## cr17391-dominicabundle

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### Risk Assessment Matrix — summary and recent context
- Tropical storm Erika (August 2015) caused damages and losses estimated at 96 percent of GDP.
- Dominica received SDR6.15 million (75 percent of quota at the time) under the Fund’s Rapid Credit Facility (RCF) disbursement in October 2015.
- Government committed to fiscal consolidation of over 6 percent of GDP through FY2020/21 and to cut public debt to the regional target of 60 percent of GDP by 2030.
- Post-storm priorities: infrastructure rehabilitation and social relief while addressing fiscal sustainability.
- First-generation fiscal measures from RCF disbursement and additional measures implemented; yields somewhat below targets.

### Macro outlook and projections (active scenario)
- Real GDP:
  - 2016 estimated at 1.0 percent.
  - Projected 2017 growth: 3.6 percent.
  - Projected 2018 growth: 3.3 percent.
  - Medium-term potential growth projected to decelerate towards 1.5 percent.
- Inflation and money:
  - Inflation slightly negative year-on-year in 2016; medium-term inflation projected near 2 percent.
  - Broad money (M2) projections include 5.0 percent (2017), 4.7 percent (2018) and decline towards 3.5 percent (2022) in the series presented.
- External current account:
  - 2016 current account deficit estimated at -11.8 percent of GDP.
  - Projected to widen near term due to reconstruction-related imports; medium-term to improve to near -10 percent of GDP under recovery in agriculture, tourism, manufacturing and fiscal consolidation.
- Key projects expected to support near-term growth:
  - A Range Hotel project; geothermal power plant; a new hospital; expansion of the All Saints University; a large hotel construction project estimated at 20 percent of GDP currently in execution.
- External financing assumed primarily through FDI and official concessional loans.

### Fiscal developments, measures, and yields
- FY2015/16 overall deficit: -0.9 percent of GDP (deterioration of 1.8 percent of GDP versus 2016 Article IV projection).
- FY2016/17 first semester: significant deterioration relative to FY2015/16 despite record-high CBI revenues.
- CBI program:
  - CBI revenues increased from 3.4 percent of GDP in 2015 to estimated 7.4 percent in 2016.
  - CBI deposits and receipts (central government, EC$ millions): 50.7 (2012), 49.7 (2013), 23.0 (2014), 72.7 (2015), 136.0 (2016), 133.9 (2017 projected).
- Fiscal consolidation yields (Total Yield, cumulative, percent of GDP):
  - FY2015/16 (Est.) 0.4; FY2016/17 0.7; FY2017/18 2.1; FY2018/19 3.5; FY2019/20 4.8; FY2020/21 5.7; FY2021/22 6.5.
- Total Yield under RCF commitment (cumulative, percent of GDP):
  - FY2015/16 0.5; FY2016/17 1.1; FY2017/18 2.2; FY2018/19 3.5; FY2019/20 4.9; FY2020/21 6.2.
- Selected measures (status as presented):
  - Increase in specific excises on alcohol, and tobacco by 10%: Done.
  - Highway maintenance levy (0.1 percent annual yield): Done.
  - Reinstatement of import duty on meat (0.1 percent annually): Done.
  - Departure tax (0.13 percent annually from FY2016/17 onward): Ongoing.
  - Reduction in discretionary concessions by rationalizing tax incentives: Pending.
  - Property tax reform: Pending.
  - Introduction of villa construction fee: Done.
  - Introduction of new investment option in the CBI: Done.
  - Reduction in CIT tax rate (from 28 to 25 percent in January 2016): Done (recorded as 0.0 then -0.3 in subsequent years).
- Expenditure-side cumulative reductions (percent of GDP): FY2016/17 -0.1; FY2017/18 1.2; FY2018/19 2.4; FY2019/20 3.3; FY2020/21 4.2; FY2021/22 5.0.

### Fiscal outlook vulnerabilities and policy options
- Drivers of deterioration:
  - Petrocaribe obligations: 8 percent of GDP.
  - Inclusion of annual estimated cost of natural disasters: 1.5 percent of GDP per year.
  - Lower projected grant revenues.
  - Downward revision in projected yields of fiscal consolidation measures from 6.2 percent to 5.7 percent of GDP.
  - Reduction of CIT rate from 28 to 25 percent.
  - Social increases in minimum and non-contributory pensions.
- Use of CBI deposits and Vulnerability Fund (VF):
  - Recommendation to use CBI program deposits to pay down public debt and reduce issuance to reach 60 percent of GDP by 2030 without increasing fiscal consolidation beyond RCF targets.
  - Recommendation to formally establish a Vulnerability Fund (VF) with:
    - Initial funding from a share of government deposits: 26 percent of GDP.
    - Annual budgetary contributions: 1.5 percent of GDP.
  - Suggested scope: include a specific sub-fund for debt reduction and financing reconstruction investment with less recourse to debt issuance.
- Contingent measures and revenue options to strengthen sustainability:
  - Develop a formal tax incentives policy with clear bounds; consider more ambitious fiscal savings than in RCF.
  - Revenue-positive options to be explored by tax policy TA: reduction of discretionary tax concessions; cost recovery fees for health services; property tax; solid waste charge; review of fuel taxation; residential levy on villa owners.
  - Spending efficiency measures: better targeting/means-testing of social programs; remove or cap triennial back-pay compensation; begin civil service reform.

