Press Release: Statement by IMF Staff at the Conclusion of the 2005 Article IV Consultation Discussions with St. Vincent and the Grenadines
May 4, 2005
The following statement was issued by an IMF staff mission on April 12, 2005 in Kingstown1:
"An IMF staff mission visited St. Vincent and the Grenadines from April 5 - 13, 2005 to conduct the 2005 Article IV Consultation discussions. The mission received excellent cooperation from the government and benefited from constructive exchange of views with the Prime Minister, the Director General of the Ministry of Finance and Planning and other senior government officials, as well as representatives from the private sector, farmers, trade unions, and other members of civil society.
"Economic activity in St. Vincent and the Grenadines has strengthened since its recent low point in 2001. Growth has been driven by sustained activity in the construction sector, a rebound in agricultural production, and a favorable external environment, which has revived tourism. However, vulnerabilities remain given the country's dependence on imported oil, the dismantling of trade preferences in bananas, and the frequency of natural disasters.
"Although the gap in the income levels between St. Vincent and the Grenadines and that of its Eastern Caribbean Currency Union counterparts has been narrowing in recent years, growth needs to be increased and made more sustainable in order to lift the country's income levels and further reduce poverty. The mission discussed with the authorities ways to raise the economy's medium-term growth prospects, including: more efforts to enhance regional cooperation; expanding remittance and investment flows from St. Vincent and the Grenadines' large overseas population; strengthening the investment climate; and addressing structural change in the economy.
"The IMF mission encouraged the government to reduce fiscal imbalances going forward. As reflected in the last budget statement, the authorities have been attempting to strike a balance between providing fiscal stimulus and ensuring debt sustainability. In the recent past the government has used its capital program to stimulate economic activity at a time of below-average national economic growth, while partly offsetting the deterioration in the overall fiscal balance by reducing the growth in other expenditures and by enhancing its revenue-raising activities. However, this counter-cyclical fiscal stance has fueled a rapid increase in public indebtedness. The public debt-to-GDP ratio reached 80 percent in 2004. With economic growth accelerating, there is less need for a high level of public investment to stimulate economic activity.
"St. Vincent and the Grenadines' high vulnerability to natural disasters underscores the need for disaster-preparedness initiatives to cope with these shocks. Ten major disasters have hit the country since 1970, making it one of the world's most disaster-affected nations. The mission welcomes the recent preparation of a Natural Emergency Response Plan, which includes measures for managing contingencies related to hurricanes, volcanic eruptions and floods. Notwithstanding this, the mission recommends that the authorities continue to increase the emphasis on disaster mitigation and preparedness, and explore cost-effective means of providing enhanced insurance of public assets.
"Higher economic growth over the past three years is likely to have contributed to reducing the historically high levels of unemployment, underemployment and poverty. Nevertheless, unemployment and poverty remain areas of concern. The mission was encouraged by progress made by the National Economic and Social Development Council in developing a poverty-reduction strategy, and by the willingness of the government to generate a broad consensus for its economic program through its dialogue with civil society, notably through the Social Contract. Such steps strengthen the understanding of Vincentians regarding the economic challenges confronting the country, and their knowledge of, and contribution toward, a strategy for their resolution.
"The IMF mission wishes the government and the people of St. Vincent and the Grenadines every success in their endeavors to adapt to the changing global environment."
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with member countries, usually every year. A staff team visits the country, collects economic and financial information, and discusses with the country's authorities 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.