Press Release: IMF Approves Emergency Assistance for St. Kitts and Nevis
December 17, 1998
The International Monetary Fund (IMF) today approved St. Kitts and Nevis’ request for emergency financial assistance related to natural disasters.1 The assistance, equivalent to SDR 1.625 million (about US$2.3 million), will support the government’s economic recovery program and associated relief and rehabilitation efforts in the aftermath of Hurricane Georges.
In recent years, the St. Kitts and Nevis economy had a record of strong growth, low inflation, and low unemployment. Large public infrastructure projects in the past few years had kept the finances of the central government in deficit, however, and raised the level of external debt. The authorities are mindful of longer term fiscal issues that must be addressed if the government is to continue to meet its capital expenditure needs for social and economic infrastructure. In the near term and over the longer run, the authorities are committed to take steps to reduce some expenditures and to enhance revenues.
The devastation caused by Hurricane Georges reflects damage to all major infrastructure services and tourism facilities, including several major hotels. About a quarter of the nation’s sugar cane crop may also have been destroyed, according to preliminary estimates. Current estimates by the authorities indicate hurricane damage overall amounted to about US$400 million, or 150 percent of GDP in 1997. Real GDP growth is projected to slow to about 3.5 percent in 1998 and decelerate further to 2 percent in 1999, compared with recent pre-hurricane growth, which averaged about 5 percent a year.
The government’s response to the crisis has focused on addressing -- with substantial help from the international community -- the immediate priorities of providing food, shelter, and health care to displaced persons; taking measures to preserve public health; and repairing essential infrastructure and other reconstruction work. At the same time, the authorities have committed to undertake measures that will strengthen public finances over the next several years and permit the establishment of a contingency fund that could be used in the event of future emergencies. Within the new revenue measures and cost reduction initiatives, attention will be given to sheltering low-income citizens from these adjustments.
St. Kitts and Nevis joined the IMF on August 15, 1984, and its quota is SDR 6.5 million (about US$9.2 million).
1 The emergency credit is repayable within 3¼ years to 5 years and carries the IMF’s standard interest rate, which was 3.95 percent in the week beginning December 7, 1998.