### Debt sustainability and scenarios (Annex I highlights)
- Risk of external debt distress: High.
- Public sector debt as of end-FY2015/16: around 83 percent of GDP.
- Debt of rest of public sector (SOEs and Petrocaribe): about 20 percent of GDP.
- Active scenario assumptions:
  - Fiscal consolidation of over 6 percent of GDP through 2016-22.
  - Near-term growth >3 percent, declining to 1.5 percent potential by 2022.
  - Current account deficit remains high financed mainly with FDI and official debt flows.
- DSA outcomes:
  - Active policies scenario: PV of public sector external debt estimated at 73 percent of GDP in 2016 and on a declining trajectory if consolidation completed.
  - Historical scenario: PV of debt-to-GDP threshold breached for the entire period.
  - Sudden stop in CBI revenues in FY2018/19 (customized scenario): results in permanent breach of PV of debt-to-GDP ratio threshold and unsustainable upward debt trajectory.
  - Conclusion: classification of “high risk of external debt distress” across scenarios; upgrade possible if consolidation takes hold and confidence improves.

### External sector assessment (Annex II highlights)
- 2016 external position assessed weaker than level consistent with medium-term fundamentals and desirable policies.
- Current account:
  - Widened from 8.0 percent of GDP in 2015 to 11.8 percent of GDP in 2016.
  - Drivers: collapse of manufacturing exports; reconstruction-driven import increases; decline in transfers; partially offset by lower oil imports, higher tourism receipts, and CBI revenues.
- REER/competitiveness:
  - NEER appreciated by 3.6 percent on average in 2016 due to U.S. dollar strength.
  - CPI-based REER appreciated by 0.9 percent in 2016.
  - REER overvaluation estimates vary by method: 50 percent (CA model), 15 percent (ES approach), 5 percent (index REER model); all indicate overvaluation.
- Reserves:
  - Imputed reserves at end-2016: US$229 million.
  - Coverage: 9.4 months of imports; 45 percent of broad money — both exceed typical benchmarks (3 months of imports; 20 percent of broad money).
  - Significant reserve increase in 2016 presumed driven by unrecorded CBI flows.
- Quantitative external assessment (EBA-Lite, 2016):
  - Cyclically-adjusted current account balance: -12.2 percent of GDP.
  - Cyclically-adjusted current account norm: 0.7 percent of GDP.
  - Current account gap: -12.9 percent of GDP.
  - Residual to be closed by structural policies: -14.8 percent of GDP.

### Financial sector vulnerabilities and recommended actions
- Banking sector indicators:
  - Bank NPLs: 14.5 percent of total loans (down from 15.4 percent in 2015).
  - AID Bank NPLs: 24.3 percent of total loans.
  - Bank credit to private sector grew by 2.9 percent; credit union sector lending grew by 6 percent.
  - Credit union sector assets near 50 percent of GDP; many credit unions below minimum capital requirement.
- Key risks:
  - High NPLs and weak capitalization across banks and credit unions.
  - Growing systemic risk from credit unions due to weaker regulation and supervision.
  - Risk of loss or reduced correspondent banking relationships (CBRs) increasing transaction costs and operational burdens.
- Priority policy responses:
  - Strengthen AML/CFT framework and ensure effective implementation; align with FATF 2012 standard and strengthen international tax transparency in line with OECD standards to reduce CBR withdrawal risk.
  - Communicate AML/CFT and tax-transparency measures to correspondent banks; improve information-sharing agreements between respondent and correspondent banks.
  - Make ECAMC operational and use extraordinary powers to accelerate NPL resolution.
  - Eliminate ECCB’s Minimum Savings Rate (MSR) via representation at the Monetary Council to boost bank profitability and accelerate balance-sheet clean-up.
  - Fully implement Asset Quality Review (AQR) recommendations and explore options to strengthen capital buffers (issuance of additional shares, remove obstacles to bank consolidation).
  - Strengthen regulation and supervision of credit unions in coordination with regional initiatives; enforce penalties and build FSU technical capacity.
  - Expedite Offshore Banking Act revisions (increase capital requirements; reform licensing; enact regulations) per CARTAC recommendations.
  - Consider mergers/consolidation and bundling of financial services (credit card clearing, remittances) to lower costs and risks.

### Structural reforms, resilience, and institutional reforms
- Disaster resilience:
  - Build buffers and optimize insurance policies with World Bank assistance; “build back better” in reconstruction (roads, bridges, retaining walls).
- Competitiveness and growth:
  - Structural reforms to boost competitiveness: reduce electricity costs (geothermal development), improve business environment, enhance labor market flexibility, target education to productive-sector demand, reduce cost of dealing with government (insolvency, property registration, permits, taxes).
- Institutional fiscal reforms:
  - Budget process reform to align budget as main instrument for medium-term fiscal management; address optimistic revenue projections and unrealistic appropriations.
  - Consider fiscal rules with escape clauses and verifiable triggers; regional coordination across the currency union.
  - Monitor SOEs: SOE debt contributes 12 percent of GDP to public sector debt; require audited annual financial statements and annual risk statements.
- Data and surveillance:
  - Address shortcomings in coverage, accuracy, frequency, and timeliness of fiscal, national accounts, labor market, balance of payments, and credit union data.
  - Recommendation for next Article IV Consultation on a 12-month cycle.

