Press Release No. 15/124

Press Release: IMF Staff Completes Mission for the Third Post-Program Monitoring to Antigua and Barbuda

March 19, 2015

An International Monetary Fund (IMF) mission, led by Mr. Meredith Arnold McIntyre, visited Antigua and Barbuda during March 9-16 to conduct the third Post-Program Monitoring¹ review. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

At the conclusion of the visit, Mr. McIntyre made the following statement:

“The economic recovery continues to be tepid with real GDP growth estimated at about 2.4 percent in 2014. The weakening of tourist arrivals in the fourth quarter continued into a rapid decline in the first few months of 2015 and is expected to reduce growth to 2.1 percent this year. Low fuel prices are projected to keep inflation low, and narrow the current account deficit.

“The fiscal performance was weaker than previously projected and financing pressures were large and substantial. Partly reflecting fiscal loosening in the run-up to the general elections, the overall fiscal deficit in 2014 reached 2.9 percent of GDP. Most of the deficit is accounted for by higher-than-expected transfers (1.2 percent of GDP), higher public investment (0.5 percent of GDP) and spending on goods and services (0.2 percent of GDP). With elevated scheduled amortization, the gross financing needs increased to 10.3 percent of GDP. However, with limited financing options the authorities relied on higher domestic financing (mostly government securities) and arrears. The ratio of public sector debt to GDP increased to 98.7 percent of GDP.

“ABI Bank, which was intervened by the Eastern Caribbean Central Bank (ECCB), remains unresolved and weak financial soundness indicators continue to affect the banking system. As a result, Antigua and Barbuda has realized a fourth consecutive year of negative private sector credit growth.

“On current policies, the growth outlook for 2015 is modest (2.1 percent). This projection reflects, on the upside, lower oil prices, the recovery in the United States, and the opening of the new airport terminal. On the down side, the large decline in tourist arrivals in the first two months of 2015 (about 8 percent) has reduced the prospects for the sector.

“The mission welcomes the authorities’ intention to tackle the cash flow problem, move the economy toward fiscal and debt sustainability and underpin bank resolution. This will require a stronger primary surplus.

“The mission welcomes the authorities’ resolve for a swift resolution of ABI Bank as well as progress on legal reform. The Fund and World Bank will continue to consult with the ECCB to maintain confidence in the process and ensure the stability of the financial system.

“The authorities’ initiatives to boost competitiveness and improve the business environment is welcomed. Efforts to increase energy efficiency and diversify the sources of energy and to promote investments in the tourism sector are commended. The mission also welcomes the authorities’ plans with the support of the World Bank to restore Antigua Public Utilities Authorities’ efficiency and profitability in 2015.”

The mission wishes to thank Prime Minister Browne, Ministers Michael and Yearwood, Minister of State Weston, the ECCB Governor Sir K. D. Venner, the Financial Secretary, and other senior government officials for the cordial and constructive meetings. It would also like to thank representatives of the banking and business sectors for their candid views, which helped to broaden the mission’s understanding of economic developments in Antigua and Barbuda.

¹ See: http://www.imf.org/external/np/sec/pr/2013/pr13200.htm