Press Release: IMF Completes Second Review Under Dominica's PRGF Arrangement and Reviews Noncomplying Purchases and Disbursement
August 6, 2004
The Executive Board of the International Monetary Fund (IMF) has completed the second review of the Dominica's performance under its three-year Poverty Reduction and Growth Facility (PRGF) arrangement. In doing so, the Executive Board approved Dominica's request for a waiver on the nonobservance of the continuous performance criterion on nonaccumulation of external payment arrears.1
This decision enables Dominica to draw an amount equivalent to SDR 0.31 million (about US$450,000) under the arrangement, and would bring total disbursements to SDR 2.97 million (about US$4.3 million). The IMF's Executive Board approved Dominica's three-year PRGF arrangement on December 29, 2003 (see Press Release No. 03/228) for an amount equivalent to SDR 7.7 million (about US$11.2 million).
Following the Executive Board's discussion of Dominica, on August 4, 2004, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair said:
"The Dominican authorities' consistently strong implementation of the economic program supported by the Poverty Reduction and Growth Facility (PRGF) arrangement has contributed to a rebound of economic growth, with continued low inflation. The prospects for sustained economic recovery will depend on the authorities' successful execution of the 2004/05 budget, the timely implementation of comprehensive structural reforms, and completion of the ongoing debt restructuring needed for Dominica's medium-term sustainability.
"The authorities have strengthened their fiscal consolidation efforts, as seen in the 2004/05 budget. They are aiming for a larger primary surplus for this fiscal year, and are advancing the timetable for reaching the medium-term primary surplus target to FY 2005/06. However, a large financing gap remains, which is expected to be covered by the debt restructuring.
"It was noted that the authorities were observing the best international practices regarding transparency, creditor consultations, and the safeguarding of inter-creditor equity in their debt restructuring efforts. While the initial slow pace of engagement on the part of some of Dominica's creditors was regrettable, the recent progress in advancing the debt restructuring process is encouraging. Over the last few weeks, the authorities reached agreement with creditors including the Caribbean Development Bank, several bilateral creditors, private investors with participatory rights in one of the two large external bonds, and the bulk of domestic creditors. The banking system and treasury bill market have remained stable in the wake of the ongoing debt restructuring.
"Timely implementation of comprehensive structural reforms will improve the investment climate, enhance competitiveness, and strengthen the financial sector. These reforms include: downsizing the civil service; raising civil servants' retirement age; rationalizing tax exemptions; introducing a VAT; implementing the Fiscal Responsibility Law; and improving the budgetary framework," Mr. Carstens said.
1 The Board also reviewed four noncomplying purchases/disbursement during 2002-04 and a breach of obligations under Article VIII, Section 5 of the Fund's Articles of Agreement, which arose as a result of misreporting on the observance of the continuous performance criterion on nonaccumulation of external payments arrears due to a misclassification of a small external claim. The Board was satisfied with the authorities' swift actions to correct this problem and granted waivers for the noncomplying purchases and disbursement and decided not to take action for the breach of obligations under Article VIII, Section 5.