### Key quantitative indicators (selected, preserved as presented)
- NPLs (commercial banks): 14.5 percent of total loans (2016).
- External current account deficit (2016): -11.8 percent of GDP.
- Public sector debt (end-FY2015/16): around 83 percent of GDP.
- Petrocaribe obligations: 8 percent of GDP.
- Annualized natural disaster cost assumed: 1.5 percent of GDP per year.
- CBI revenues (percent of GDP): 3.4 percent (2015); estimated 7.4 percent (2016); staff noted estimate of 9.4 percent of GDP in FY2016/17 in one risk description.
- Imputed reserves (end-2016): US$229 million; coverage 9.4 months of imports; 45 percent of broad money.
- Central government deposits (EC$ millions, memo): 265 (2015), 369 (2016), 350 (2017), 328 (2018), 304 (2019), 277 (2020), 248 (2021), 219 (2022).
- Central government debt (percent of GDP): 82.7 (2016); projected path under active scenario includes 80.1 (2017), 77.8 (2018), 75.7 (2019), 73.5 (2020), 70.9 (2021), 68.0 (2022).
- Net imputed international reserves (millions of U.S. dollars, end-year): 220.9 (2015), 223.3 (2016), 225.7 (2017), 227.8 (2018), 230.0 (2019), 232.2 (2020), 234.3 (2021 projected series).

### Priority policy recommendations (condensed)
- Fiscal:
  - Fully implement fiscal consolidation to meet RCF commitment of 6.5 percent of GDP by FY2021/22.
  - Use CBI revenues to reduce debt and build buffers; formally establish a Vulnerability Fund (VF) with a sub-fund for debt reduction and reconstruction investment.
  - Stagger measures over the medium term; focus consolidation on the underlying primary balance excluding transitory factors (CBI, grants, storm-related expenditures).
  - Identify alternative financing if Petrocaribe support ceases; consider contingent fiscal measures and revenue options from TA.
- Financial sector:
  - Strengthen AML/CFT and international tax transparency; communicate reforms to preserve CBRs.
  - Make ECAMC operational; implement AQR recommendations; remove ECCB MSR; strengthen regulation and supervision of credit unions; pursue bank consolidation and capitalization.
  - Expedite reforms to offshore banking regulatory framework per CARTAC recommendations.
- Resilience and structural reforms:
  - Build buffers and optimize insurance with World Bank assistance.
  - Advance geothermal power to reduce electricity costs; “build back better” public infrastructure.
  - Implement structural reforms to boost competitiveness and improve the business environment.
- Institutional:
  - Reform budget processes; consider fiscal rules tailored with escape clauses; improve SOE monitoring and reporting.
  - Improve statistical capacity and data timeliness for surveillance and policymaking.

_Italic: Source — IMF staff report content from chapters including "1. Risk Assessment Matrix", Annex I, Annex II, and related sections in cr17391-dominicabundle._

### 1. Risk Assessment Matrix ________________________________________________________________________ 10

### 1. Risk Assessment Matrix

### Background
- In August 2015, tropical storm Erika caused damages and losses estimated at 96 percent of GDP.
- Dominica received SDR6.15 million (75 percent of quota at the time of the request) under the Fund’s Rapid Credit Facility (RCF) disbursement in October 2015.
- The government committed to fiscal consolidation of over 6 percent of GDP through FY2020/21, and to cut public debt to the regional target of 60 percent of GDP by 2030.
- Post-storm priorities: infrastructure rehabilitation and social relief while addressing fiscal sustainability.
- First-generation fiscal measures committed at RCF disbursement and additional measures have been implemented, but yields are somewhat below targets.

### Recent developments and key indicators
- Output growth: 2016 real GDP estimated at 1.0 percent.
- Sectoral notes:
  - Tourism recovering towards pre-storm levels with restoration of air access and resumption of the Creole Festival.
  - Manufacturing declined due to storm-related closure of the main industrial plant; remaining manufacturing significantly below pre-storm levels.
  - Agriculture showed signs of improvement supported by government support programs.
  - Private construction recovering, including a publicly-financed hotel refurbishment program.
  - Private investment improving with financing from the citizenship-by-investment (CBI) program, including a large hotel construction project (20 percent of GDP) currently in execution.
- Inflation: slightly negative year-on-year due to falling fuel prices.
- Fiscal performance:
  - FY2015/16 overall deficit: -0.9 percent of GDP, a deterioration of 1.8 percent of GDP compared to the 2016 Article IV projection.
  - Factors: increased capital spending, lower-than-expected donor grants, higher expenditures on goods and services and public transfers; partially offset by CBI program revenues of over 5 percent of GDP.
  - Tax revenues increased relative to FY2014/15 after hikes in specific tax rates and import duties and better auditing/collection.
  - FY2016/17 first semester: significant deterioration relative to FY2015/16 despite record-high CBI revenues, due to lower grant flows and anticipated public investment for reconstruction.
- Financial sector:
  - Bank NPLs: 14.5 percent of total loans (down from 15.4 percent in 2015).
  - Bank credit to private sector grew by 2.9 percent, supported by a large government housing program via the National Bank of Dominica (NBD).
  - Credit union sector lending grew by 6 percent; total assets of the credit union sector are near 50 percent of GDP.
  - Rising risk to financial stability due to increase in NPLs since 2014 and relatively weaker regulation and supervision of credit unions.
- Correspondent banking relationships (CBRs): global tightening increases transaction and administrative costs, particularly onerous for non-banks; institutions have maintained CBRs but costs and compliance burdens rose.
- External sector:
  - External current account deficit estimated at -11.8 percent of GDP in 2016.
  - Imports increased partly due to reconstruction needs; exports of goods declined due to storm disruptions.
  - CBI revenues increased from 3.4 percent of GDP in 2015 to estimated 7.4 percent in 2016.
  - IMF assessment: external position weaker than level consistent with medium-term fundamentals and desirable policies (Annex II); analysis suggests an REER overvaluation of over 20 percent on average with a wide range of 5 to 50 percent depending on method used, though REER close to 10-year average and current account deficit narrowed in recent years.
  - Imputed reserves assessed adequate; ample bank liquidity and government deposits and large imputed international reserves at the ECCB imply significant external buffers.

