IMF Board Completes Final Review Under SBA for St. Kitts and Nevis, Approves US$4.5 Million DisbursementPress Release No. 14/342
July 15, 2014
The Executive Board of the International Monetary Fund (IMF) on July 11 completed the ninth and final review of St. Kitts and Nevis’ economic performance under a program supported by a 36-month Stand-By Arrangement (SBA). The completion of this review enables the authorities to draw an additional amount equivalent to SDR 2.931 million (about US$4.5 million), bringing the total resources available for immediate disbursement to St Kitts and Nevis under the arrangement to SDR 5.141 million (about US$7.9 million). The authorities have expressed the intention to continue to treat the arrangement as precautionary.
The SBA was originally approved on July 27, 2011 (see Press Release No.11/295), for SDR 52.51 million (about US$84.5 million at the time of the approval of the SBA), or 590 percent of St. Kitts and Nevis’ IMF quota. In March 2014, the authorities decided to treat the arrangement as precautionary (see: Press Release No. 14/117), and on June 24, 2014 the authorities started to make repayments to the Fund ahead of schedule (see: Press Release No. 14/313). In completing the review, the Executive Board also approved the waiver of the non-observance of the continuous performance criterion on external arrears.
After the expiration of the SBA, St Kitts and Nevis and the Fund will continue to maintain a fluid and constructive policy dialogue. In accordance with Fund policy, Post-Program Monitoring (PPM) will now be initiated.1
Following the Executive Board discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Substantial strides have been made under St. Kitts and Nevis’ home-grown Fund-supported program. Fiscal and debt sustainability have improved significantly, financial sector stability was preserved during a comprehensive debt restructuring exercise, and economic growth has rebounded strongly following a four-year recession. As evidence of the strong turnaround, St. Kitts and Nevis repaid early a significant portion of its outstanding credit to the IMF and continues to treat the arrangement as precautionary.
“The fiscal outturn for end-March 2014 was consistent with program objectives and the government is on track to achieve its end-year targets. The temporary accumulation of small external arrears was rapidly cleared and measures to prevent their recurrence have been taken. Attaining the medium-term fiscal program objectives is consistent with achieving the ECCB debt target of 60 percent of GDP by 2020, but it will require continued fiscal prudence and the implementation of structural reforms, including strengthening of revenue administration, civil service reform, and streamlining of the social safety net. Debt has fallen considerably, but it is still high and vulnerable to shocks. Completing the remaining debt-for-land swap is necessary to achieve the medium-term debt target.
“The government should continue with its cautious use of Citizenship-By-Investment inflows, which have been key in improving the fiscal and external macroeconomic performance. The establishment of a fund to help manage these inflows would be important to build fiscal buffers and contain associated risks. Strengthening the institutional safeguards against misuse of the program to ensure its longer-term viability is also key.
“The banking sector remains stable but continued vigilance is needed, including with regard to financial sector developments in the ECCU region.
“Achieving the country’s medium-term growth and development objectives will require continued implementation of key structural reforms designed to enhance external competitiveness and strengthen the business climate.
“St. Kitts and Nevis will continue its close policy dialogue with the Fund under the Post-Program Monitoring framework.”
1 The central objective of PPM is to provide for closer monitoring of the policies of members that have substantial Fund credit outstanding following the expiration of their arrangements. PPM is discussed in more detail in this factsheet.