Press Release: IMF Staff and St. Kitts and Nevis Reach Agreement in Principle on US$84 Million Stand-By Arrangement
June 3, 2011Press Release No. 11/215
June 3, 2011
Mr. Alfred Schipke, chief of the International Monetary Fund (IMF) mission to St. Kitts and Nevis, issued the following statement today in Basseterre:
“The St. Kitts and Nevis authorities and an IMF staff mission have reached broad agreement on the key elements of an economic program that the IMF could support with a Stand-By Arrangement (SBA) in an amount equivalent to SDR 52.3 million (about US$84 million) over 36 months. The IMF’s Executive Board could consider St. Kitts and Nevis’s SBA at the end of July, following review by IMF management.
“St. Kitts and Nevis is taking decisive action to address the legacy of the most severe recession in the country’s history. Declines in tourism revenue and foreign direct investment-related construction triggered a sharp contraction in economic activity, deterioration in the fiscal position, and a significant increase in public debt levels. In 2011, the current account deficit is expected to widen due to the dual impact of a nascent economic recovery and an increase in food and fuel prices. Moreover, financing needs are increasing as a result of large imminent debt servicing obligations. Since the latter half of 2010, the authorities have begun implementing measures to help reverse the decline in revenue and reduce the fiscal deficit, including the introduction of a value added tax (VAT), an increase in electricity tariffs, and prioritization of capital expenditures.
“The main goal of the government’s economic strategy is to foster macroeconomic stability and put the public debt on a firmly declining path, which is expected to contribute to higher economic growth and improved living standards for all members of the society. In addition to strong fiscal measures already adopted by the government, the program would include a comprehensive debt restructuring to achieve a sustainable debt service profile and ensure fair burden sharing by all stakeholders. In addition, the government intends to implement a number of complementary measures to strengthen public financial management; improve the collection of revenue at the Customs and Inland Revenue departments; and develop a debt-management strategy to reduce the debt-to-GDP ratio over the coming years.
“At the same time, the program will maintain social safety net spending to protect the most vulnerable, in particular programs for school meals, uniforms and text books. In addition, the government plans to establish a register of beneficiaries that would help to better target social assistance, and many basic commodities will continue to be exempt from the VAT.
“The program—on which staff level agreement was reached—is also expected to catalyze additional financing from other international institutions. Given the broad-based nature of the reform agenda, the support of other development partners over the medium term is essential to the success of the government’s program, including through the provision of technical assistance in priority areas.”
St. Kitts and Nevis, which became a member of the IMF on August 15, 1984, has a current IMF quota of SDR 8.9 million (about US$14.2 million).