### Outlook and projections (Active scenario)
- Growth:
  - Projected 2017 growth: 3.6 percent.
  - Projected 2018 growth: 3.3 percent.
  - Medium-term potential growth projected to decelerate towards 1.5 percent (estimated based on historical trends in labor force, and human and physical capital accumulation).
  - Near-term pickup driven by reconstruction public investment and several large-scale projects in execution (close to 40 percent of GDP) expected to boost domestic demand and employment and lift potential output.
  - Large projects include: Range Hotel project; geothermal power plant; a new hospital; expansion of the All Saints University.
- Fiscal consolidation:
  - Active scenario assumes full implementation of fiscal consolidation of 6.5 percent of GDP by FY2021/22, in line with RCF commitment.
  - Under active scenario, debt falls to 60 percent of GDP by 2030 as government deposits (26 percent of GDP) are used to cover a share of gross financing needs, reducing the need to issue new debt.
  - Passive scenario: if remaining fiscal adjustment measures are not adopted and spending plans are not financially constrained, public debt would follow an increasing trajectory.
- External current account:
  - Projected to widen in the near term due to higher imports associated with reconstruction and large private investment projects.
  - Medium-term projection: improve to near -10 percent of GDP, supported by recovery in agriculture, tourism, and manufacturing and progress on fiscal consolidation.
  - Financing assumed primarily through foreign direct investment (FDI) and official concessional loans.

### Fiscal measures and expected yields (selected figures)
- Total Yield (cumulative, in percent of GDP): FY2015/16 (Est.) 0.4; FY2016/17 0.7; FY2017/18 2.1; FY2018/19 3.5; FY2019/20 4.8; FY2020/21 5.7; FY2021/22 6.5.
- Total Yield under RCF commitment (cumulative, in percent of GDP): FY2015/16 0.5; FY2016/17 1.1; FY2017/18 2.2; FY2018/19 3.5; FY2019/20 4.9; FY2020/21 6.2.
- Notable individual measures and status:
  - Increase in specific excises on alcohol, and tobacco by 10%: Done.
  - Introduction of a highway maintenance levy (0.1 percent annual yield): Done.
  - Reinstatement of the import duty on meat imports at the 2008 level (0.1 percent annually): Done.
  - Increase in tax base due to better auditing and enforcement to collect tax arrears: Ongoing (yields reflected).
  - Departure tax (0.13 percent annually from FY2016/17 onward): Ongoing.
  - Reduction in discretionary concessions by rationalizing tax incentives: Pending.
  - Property tax reform: Pending.
  - Introduction of villa construction fee: Done.
  - Introduction of new investment option in the CBI: Done.
  - Reduction in CIT tax rate: Done (impact recorded as 0.0 then -0.3 in subsequent years).
  - Increase in Customs Service Charge 0.2 percent annually: Done.
  - Expenditure-side yields: cumulative expenditure reduction path shows FY2016/17 -0.1; FY2017/18 1.2; FY2018/19 2.4; FY2019/20 3.3; FY2020/21 4.2; FY2021/22 5.0 (percent of GDP).
  - RCF measures on expenditure include wage restraint and unwinding of reconstruction-related spending (various statuses: ongoing, pending).

### Risks
- Overall: Important downside risks to growth and external sustainability exist, with some upside risks.
- Key downside risk drivers:
  - Capacity constraints in public investment could be deeper than anticipated, reducing near-term growth.
  - Natural disasters are a recurrent threat.
  - Political resistance could delay implementation of complex fiscal reforms.
  - Large-scale projects may not be completed, reducing expected growth.
  - If CBI revenues (estimated at 9.4 percent of GDP in FY2016/17) remain buoyant rather than falling to near-RCF-disbursement levels of 3 percent of GDP, fiscal outlook could improve; conversely a sudden stop would create financing gaps.
- Financial stability risks:
  - High NPLs could persist without corrective regulatory action, especially in the credit union sector.
  - Growth of the credit union sector increases systemic risk given weaker regulation and supervision compared to banks.
  - Risk of loss of CBRs could disrupt international payments and transfers.
- External sector risks:
  - REER overvaluation estimates vary widely (5 to 50 percent across methods), suggesting vulnerability to competitiveness shocks.
- Risk Assessment Matrix (summary of selected entries):
  - Poor fiscal policy implementation (direction ↓): Likelihood High; Impact High; Policy response: Implement credible multi-year fiscal adjustment strategy in line with the active policies scenario.
  - Natural disasters (↓): Likelihood High; Impact High; Policy response: Build buffers and optimize insurance policies, with the assistance of the World Bank.
  - Petrocaribe financing (↓): Likelihood High; Impact Medium; Policy response: Identify alternative sources of financing while maintaining fiscal consolidation momentum.
  - Reduced financial services by correspondent banks (↓): Likelihood High; Impact Medium; Policy response: Strengthen AML/CFT framework and ensure effective implementation; communicate efforts to address perceived risks.
  - Policy uncertainty and divergence (↑/↓): Likelihood High; Impact Medium; Policy response: Follow through with fiscal adjustment measures; use CBI revenues to reduce debt and build buffers.
  - Significant further strengthening of the US dollar and/or higher rates (↓): Likelihood High; Impact Medium; Policy response: Implement structural reforms to boost competitiveness.
  - Financial sector instability (↓): Likelihood Medium; Impact High; Policy response: Implement regional strategy to strengthen indigenous banks in the ECCU; strengthen regulation and supervision of credit unions.
  - Citizenship program demand (↑/↓): Likelihood Medium; Impact Medium to High; Policy response: Create a government fund to direct receipts toward debt reduction, infrastructure, and reconstruction; maintain strict governance and strengthen due diligence.
  - Large-scale investment projects (↑/↓): Likelihood Low; Impact Medium to High; Policy response: Continue improving the business environment.
  - Lower energy prices (↑): Likelihood Low; Impact Medium; no specific policy response listed in the matrix.
- RAM likelihood definitions: “low” <10 percent; “medium” 10–30 percent; “high” ≥30 percent. RAM reflects staff views as of discussions with authorities; risks may interact and materialize jointly.

