Press Release: IMF Completes First Review of Dominica's Stand-By Credit, Approves US$428,000 Disbursement
July 28, 2003
The Executive Board of the International Monetary Fund (IMF) has completed the first review of Dominica's performance under a one-year SDR 3.28 million (about US$4.6 million) Stand-By Arrangement, which was approved on August 28, 2002 (see Press Release No. 02/37). This decision entitles Dominica to the release of a further SDR 307,500 (about US$428,000), which would bring total disbursements under the program to SDR 2.36 million (about US$3.3 million).
The Executive Board also approved the extension of the arrangement until end-February 2004, as well as Dominica's request for waivers on the nonobservance of seven quantitative performance criterion and one structural performance criterion.
After the Executive Board's discussion on July 25, 2003, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, said:
"Dominica has been facing a difficult economic situation, with activity falling much more than anticipated, and performance under the program has gone off track. However, in recent months, the authorities have strengthened their economic policy stance, and adopted a two-stage approach toward stabilization and structural reform.
"The first stage consists of a strengthened program for 2003 to improve the prospects for orderly adjustment, supported by additional financing from multilateral institutions and the donor community. The cornerstone of the 2003 program is a package of fiscal adjustment measures focused on broadening the tax base and improving tax administration, and downsizing the public sector wage bill. The extended Stand-By Arrangement supports the authorities' efforts in this first stage. Multilateral institutions and donors have already made firm commitments to close the remaining 2003 financing gap.
"The second stage of the approach consists of measures to help reestablish the basis for sustained growth, including a medium-term program with a strong structural component, and implementation of a debt strategy to ensure medium-term sustainability. Strong political ownership of the program by society in general, as well as by the institutions of government, will be needed, commensurate with the scale of the economic problems Dominica faces.
"The structural reform agenda focuses on: development of a debt strategy; implementation of an automatic fuel price adjustment mechanism; development of a public sector reform strategy; completion of a diagnostic review of the financial sector; and divesture of government shares in the National Commercial Bank.
"In concluding the first review under the Stand-By Arrangement, the Fund commends the authorities for their determined efforts to press ahead with their stabilization and reform program. On this basis, the Fund has extended the arrangement for six months, and granted the waivers of performance criteria," Mr. Sugisaki stated.