Mission Concluding Statements
Antigua and Barbuda and the IMF
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INTERNATIONAL MONETARY FUND
September 24, 2004
An IMF staff mission visited Antigua and Barbuda from September 13 to September 24, 2004 to conduct the 2004 Article IV Consultation discussions. The mission received excellent cooperation from the government and benefited from constructive discussions and exchange of views with the Minister of Finance and Economy, other senior government officials, the Leader of the Opposition, and the National Economic and Social Council (NESC), as well as representatives from the private sector, trade unions, and other members of the civil society.
Years of fiscal mismanagement have lead to a very large build up of public debt, close to EC$3 billion, or around 135 percent of GDP at end-2003. Fiscal revenues have fallen since the early 1990s and, as a share of GDP, are the lowest in the Organization of Eastern Caribbean States (OECS) region. At the same time, current expenditures rose sharply, as the public sector created jobs to absorb the unemployed. Today, nearly 13,000 people work for the Central Government—at about 40 percent of the labour force, this is among the highest in the world. At the same time, the efficiency of the public sector has steadily eroded.
The country has faced severe difficulties in meeting its debt obligations—arrears on external loans have been run for more than 20 years and new financing, especially from abroad, has virtually dried up. Moreover, government contributions for public sector workers to the Social Security Scheme have not been made in at least a decade. This culture of nonpayment and nontransparency has spread to the domestic economy and is reflected in tax collections that are low, and well-below legislated rates. A number of capital projects also had to be abandoned, sometimes mid-way.
The new administration faces the difficult task of putting the fiscal accounts on a solid footing and resolving the debt and arrears problems. A bold and comprehensive strategy is needed to break the legacy of past fiscal mismanagement. In the IMF mission's view, this strategy has three key components: fiscal consolidation and aiming for a manageable debt burden, achieving higher and sustained growth by creating conditions for the private sector to flourish, and rebuilding institutions to support both the fiscal and growth objectives.
Fiscal consolidation requires a close look at tax policy and administration, abolishing discretionary tax exemptions that cost the budget nearly 10 percent of GDP annually, and we understand that limiting concessions is already underway; a review of public expenditures; and civil service reform. To raise and sustain high economic growth rates, it is critical that the playing field is leveled for all private sector participants, that the relative size of the public sector is reduced to allow the private sector to flourish, that the investment climate is made conducive, and that Antigua and Barbuda supports and actively engages in regional initiatives such as the Caribbean Single Market Economy (CSME). Finally, without improving governance and enhancing transparency, none of these goals are likely to be achieved on a sustained basis.
The IMF mission welcomes the administration's resolve to address Antigua and Barbuda's deep-rooted problems head on and their openness in discussing these difficult issues. We fully support recent initiatives to improve transparency and governance and increase public awareness. The task ahead is not easy and we would encourage the administration to begin tackling these issues now. We believe that Antigua and Barbuda's private sector-led growth potential is high and remains to be tapped. We wish the government and the people of Antigua and Barbuda every success.
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with member countries, usually every year. A staff team visits the country, collects economic and financial information, and discusses with the country's authorities 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.
IMF EXTERNAL RELATIONS DEPARTMENT