### Policy recommendations and responses discussed
- Fiscal policy:
  - Reinforce fiscal consolidation effort to meet RCF commitment of 6.5 percent of GDP by FY2021/22.
  - Use CBI revenues to reduce debt and build buffers; consider creating a government fund to direct receipts toward debt reduction, infrastructure investment, and reconstruction after natural disasters.
  - Implement credible multi-year fiscal adjustment strategy in line with the active policies scenario.
  - Identify alternative financing sources if Petrocaribe support ceases.
- Financial sector:
  - Strengthen AML/CFT framework in line with international standards and ensure effective implementation; communicate measures to correspondent banks to preserve CBRs.
  - Promptly implement remaining elements of regional strategy to strengthen indigenous banks in the ECCU.
  - Strengthen regulation and supervision of credit unions to reduce systemic risk.
- Disaster resilience:
  - Build buffers and optimize insurance policies with World Bank assistance.
- Competitiveness and growth:
  - Implement structural reforms to boost competitiveness.
  - Continue improving the business environment to increase likelihood and benefits of large-scale investment projects.
- Other measures:
  - Ensure strict governance and strengthened due diligence for the citizenship-by-investment program to reduce sudden-stop risks.

*Source: IMF staff report content from "1. Risk Assessment Matrix" chapter for Dominica.*

### 13. Despite high projected CBI program revenues in the near-term, the fiscal outlook has

### 13. Despite high projected CBI program revenues in the near-term, the fiscal outlook has

### Fiscal outlook and drivers of deterioration
- Fiscal outlook has deteriorated and the measures in the RCF are no longer sufficient to reach the regional debt target of 60 percent of GDP by 2030.
- Contributing factors:
  - Petrocaribe obligations: 8 percent of GDP.
  - Inclusion of annual estimated cost of natural disasters: 1.5 percent of GDP per year.
  - Lower projected grant revenues.
  - Downward revision in the projected yields of the fiscal consolidation measures: from 6.2 percent of GDP to 5.7 percent of GDP.
  - Reduction of the CIT rate from 28 to 25 percent in January 2016.
  - Socially important increases in minimum pensions and non-contributory pensions for the elderly strained resources.
- Positive factors:
  - Increase in the customs service charge.
  - Ongoing gradual parametric reform of the pension system.

### Importance of timely implementation of fiscal measures
- Critical to continue implementing remaining fiscal measures in the RCF disbursement, including:
  - Unwinding of storm-related expenditure.
  - Public wage restraint.
  - Maintaining additional resources to improve tax administration to make compliance gains durable.
- Measures should be staggered into a medium-term horizon to smooth impact on domestic demand.
- Fiscal consolidation should focus on the underlying primary balance excluding unpredictable and transitory factors (CBI program revenues, grants, and storm-related expenditures) so that positive surprises to these factors do not derail consolidation efforts.

### Use of CBI program deposits and Vulnerability Fund (VF)
- CBI program deposits should be used to pay down public debt and to reduce issuance to reach the 60 percent of GDP regional debt target by 2030 without increasing fiscal consolidation effort beyond RCF disbursement targets.
- Recommendation to formally establish a saving fund for reconstruction and resilience to natural disasters (“Vulnerability Fund”, VF) as soon as feasible, in line with recent Fund TA recommendations.
- VF funding proposals:
  - Initial funding from a share of government deposits: 26 percent of GDP.
  - Annual budgetary contributions: 1.5 percent of GDP.
- Scope of the saving fund should be expanded to include a specific additional sub-fund for debt reduction and financing reconstruction investment with less recourse to debt issuance.
- Simulation exercises (with assumption of a sudden stop in CBI revenues in FY2018/19) indicate better output and welfare outcomes if CBI resources are used for investment and debt reduction instead of public consumption.

### CBI program integrity and transparency
- Strengthen CBI program integrity to minimize sustainability risks:
  - Increase transparency with at least semi-annual public disclosures of flows and balances and due-diligence reports.
  - Adopt fully transparent accounting of all CBI-related inflows and expenses in the central government budget.
- Authorities’ ongoing measures noted as positive:
  - Plans to improve due diligence including support from international experts and a communication plan.
  - Doubling staff and hiring a foreign firm to support due diligence activities.
  - Inclusion of CBI program receipts and spending details in the FY2016/17 budget speech.
  - Considering Fund TA recommendations for fully transparent recording starting in the FY2017/18 budget.

