Public Information Notice: IMF Executive Board Concludes 2007 Article IV Consultation with Antigua and Barbuda

July 3, 2008

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.

Public Information Notice (PIN) No. 08/81
July 3, 2008

On February 4, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Antigua and Barbuda.1


Macroeconomic outcomes have strengthened significantly in recent years. Real GDP growth averaged 5 percent during 2003-05, and is estimated to have reached 12 percent in 2006. Economic activity was sustained by construction—mainly in hotels, but also public investment related to the Cricket World Cup (CWC). In 2007, growth is expected to moderate to about 6 percent, as construction activity slows. The external current account deficit widened in recent years due to surging world oil prices and construction-related imports. Money and credit growth have strengthened in recent years, reflecting strong economic activity. While recent growth outcomes have been favorable, Antigua and Barbuda remains vulnerable to exogenous shocks, given its dependence on imported oil, volatile tourism receipts, and exposure to natural disasters. High debt levels also leave it vulnerable to a tightening of regional and international financing conditions.

Despite the rebound in economic activity, fiscal imbalances have remained large, reflecting a number of one-off expenditures in 2006-07. Tax revenues have increased significantly, buoyed by the upturn in economic activity as well as the Antigua and Barbuda Sales Tax (ABST) introduced in January 2007. But spending has also surged, largely reflecting the effects of the CWC and one-time costs associated with the voluntary separation program for public employees. As a result, the primary deficit is expected to narrow to about 3 percent of GDP in 2007. Public debt, which fell from a peak of 143 percent of GDP in 2002 to 107 percent in 2006, has remained broadly stable during 2007. Notwithstanding the fiscal imbalances, the authorities have continued to reissue debt on the regional government securities market at relatively low rates.

The CPI-based real effective exchange rate (REER) and the customer-weighted REER (which tracks REER movements relative to main tourism customers) have depreciated since 2002 with the weakening of the U.S. dollar. However, given the high level of public debt, substantial fiscal adjustment will be necessary to underpin the stability of the regional currency board arrangement.

There has been progress in implementing broad structural reforms. On fiscal issues, the authorities intend to enhance revenue performance, including the introduction of a more flexible mechanism for retail fuel pricing in 2008. They also intend to improve the investment climate, reduce skills mismatches, diversity exports, and deregulate telecommunications, with a view to enhancing the resilience of the economy to shocks.

Executive Board Assessment

Directors welcomed Antigua and Barbuda's recent strong economic growth and relatively low inflation, and commended the authorities for their ongoing efforts to improve the country's fiscal position. Looking forward, Directors supported the authorities' continuing efforts to address structural weaknesses in order to reduce the country's exposure to external shocks and promote durable growth. This should entail, in particular, improving the investment climate, reducing skills mismatches, diversifying exports, and making regulations in telecommunications more efficient.

Directors agreed that it will be important for the government to demonstrate fiscal strengthening in 2008. They commended the implementation of broad-based tax reforms, including the VAT, and looked forward to their uniform and transparent implementation. Directors welcomed the authorities' intention to introduce a fuel price adjustment mechanism to achieve greater pass-through of oil price increases. Firm expenditure restraint would allow the surge in spending in 2006 and 2007 to be unwound.

Directors welcomed the authorities' commitment to strengthen debt management and their ongoing efforts to normalize relations with creditors. They looked forward to the early clearance of external and internal arrears. Directors stressed that additional fiscal measures will be essential, over the medium term, to placing the debt-to-GDP ratio securely on a downward path. Expenditure restraint will be critical to this effort, including, in particular, civil service reform to contain the wage bill and enhance efficiency in the public sector.

Directors noted that the real exchange rate appears broadly in line with fundamentals, with the depreciation in recent years having contributed to improved competitiveness. They emphasized that maintaining competitiveness will depend on the authorities maintaining their commitment to sustained fiscal consolidation and structural reforms, which will also underpin the regional currency arrangement.

Directors cautioned that rapid growth in private sector credit could erode the quality of loan portfolios. They welcomed efforts to further strengthen financial sector supervision, including through unified supervision of nonbank financial institutions.

Directors saw a need for strengthening economic data in terms of coverage, timeliness, and reliability. They encouraged the authorities to enhance the resources devoted to this area, and supported the provision of technical assistance as appropriate.

Antigua and Barbuda: Selected Economic Indicators, 2004-08
        Proj. Proj.


2004 2005 2006 2007 2008
(Annual percentage change, unless otherwise specified)

Output and prices


Real GDP (factor cost)

5.2 5.5 12.2 6.1 2.1

Nominal GDP (market prices)

8.5 6.3 15.4 8.5 3.4

Consumer prices, end of period

2.8 2.5 0.0 1.5 3.0

Consumer prices, period average

2.0 2.1 1.8 1.5 3.0

Banking system


Net foreign assets 1/

-1.4 3.4 9.9 3.0 1.9

Net domestic assets 1/

10.6 3.5 5.3 7.6 1.5

Of which


Net credit to the public sector

-1.1 -1.2 -5.2 2.4 -2.1

Credit to private sector

0.9 7.7 15.6 7.0 3.6

Broad money

9.2 6.9 15.2 10.7 3.4
(In percent of GDP, unless otherwise specified)

Public sector


Central government finances


Total revenue and grants

21.6 21.9 25.2 24.4 23.9

Total expenditure and net lending

27.7 28.8 33.9 32.4 28.4

Current expenditure

25.2 24.8 26.1 25.7 24.4

Capital expenditure

2.5 4.0 7.9 6.7 4.0

Overall balance (cash basis)

-6.1 -6.9 -8.8 -8.0 -4.5

Primary balance (after grants)

-1.2 -2.3 -4.0 -2.8 0.7

Central government debt

127.0 102.6 98.6 99.5 100.6

Gross public sector debt

135.0 111.0 106.5 108.4 113.3

External sector


External current account

-8.3 -12.4 -16.1 -17.9 -15.4

Stayover arrivals (percentage change)

10.9 -8.4 3.4 3.0 7.0

Public sector external debt (end of period)

65.7 41.3 40.7 41.9 46.3

External public debt service


In percent of exports of goods and services

14.5 32.2 7.3 7.7 7.8

Real effective exchange rate (- = depreciation)


Percentage change

-3.0 -1.1 -1.1 -3.3 ...

External terms of trade (- = deterioration)


Percentage change

-4.4 -5.4 -3.0 0.1 -3.8

Sources: Antigua and Barbuda authorities; ECCB; and Fund staff estimates and projections.
1/ Contribution to broad money growth.

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.


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