Press Release: Statement at the Conclusion of an IMF Mission to St. Vincent and the Grenadines
May 21, 2010Press Release No. 10/211
May 21, 2010
An International Monetary Fund (IMF) mission led by Mrs. Nita Thacker visited St. Vincent and the Grenadines during May 12-21 for the annual Article IV discussions on economic developments and macroeconomic policies. The mission met with the Honorable Prime Minister and Minister of Finance, Dr. Ralph Gonsalves, the Acting Prime Minister Mr. Michael Browne, members of the Cabinet, the Director General of the Ministry of Finance Mr. Maurice Edwards, other senior government officials, as well as members of the opposition headed by Hon. Arnhim Eustace. The mission also met with representatives of the private sector and labor unions.
At the end of the mission, Mrs. Thacker issued the following statement:
“St. Vincent and the Grenadines has been severely affected by the spillovers of the global crisis on tourism, remittances, and foreign direct investments. Economic activity contracted 0.6 percent in 2008 and 1 percent in 2009, after an average increase of about 8 percent in 2006-07. Inflation declined to 0.4 percent in 2009 from 10 percent in 2008, reflecting the decline in international food and fuel prices. The balances of the central government worsened in 2009. The overall deficit doubled to 3.3 percent of GDP and the primary surplus of 2008 disappeared to leave a near-zero deficit in 2009. The deficit was financed largely through issuance of Treasury bonds, leading to an increase in the total public sector debt to 75 percent of GDP, a jump of 7 percentage points from 2008.
“Growth is expected to recover gradually over the medium term, reflecting the projected slow recovery in employment and consumer spending in tourism source economies. The fiscal deficit is expected to widen further this year, reflecting in part spending on some one-off items, including the bridge loan to the airport authority and resources for the financial sector. However, over the medium term, the authorities plan to reduce the deficit through a mix of revenue and expenditure measures to ensure that the debt-to-GDP ratio declines in line with the ECCB recommended target of 60 percent by 2020.
“The banking sector requires close monitoring, as soundness indicators deteriorated in 2009. Also, uncertainty in the nonbank financial sector remains high, reflecting the fallout from the collapse of the CL Financial Group. In this context, the mission welcomed the authorities commitment to a regional strategy for resolving the issues related to this sector. Progress is also being made on establishing a Single Regulatory Unit to strengthen the supervision of the nonbank financial institutions.
“Upon its return to Washington, the mission will prepare a report, to be discussed by the IMF's Executive Board, tentatively scheduled for July 2010.
“The mission thanks the authorities for their warm hospitality and close cooperation.”