### Contingent fiscal consolidation measures and revenue options
- Explore contingent fiscal consolidation measures to strengthen fiscal sustainability against shocks or lower-than-expected yields:
  - Develop a formal tax incentives policy for private investment with clear bounds; room exists to target more ambitious fiscal savings than in the RCF disbursement.
  - Reconsider revenue-enhancing tax reform including measures discussed in the RCF disbursement; a tax policy Fund TA mission will explore revenue-positive options such as:
    - Reduction of discretionary tax concessions.
    - Cost recovery fees for health services.
    - Property tax.
    - Solid waste charge.
    - Review of fuel taxation.
    - Residential levy on villa owners.
  - Improve spending efficiency through:
    - Better targeting and means-testing of social programs.
    - On public wage setting, remove or cap the triennial back-pay compensation.
    - Begin civil service reform to improve public sector efficiency.
  - Note: Some revenue measures face social resistance and could worsen investment incentives if poorly designed.

### Institutional fiscal reforms (durability of consolidation)
- Accelerate institutional fiscal reform to make consolidation durable:
  - Budget process reform: align budget process as main instrument for medium-term fiscal management; address overly-optimistic revenue projections and unrealistic expenditure appropriations and public investment execution constraints.
  - Fiscal rules: reconsider fiscal responsibility legislation including fiscal rules (debt target and expenditure ceiling); tailor rules with escape clauses and verifiable triggers for shocks; consider regional adoption across the currency union.
  - Monitoring of SOEs: create framework for oversight and monitoring of SOEs’ fiscal risk. Key facts:
    - SOE debt contributes 12 percent of GDP to the stock of public sector debt.
    - SOEs should submit audited annual financial statements and prepare an annual risk statement.

### Authorities’ views
- Authorities broadly agreed with policy recommendations and confirmed commitment to the fiscal consolidation plan and RCF targets; welcomed Fund TA support.
- They are working to establish the VF but prioritize reconstruction and public investment in the immediate term.
- Willing to consider revenue options from planned TA on tax policy; committed to unwind storm-related spending as needs recede.
- Expressed concerns that some tax measures could face social resistance or worsen investment incentives.
- Questioned inclusion of Petrocaribe obligations in public debt stock, noting only the portion converted to grant was utilized.

### Financial sector: main issues and recommendations
- Financial sector not functioning as engine for investment and growth due to:
  - Weak balance sheets, low capitalization, low profitability, and high NPLs across the sector.
  - Government involvement in financial intermediation via the Agricultural and Industrial Development (AID) Bank reduces efficiency.
  - Minimum Saving Rate (MSR) set by the ECCB increases deposit and lending rates.
  - Low supply of bankable projects and borrower capacity constraints limit credit demand.
- Structural constraints:
  - Insufficient borrower credit information and costly, protracted legal processes for loan enforcement.
  - Support and advancement of regional plan to establish a credit bureau recommended.
- Actions to improve soundness and reduce NPLs:
  - Use extraordinary powers granted to Eastern Caribbean Asset Management Corporation (ECAMC) to accelerate NPL resolution.
  - Government should use representation at the Monetary Council to eliminate the MSR to strengthen banks’ profitability and speed up balance sheet clean-up.
  - Fully implement Asset Quality Review (AQR) recommendations; valuations contested so no concrete AQR implementation timeline currently.
  - Explore options to strengthen capital buffers: issuance of additional shares or remove obstacles to bank consolidation.
  - Bank consolidation simulations indicate potential to reduce portfolio concentration risk and increase and stabilize profits.
- AID Bank recommendations:
  - Narrow lending portfolio to sectors affected by missing or incomplete credit markets in line with national development strategies.
  - Reduce NPLs (currently 24.3 percent of total loans) through review of delinquent loans and expeditious write-offs of long-standing NPLs.
- Credit unions:
  - Revamp regulation and supervision in coordination with regional initiative.
  - Most credit unions are below minimum capital requirement; stronger regulation, strict enforcement, timely and automatic penalties, and stronger FSU powers and technical capacity are necessary.
  - Credit unions own about one-third of the stock of banks’ deposits, requiring macro-financial monitoring and coordination with the ECCB.

*Source: DOMINICA — INTERNATIONAL MONETARY FUND (excerpt).*

### 28. Lowering the risk of withdrawal of CBRs also requires swift action. Significant progress has

### 28. Lowering the risk of withdrawal of CBRs also requires swift action. Significant progress has

### Financial-sector vulnerabilities and mitigation priorities
- Significant progress has been made to strengthen AML/CFT legislation closer to international standards in recent years, but enforcement remains a challenge given capacity and resource constraints.
- Government actions recommended to reduce the risk of withdrawal of correspondent banking relationships (CBRs):
  - Continue strengthening AML/CFT legislation in line with the 2012 FATF standard, while taking steps to ensure effective implementation.
  - Strengthen the international tax transparency framework in line with OECD standards.
  - Improve information-sharing agreements between respondent and correspondent banks.
  - Consider options for mergers in line with the Monetary Council’s objective to consolidate the indigenous banking system.
  - Explore options for the bundling of financial services (e.g., credit card clearing, remittances).

### Offshore banking sector
- Improving the offshore banking sector regulatory framework is important.
- The government should expedite approval of revisions to the Offshore Banking Act recommended by Caribbean Technical Assistance Center (CARTAC), which include:
  - an increase in capital requirements;
  - a reform of the application process for new licenses; and
  - the enactment of regulations.
- These reforms would contribute to moderating the risk of loss of CBRs.

### Authorities’ views on financial-sector reforms
- Authorities are committed to strengthening the financial sector and exploring options to increase capital buffers.
- Supportive of bank consolidation and seeking additional capital for the indigenous bank.
- Re-assessing the offshore banking sector due to significant risks, including reputational, and have discontinued issuance of new offshore bank licenses.
- Acknowledge credit unions have increased in size and now more closely resemble banks; concur on need for stronger, regionally coordinated regulation.
- On the AID Bank, government stated most lending activities would not be addressed by competitive credit markets.

