Press Release: Statement by an IMF Mission to Dominica
February 4, 2010Press Release No.10/26
February 4, 2010
An International Monetary Fund (IMF) mission led by Mr. Hunter Monroe of the IMF’s Western Hemisphere Department visited Dominica during January 18-28 for the annual Article IV discussions on 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 and labor unions. The mission thanks the authorities for the warm hospitality and close cooperation it received during its stay in Dominica.
The following statement was issued today by the IMF mission led by Mr. Monroe:
“Dominica has been affected by the global crisis through lower stayover tourist arrivals, foreign direct investment inflows, and remittances from Dominicans abroad. However, Dominica has benefited from a relatively favorable fiscal position, which allowed room for countercyclical government action. Reflecting in part the authorities’ decision to maintain the level of capital spending in 2009 at the high level in 2008, real Gross Domestic Product is estimated to have shown only a slight decline of 0.3 percent. Prices rose 3.2 percent in the 12 months to December 2009 (zero percent on a period average basis), reflecting increases in world food and fuel prices.
“The near to medium-term economic outlook is positive. With the recovery of the global economy and expected improvements in international trade and tourism activities, the Dominican economy is expected to grow at 1½ percent in 2010. There are downside risks, however, if weakness in advanced economies adversely affects tourism demand in Dominica’s key source markets.
“The mission welcomes the fiscal stance for FY2009/10, which would imply a primary surplus of 3 percent of GDP. However, additional spending to be financed by external loans would imply a temporary weakening of the primary surplus in FY2010/11. The mission urged the authorities to return as soon as possible to the fiscal anchor provided by a primary surplus of 3 percent of GDP, which is of paramount importance for long-term debt sustainability.
“Financial vulnerabilities emanating from the nonbank sector have heightened uncertainty and warrant close monitoring. The collapse of the CL Financial Group and large role played by credit unions underscore the need to strengthen the supervision of non-bank financial institutions including insurance companies and credit unions. The Agricultural and Industrial Development Bank, now under the supervision of the Financial Services Unit (FSU), has refocused on its original mandate as a development bank, and faces the challenge of managing carefully the rapid growth in its loan portfolio.
“The country will reap the benefits of reforms reaching fruition in the near future, including the automation of customs and land titling and expanded airport facilities to handle larger aircraft and flights arriving after sunset. The appointment of a second judge has already shortened the time required to hear civil matters such as contract enforcement.
“The mission commends the authorities for continuing with sound economic policies, which have provided them space to manage the fallout of the global crisis. The IMF intends to maintain a close policy dialogue with the authorities as they continue to implement their reform agenda. Upon its return to Washington, the mission will prepare a report to the IMF's Executive Board as a basis for a Board discussion tentatively scheduled for March 2010.”