Statement by an IMF Mission to DominicaPress Release No. 09/218
June 18, 2009
Mr. Wendell Samuel, head of an International Monetary Fund (IMF) staff mission to Dominica, issued the following statement on May 23 after the conclusion of the mission:
“An IMF mission visited Dominica during May 18–22 for discussions on recent economic developments and macroeconomic policies. The mission met with the Honorable Prime Minister and Minister of Finance, Roosevelt Skerrit and his Cabinet, Financial Secretary, Rosamund Edwards, other senior government officials, and representatives of the private sector. The mission thanks the authorities for the warm hospitality and close cooperation during its stay in Dominica.
“The Dominican economy has been adversely affected by the global downturn, compounding losses from hurricane strikes in the last two years. Real GDP growth is projected to be about 1 percent in 2009 after reaching 3 percent in 2008. Inflation, mainly reflecting food and fuel price increases, peaked at 7½ percent in September, but has since subsided to around 2 percent by the end of 2008. The external current account deficit is estimated to have widened to 32 percent in 2008 due to higher food and fuel import bills, reconstruction related imports and a decline in manufacturing exports.
“The government’s economic recovery program appropriately seeks to maintain sound macroeconomic policies, places priority on better targeting social assistance, and deepens structural reforms aimed at enhancing private-sector-led economic growth. The mission welcomed the Government’s plans to achieve a primary fiscal surplus of about 1 percent of GDP in the FY 2009/10 budget. It welcomed the authorities efforts to further prioritize capital expenditure and better target social outlays to avoid unsustainable increases in government spending. It also encouraged the authorities to consider contingency measures, should the global recession prove to be deeper and more protracted than currently projected.
“Looking ahead, the mission welcomed the government’s priorities of boosting growth and reducing poverty through greater economic diversification, and its commitment to return to their medium-term primary fiscal surplus target of 3 percent of GDP to place the still high public debt/GDP ratio on an appropriate declining path, as elaborated in the revised Growth and Social Protection Strategy (GSPS). The mission welcomed the passage of the Financial Services Unit (FSU) Act, which would help to strengthen the regulatory and supervisory framework for nonbank financial institutions, in particular for insurance companies. It urged the authorities to continue working for a regional solution to the problems in the insurance sector that minimizes the fiscal cost and involves private sector participation. The government’s efforts to reduce the cost of doing business, including easing infrastructure constraints, and streamlining business procedures should help enhance productivity and competitiveness, and create new sources of growth led by private sector.
“The Government’s determination to continue implementing economic policies aimed at reducing the public debt ratio and creating buffers against external shocks and natural disasters is commendable. The authorities’ sound macroeconomic policies should position the Dominica economy to accelerate growth when global economic conditions turn around while strengthening critical social and infrastructure needs. The IMF will maintain a close policy dialogue with the authorities as they continue to implement their reform agenda.”