### Growth, competitiveness, and private investment
- Improving conditions for private investment, especially export activities, is key to accelerating growth.
- Low growth drivers cited: small contribution of labor due to high outward migration (especially of skilled persons), declines in factor productivity, and natural disasters affecting capital accumulation.
- Key reform areas to improve investment climate and competitiveness:
  - Enhance labor market legislation and better target education programs to improve labor productivity and mobility across sectors.
  - Reduce the cost of dealing with government (resolving insolvency, registering property, paying taxes, obtaining construction permits).
  - Ensure public infrastructure is resilient to natural disasters; review construction and zoning regulations.
  - Explore expansion and diversification of tourism markets, especially from the U.S.
  - Advance geothermal generation of electricity to reduce dependence on fossil fuels and lower electricity costs; ensure lower generation costs translate to the lowest possible electricity prices. The government is receiving technical and financial support from the World Bank.

### Staff appraisal: macro outlook and fiscal priorities
- Economic activity in 2016 was weak; recovery expected to pick up on public investment and several large-scale private projects now in execution.
- Growth is projected above 3 percent in 2017 and 2018.
- Risks to the outlook: recurrent natural disasters; delays in reconstruction and public investment due to capacity constraints and uncertain sources of grant and CBI financing; weaknesses in the financial sector.
- Fiscal priorities and recommendations:
  - Maintain momentum with reconstruction while putting public finances on a sustainable footing.
  - Continue implementing fiscal consolidation plan committed at time of the RCF disbursement aimed at reducing debt to 60 percent of GDP by 2030.
  - The consolidation entails an adjustment of over 6 percent of GDP, including public wage restraint, reduction of tax incentives, and gradual unwinding of storm-related spending on reconstruction, goods and services, and social assistance.
  - Do not allocate CBI flows to recurrent spending; broaden the scope of the VF for natural disasters to include a saving sub-fund of CBI resources earmarked for debt reduction and public investment.
  - Consider contingent fiscal measures to create fiscal space for reconstruction and strengthen fiscal sustainability.

### Financial-sector reform priorities (staff recommendations)
- Clean up bank balance sheets by reducing still-high NPLs and increasing bank capital.
- Make the ECAMC operational as soon as possible to facilitate removal of NPLs from bank balance sheets.
- Seek to eliminate the ECCB’s MSR, which reduces banks’ profitability and delays NPL reduction.
- Address vulnerabilities in the systemically important credit union sector: high NPLs and low capitalization—strengthen supervision and regulatory powers of the FSU and advance regional credit union legislation.
- Better target credit by public financial institutions to address missing or incomplete credit markets, in line with national development objectives.
- Establishment of a credit bureau is welcome and should facilitate access to credit.
- Review legislation aimed at strengthening enforcement of loan contracts to counterbalance increased banks’ risk aversion.
- Encourage respondent and correspondent banks to improve communication and information sharing; remove obstacles for bank consolidation; encourage bundling of financial services.

### Resilience, structural reforms, and labor-market policies
- Continue efforts to increase resilience of public infrastructure and “build back better” in reconstruction (roads, bridges, retaining walls) with technical support from official creditors and donors.
- Move ahead with geothermal energy plans to lower electricity costs, thereby improving competitiveness.
- Update labor market legislation to remove rigidities in working hours and align severance payments with a more dynamic labor market.
- Incentivize educational attainment and skills aligned with productive-sector demand to facilitate labor adaptation and increase employment.
- Public wage negotiations should consider impacts on private-sector wages, production costs, investment, employment, and external competitiveness.

### Data and surveillance
- Data provision has shortcomings due to capacity constraints in the statistical agency, with weaknesses in coverage, accuracy, frequency, and timeliness.
- Surveillance would benefit from more timely and improved data on: national and fiscal accounts, labor market, the balance of payments, and credit unions.

### Institutional and procedural recommendation
- Staff recommends that the next Article IV Consultation for Dominica take place on the standard 12-month cycle.

*Source: cr17391-dominicabundle - 28. Lowering the risk of withdrawal of CBRs also requires swift action. Significant progress has (IMF staff).*

### 1.0 percent

### cr17391-dominicabundle - 1.0 percent

### External Sector Developments
- Competitiveness: D ominica NEER and D ominica R EER indexed to 2005 = 100; United States REER shown for comparison (indexes, 2005 = 100).
- External deficit: increased following US$ appreciation and storm-related impacts.
- Exports: declined significantly as a result of the storm; goods exports categories shown include Bananas, Beverage, Other food and animals, Soap, Paints and Varnishes, Other manufacturing, Re-exports.
- Imports: increased, in part due to storm-related reconstruction of infrastructure; Goods Imports broken down by Fuel, Food, FDI-related, Public expenditure-related, Private reconstruction related, Other.
- External grants: performed below expectations.
- Private external debt: increased, underpinned by reconstruction financing and new private investments.
- Current Account Deficit and Financing (percent of GDP): time series shown with contributions from FDI, Grants, Public Sector, Commercial Banks, Other, Total balance.
- Gross external debt (percent of GDP): series shown rising to values including 104.1, 101.1, 99.5, 97.5, 95.3, 92.3, 89.3 (various years displayed).

