Press Release No. 11/284

Press Release No. 11/284
July 18, 2011

An International Monetary Fund (IMF) mission headed by Hunter Monroe issued the following statement on Monday, July 18, 2011 at the end of its discussions in Montserrat:

“An IMF staff team visited Montserrat from July 12 to 18, 2011 to undertake the IMF’s first formal bilateral dialogue with the UK overseas territory of Montserrat, at the request of the Montserrat authorities. The team held productive discussions with the local authorities, the banking and business representatives, the opposition, and union representatives.

“Montserrat has a number of promising opportunities to enhance its growth prospects. The construction of a new capital and port, the keystone of the public investment program, would provide a focal point for public and private sector activity. The government is defining options to improve access to the island, and an investment program is underway to enrich the tourist experience taking advantage of Montserrat’s unique characteristics. The current approach for the mining of volcanic sands, the only export industry, needs improvement. It is being replaced with a sound and sustainable strategy; establishing a national consensus behind the strategy will be crucial. Lowering energy costs including through geothermal energy would transform the local economy.

“Improving the business environment will be essential to rebuilding a viable private sector. The mission noted progress in streamlining customs clearance and recommended establishing a one-stop shop for investors and joining the World Bank’s Doing Business indicators database to provide a diagnostic and benchmark for progress.

“The challenge for fiscal policy is to keep recurrent expenditure in line with recurrent revenue and to reduce dependence on external grants over time while carefully selecting public investment projects that will deliver future streams of income. The medium-term fiscal framework needs to be revised to reflect changes in economic circumstances. The mission welcome plans to improve tax administration, to simplify the tax system, and to improve the sustainability of the pension system.

“The economy’s exposure to two failed insurance companies which had been offering deposit-like products represents a significant challenge to the financial and public sectors as well as to affected individuals. The mission recommended that financial institutions with such impaired assets clean up their balance sheets and seek new capital as needed. The mission encourages the authorities to strengthen the regulation and supervision of the financial sector, including by regulating previously unsupervised institutions.

“The mission benefited from open and fruitful exchanges with representatives of the local authorities and the private sector and wishes to express its gratitude for the cooperation and kind hospitality.”