, especially in the areas of trade and fiscal statistics, and on offshore business activity.

Directors welcomed the background paper on the Eastern Caribbean Currency Union. They saw the discussion of regional surveillance as providing a good perspective for the Article IV consultations. Directors agreed that while the common currency arrangement has served the region well, it has increased the importance of the implementation of policy in individual countries to strengthen competitiveness. These include increasing public savings—as proposed by the ECCB—and improving the quality of public expenditure. Regional money and capital markets should be strengthened, and the ECCB should play a larger role in prudential supervision, including supervision of offshore financial centers.

Directors agreed that the next report on the consultations with the ECCB should be discussed by the Board. They welcomed the greater focus on regional surveillance proposed by the staff and saw several issues—such as strengthening competitiveness and banking supervision—where individual countries could benefit from other countries' experience and from a greater regional perspective. They looked forward to future Article IV consultations being guided more by this regional perspective. Several Directors welcomed the prospective early establishment of CARTAC.

Antigua and Barbuda: Selected Economic Indicators

  1996 1997 1998 Est.

Output and prices Real GDP
Consumer prices (average)
In percent of GDP
Investment and saving
Gross domestic investment
Gross domestic savings
Public sector operations
Public sector revenue
Public sector expenditure
Public sector savings
Public sector balance
In millions of U.S. dollars unless otherwise specified
External sector
Merchandise exports
Merchandise imports
Gross tourism receipts
Current account balance
Current account (in percent of GDP)
Overall balance
External public debt 1/
Public sector external arrears
Real effective exchange rate (1990=100)
Changes in percent of broad money at the beginning of period
Monetary sector
Net domestic assets
Credit to the private sector
Broad money (M2)

Sources: Antiguan authorities: Eastern Caribbean Central Bank; and IMF staff estimates and projections.

1/ Includes arrears on principal and interest.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. This PIN summarizes the views of the Executive Board as expressed during the March 7, 2001 Executive Board discussion based on the staff report.


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