IMF Executive Board Concludes 2006 Article IV Consultation with Antigua and Barbuda

Public Information Notice (PIN) No. 07/7
January 25, 2007

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 January 17, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the 2006 Article IV consultation with Antigua and Barbuda.1


The government of Antigua and Barbuda has adopted an ambitious reform program in its endeavor to pull the economy from decades of fiscal weakness-characterized by persistent fiscal deficits, a triple-digit debt burden, endemic arrears, and a large civil service-and declining growth rates. The reform agenda includes comprehensive tax reforms, civil service downsizing, measures to improve the investment climate, plans to reform the ailing social security system, and an impending strategy to regularize relations with creditors. These efforts have been complemented by extensive outreach to build public support. Successful implementation of the ongoing and planned reforms could mark a watershed for Antigua and Barbuda's economic prospects.

The reform drive has benefited from an upswing in recent economic activity. The economy is experiencing its third consecutive year of high growth, driven by a construction boom in hotels and housing, as well as projects related to the 2007 Cricket World Cup. Growth in 2006 is expected to reach 8 percent, among the highest in the region. Over the medium term however, growth will slow as the construction boom winds down. Inflation has remained low, largely reflecting the stability provided by the regional quasi-currency board arrangement.

Fiscal outcomes deteriorated in 2005 but are expected to improve in 2006. Data till the first half of 2006 show an improvement in the fiscal position, largely due to revenue gains, while capital expenditure increased sharply in preparation for the Cricket World Cup. The government was able to access the regional government securities market-the first time ever for Antigua and Barbuda-and use proceeds to partly pay off high-end debt. Despite these efforts, arrears continued to accumulate and the debt stock remains in excess of 100 percent of GDP.

The external current account deficit increased to 15 percent of GDP in 2005 and is projected to widen further to 20 percent of GDP in 2006, but will be fully financed by foreign direct investment.

The financial sector faces risks in the context of a lending boom-by both, the banking and non-banking financial sector-and already high non-performing loan levels at locally-incorporated banks. Some progress has been made in banking sector supervision with the implementation of the revisions to the uniform Banking Act. Legislation for the supervision of the non-bank financial sector (by the Financial Services Regulatory Commission) has been prepared but is yet to be approved by the Parliament. The authorities are continuing to strengthen their Anti Money-Laundering framework.

Executive Board Assessment

Directors welcomed the government's program to resolve long-standing fiscal and debt problems, raise growth prospects, and build a consensus to support difficult and ambitious reforms. The strong economic outlook provides a good opportunity to advance these reforms.

The tax reform, including the imminent implementation of the value-added tax, is a major achievement. At the same time, it will be important to strengthen tax administration and tax compliance.

Directors emphasized that tight control over expenditure will be crucial to achieve fiscal sustainability. In this light, the sharp increase in wage and investment spending in the 2007 budget, if implemented, would set back plans to restore viable public finances. Directors welcomed the authorities' intention to work toward achieving the fiscal adjustment as originally envisaged.

Directors supported the government's intentions to regularize relations with creditors and achieve debt sustainability. They encouraged the authorities to maintain an open and collaborative approach with all creditors and to make progress in resolving outstanding arrears.

Structural reforms-in particular, labor market reforms and improvements in infrastructure-will be important to sustain growth and external competitiveness. The efforts to enhance the transparency of the incentive regime through the Investment Authority Act are commendable, but consideration should also be given to a broader reform of the tax incentives system, perhaps at a regional level.

Directors welcomed the government's stated intentions on pension reform, needed to ensure the long-term sustainability of the universal pension scheme and to address budgetary pressures related to population aging. Directors recommended that plans for social security reform also cover civil service pensions, and that consideration be given to integrating the two systems.

Directors urged a further strengthening of financial sector supervision, in particular with respect to the expanding and thus-far unregulated non-bank financial sector.

Directors welcomed the authorities' efforts to reorganize the statistics department, and encouraged them to persevere with improvements in data needed for policy making and surveillance. They supported the provision of technical assistance in these areas as needed, from CARTAC and other sources.

