Statement by an IMF Mission on the 2006 ECCU Regional Discussions with DominicaPress Release No. 06/173
August 2, 2006
Mr. David O. Robinson, head of an International Monetary Fund Staff Mission to the Eastern Caribbean Currency Union (ECCU) countries, issued the following statement today in Roseau:
"An IMF mission is visiting the Eastern Caribbean Currency Union countries during July and August to conduct the Fund's 2006 ECCU regional discussions. This mission augments the work of the individual country Article IV consultation discussions and covers the issues that cut across the region. It will visit the six IMF member countries of the ECCU—Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines—and key regional institutions, including the Caribbean Development Bank, the Eastern Caribbean Central Bank (ECCB), and the Organization of Eastern Caribbean States (OECS). In this context, the IMF mission is visiting Dominica during July 31-August 1, 2006.
"The regional discussions will focus on the economic prospects, opportunities, and challenges facing the ECCU. A concluding statement that outlines the policy recommendations will be presented in October for consideration by the member countries of the ECCU. A report reflecting these discussions will be prepared subsequently and presented to the IMF's Executive Board. The reports for each of the last two years are publicly available at http://www.imf.org/external/pubs/ft/scr/2005/cr05304.pdf and http://www.imf.org/external/pubs/ft/scr/2004/cr04299.pdf
"Recent economic outcomes have been strong—growth for the ECCU region accelerated in 2005 to about 4½ percent, largely due to a recovery in tourism, and increased construction activity ahead of the 2007 Cricket World Cup. While inflationary pressures have emerged due to the strong economic activity and higher world oil prices, inflation has remained in the low single digits, anchored by the regional monetary arrangement at the ECCB. Fiscal positions also improved, with the central government primary balance (the overall balance of the government minus interest payments) recording a small surplus for the first time in nearly a decade.
"Buoyed by continued growth in the region's main tourism markets—the United States and the U.K.—as well as the ongoing high level of construction activity, near-term growth prospects remain strong in most countries. This supportive environment provides a window to enhance the flexibility of the region's economies that will be important to enable the region to take advantage of the new opportunities provided by the CSME (Caribbean Single Market and Economy) and the increasing globalization of the world economy, as well as to adjust to the further decline of trade preferences for bananas and sugar. Sustaining growth once the impetus dissipates from the construction boom ahead of the Cricket World Cup will be key to maintaining and further improving living standards in the region.
"Despite the improvement in fiscal outcomes seen in 2005 and restructuring agreements reached with creditors in three countries—Antigua and Barbuda, Dominica, and Grenada—debt burdens remain high throughout the region. Interest outlays by countries in the region restrict the fiscal space available to pursue social agendas and address emerging concerns such as HIV/AIDS. Important reforms to place the fiscal balances on a firmer footing are underway in many countries—including through the introduction of value added taxes—and it is essential that improved fiscal positions are sustained. In this context, care will be needed to ensure that public sector investments are yielding adequate social rates of return and that tax incentives are not unduly eroding tax bases.
"It is against this background that the mission is discussing policy options with national and regional authorities. The IMF team would like to thank the authorities of Dominica for the insightful and open discussions. The authorities' successful implementation of their economic program has resulted in strong macroeconomic performance, which has boosted economic activity and restored the foundation of sustainable growth and poverty reduction. Further structural reforms are underway, which will enhance the economy's growth potential and alleviate the existing vulnerabilities. We wish them every success in their continued efforts."