Press Release No. 05/273

Press Release: Statement by IMF Deputy Managing Director Agustín Carstens at the Conclusion of his Visit to Dominica

December 13, 2005

"I was pleased to have the opportunity to meet a wide cross-section of society during my visit to Dominica—members of the Cabinet and other government officials, representatives of the private sector and civil society, and members of the media.

"It is evident that the reform strategy in Dominica has been very successful. Economic growth has revived after the crisis of 2001-02 during which output contracted by 10 percent. I think that Dominica can achieve even higher growth rates if the improvement in the macroeconomic environment is maintained and there is steadfast progress on structural reforms. Sustained growth will, in turn, lower the still-high rates of unemployment and poverty, so that all segments of Dominican society can share in the economic recovery.

"Strong policies have contributed to the turnaround in economic performance. There has been an improvement in public finances and a commendable effort to reach cooperative debt restructuring agreements with creditors. The improved fiscal climate has boosted confidence and is helping to restore the foundation for economic growth. The adoption of the VAT next year should help to improve the efficiency of the tax system. The decision to publish information on tax concessions is an important step toward improving transparency.

"Of course, a number of important challenges remain. The large unfunded liabilities of the social security system constitute a major risk to public finances in the medium term. Hence there is a need for early and significant actions on social security reform, and I am encouraged that the government intends to review recommendations to overhaul the system.

"Public debt levels are still high, partly because debt restructuring is taking time due to a few hold-out creditors. Reducing the debt stock to manageable levels within a reasonable time should remain one of the objectives of fiscal policy.

"Structural rigidities persist, which are holding back private investment and the development of new sources of growth in the economy. This was borne out in my meeting with private sector representatives, with greater efficiency in customs and greater competition in the electricity sector mentioned as key reforms that are needed. A more transparent and simpler system to make land available to potential investors would also help.

"The recent track record of the government, and the renewed political mandate that it has received, give confidence that there will be progress in surmounting many of these challenges in the coming years. The IMF has been pleased to support Dominica's reforms under its Poverty Reduction and Growth Facility (PRGF) and we remain fully committed to helping the country in the future."