Antigua and Barbuda: Selected Economic and Financial Indicators, 2001-06

          Est. Proj.
  2001 2002 2003 2004 2005 2006

  (Annual percentage changes, unless otherwise specified)

National income and prices


GDP at constant factor cost

1.5 2.0 4.3 5.2 5.3 8.0

Nominal GDP at market prices

4.7 1.0 5.1 8.5 6.9 9.9

Consumer prices (end of period) 1/

... 2.6 1.8 2.8 2.5 1.0

Consumer prices (period average) 1/

... 2.4 2.0 2.0 2.1 2.0

External sector


Exports, f.o.b.

-12.6 -24.7 32.9 27.7 25.8 9.9

Imports, f.o.b.

5.2 -4.6 16.3 6.3 10.9 19.7

Travel receipts (gross)

-6.4 0.6 9.5 12.6 -0.3 5.6

Nominal effective exchange rate (period ave., depreciation -) 2/

2.5 -0.3 -3.2 -2.7 -0.3 0.8

Real effective exchange rate (period ave., depreciation -) 2/

3.3 1.3 -2.2 -2.2 -0.3 0.3
  (Contribution to broad money growth)

Money and credit


Net foreign assets

12.6 0.6 21.9 3.3 30.0 7.0

Net domestic assets

-7.8 5.7 -0.8 5.9 -23.1 6.2

Net credit to the public sector

-1.8 0.3 3.0 -1.1 -1.2 -3.0

Credit to the private sector

2.9 7.5 2.2 0.9 7.7 11.0

Broad money

4.8 6.3 21.1 9.2 6.9 13.2

Average deposit rate (in percent per annum) 2/

4.5 4.4 4.9 4.1 3.9 4.0

Average lending rate (in percent per annum) 2/

11.6 11.4 12.8 12.0 11.4 11.1
  (In percent of GDP)

Central government


Primary balance

-6.8 -6.9 -4.2 -1.2 -2.3 -1.7

Overall balance

-12.4 -12.2 -9.5 -6.1 -7.1 -6.0

Total revenue and grants

19.2 21.7 21.1 21.6 21.8 26.1

Total expenditure and net lending

31.6 33.9 30.7 27.7 28.9 32.1

Identified financing

5.5 6.8 11.9 6.4 8.5 6.0


3.9 3.2 7.3 0.1 -20.9 1.7


1.5 3.5 4.5 4.5 8.0 4.2

Debt relief

... ... ... 1.9 21.3 ...

Statistical discrepancy

6.9 5.5 -2.3 -0.3 -1.3 ...

External sector


Current account balance

-8.0 -10.9 -13.4 -9.5 -14.5 -20.2

Trade balance

-38.4 -37.5 -40.8 -38.8 -39.3 -43.5

Service balance

32.6 31.7 30.7 33.0 29.7 27.7

Of which:


Gross tourism receipts

38.3 38.1 39.8 41.3 38.5 37.0

Overall balance

-0.9 -1.6 -1.6 -2.1 -15.8 -0.1

External government debt (end of year)

66.6 73.2 78.0 70.8 40.1 38.2

Of which:



14.5 19.0 23.2 22.5 16.4 15.8

Scheduled external debt service


(In percent of exports of goods and services)

8.4 8.5 8.9 9.7 30.8 5.7

Memorandum items:


Gross international reserves of the ECCB


(In millions of U.S. dollars)

446.0 504.8 539.9 632.4 600.8 ...

(In percent of ECCU broad money)

19.1 20.2 19.8 20.5 17.9 ...

Nominal GDP at market prices (in millions of EC$)

1,918 1,938 2,036 2,210 2,362 2,597

Total government debt (in millions of EC$)

2,482 2,716 2,989 3,035 2,543 2,686

(In percent of GDP)

129 140 147 137 108 103

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

1/ Based on preliminary estimates of an unpublished, new consumer price index, beginning January 2001, compiled by the Statistics Division, Ministry of Finance.

2/ Figures for 2006 are as of end-June 2006

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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