Statement by an IMF mission at the conclusion of the 2006 Article IV Consultation discussions with Antigua and BarbudaPress Release No. 06/198
September 12, 2006
An International Monetary Fund (IMF) mission led by Mr. Ulric Erickson von Allmen issued the following statement today in St. John's:
"A mission of the IMF visited Antigua and Barbuda from August 30 to September 12, 2006, to hold the 2006 Article IV Consultation. The discussions have taken place against the background of the authorities' bold reform agenda to tackle long standing fiscal and debt problems and build an environment conducive to private sector growth. For decades, the economy has struggled with chronically large fiscal deficits, a high debt burden, and endemic arrears. A comprehensive policy agenda has now been developed. Considerable progress has been made, including key fiscal measures—such as the reintroduction of the Personal Income Tax, preparations for the Antigua and Barbuda Sales Tax, and the voluntary separation program—and reforms to strengthen the investment climate, through greater transparency in government and policy making—such as the National Economic Policy Symposium in July—as well as through the approval of the Investment Authority Act.
"The reforms have contributed to positive macroeconomic outcomes, especially on the fiscal side. The authorities also have, for the first time, placed debt instruments—including of long maturity—in regional capital markets. Growth has accelerated markedly in 2006, and economic prospects have improved.
"Nevertheless, the transition to sound public finances remains a work in progress, and it is imperative that the reform momentum be maintained and that planned reforms are implemented effectively. In particular, moving ahead with the implementation of the voluntary separation program and the sales tax are crucial for achieving a lasting improvement in public finances. Strengthened expenditure management and control is also key to ensure effective budgetary implementation and the draft Finance and Administration Act could contribute importantly in this regard. The mission welcomes the authorities' intention to regularize relations with their creditors—an important step in putting the fiscal accounts in order. The tax incentives policy should also be reviewed with a view to make it more efficient and less costly for the budget.
"Output is projected to expand by about 8 percent this year on account of large construction investments. As growth beyond that tapers to more sustainable levels, it will need to be underpinned by reforms to enhance the economy's medium-term growth prospects. Implementation of the Investment Authority Act would help promote a more transparent business environment. Labor market reforms will also be important to help sustain high growth.
"The mission is encouraged by the fiscal and structural reforms underway. Implementation of these reforms should help achieve strong and sustainable macroeconomic outcomes."