*Sources: CSO and Fund staff estimation (figures and charts as presented).*

### Tourism and Visitor Arrivals
- Total Visitor Arrivals: Dominica vs. ECCU (Seasonally Adjusted, 12 MMA, Index, 2001M01 = 100) — Dominica and Rest of ECCU series displayed.
- Contribution to Growth of Stay-over Visitors by Country (y-o-y, pp): country series include US, Canada, UK, Caribbean, Other, Total with values shown across years.
- Tourism export values in Balance of Payments: Tourism series include values such as 76.1, 102.6, 127.2, 125.1, 122.7, 135.7, 142.7, 150.2, 158.0, 163.8, 169.6 (millions or percent of GDP as in table).

### Fiscal Developments
- Fiscal consolidation: process underway; expenditures for reconstruction increasing and largely funded by CBI inflows.
- CBI revenues: have increased significantly, providing relief to financing needs.
- Reconstruction financing: will largely depend on external debt flows, putting pressure on debt sustainability in the near term, including in the broader public sector.
- Public Debt and Fiscal Primary Balance (percent of GDP): public debt series shown with values including 82.7 and 68.0 as reference points; debt-stabilizing primary balance illustrated.
- Government Expenditures (percent of GDP, fiscal years): Wages, Other current, Capital expenditure series shown across years.
- Revenues (In percent of GDP): Tax Revenue and Revenues series displayed; CBI contributions highlighted.

### Monetary Developments
- Deposits and Credit:
  - Credit to the private sector and Deposits indexes (Jan 2014 = 100) displayed.
  - Credit to the private sector driven by credit unions; excess liquidity is driving down interest rates.
- Financial soundness indicators:
  - NPL ratio net of provisioning, Provisioning ratio, Capital adequacy ratio, Return on assets (RHS) series plotted across years.
  - Cash reserves/total deposits (percent) contributions by Non-Banks, Businesses, Households, Private sector.
- Interest rates (nominal): Deposit Rate, Interbank market rate, ECCB's discount rate, Weighted Average Lending Rate series shown.
- NFA of Commercial Banks (EC$ million): Net Foreign Assets series displayed (values such as 300s to 700s across years).

### Banking Sector Financial Soundness Indicators
- Capital adequacy: Indigenous Banks: CAR series above the 8 percent regulatory minimum (series reported across years).
- Profitability: Return on Average Assets for Commercial banks, Indigenous, Foreign — rose above zero for the first time since 2012.
- NPLs: Commercial banks, Indigenous, Foreign NPLs series shown (In percent of total loans).
- Provisions to NPLs: series shown (In percent).
- Loan-to-Deposit Ratio and Liquid Assets-to-Total Assets: declining loan-to-deposit ratios; liquidity accumulation noted.

### Selected Economic and Social Indicators (Active Scenario) — key figures preserved
- Area (sq. km.): 754
- Population (2011): Total 71,293; Annual rate of growth (percent) -0. 1; Density (per sq. km.) 94.6
- Adult literacy rate (percent, 2004): 88
- Life expectancy at birth (years, 2006): 74.1
- Infant mortality (per thousand live births, 2006): 13
- Unemployment rate (2011): 11
- Gross Domestic Product (2015): Millions of E.C. dollars 1,396; Millions of U.S. dollars 517; U.S. dollars per capita 7,255

### Output, Prices, and Money (selected projections)
- Real GDP (annual percent change): Est./Projected series includes -1. , 10.8, 4.2, -1. 8, 1.0, 3.6, 3.3, 2.2, 2.1, 1.7, 1.5 (years labeled 2012–2022).
- Consumer prices (period average): 1.4, 0.0, 0.8, -0. 8, 0.0, 0.6, 1.4, 1.6, 1.8, 1.9, 2.0 (series by year).
- Broad money (M2) (annual percent change): 9.7, 2.2, 7.8, 4.0, 6.0, 5.0, 4.7, 4.0, 3.9, 3.8, 3.5
- Real credit to the private sector (annual percent change): 3.0, -0. 3, -2. 7, 0.9, 3.1, 2.6, 2.3, 2.2, 2.1, 1.7, 1.5

### Balance of Payments (Active Scenario) — selected figures (millions of U.S. dollars and percent of GDP)
- Current account balance (millions of U.S. dollars): -84.2, -49.4, -50.3, -41.2, -61.4, -66.0, -94.4, -94.6, -81.4, -65.5, -64.3 (Est./Projected 2012–2022).
- Current account balance (percent of GDP): -17.3, -9.7, -9.5, -8.0, -11.8, -12.1, -16.6, -16.0, -13.2, -10.3, -9.7
- Exports of goods and services (millions of U.S. dollars): 158.4, 193.5, 217.1, 209.4, 221.7, 248.7, 249.9, 248.1, 254.0, 259.8, 267.1
- Imports of goods and services (millions of U.S. dollars): 249.9, 243.7, 273.5, 256.1, 283.6, 345.4, 343.8, 336.4, 326.0, 331.8 (series as presented)
- Capital and financial account (millions of U.S. dollars): 96.8, 48.9, 84.4, 53.8, 65.5, 68.4, 96.8, 97.1, 83.9, 68.1, 66.9
- Foreign direct investment (millions of U.S. dollars): 58.5, 23.3, 33.3, 34.0, 47.0, 55.8, 72.5, 74.4, 64.7, 52.7, 50.3
- Gross external debt (millions of U.S. dollars): 74.9, 83.3, 90.1, 98.0, 104.1, 101.1, 99.5, 97.5, 95.3, 92.3, 89.3
- Net imputed international reserves (millions of U.S. dollars, end-year): 91.8, 85.4, 99.9, 125.4, 220.9, 223.3, 225.7, 227.8, 230.0, 232.2, 234.3
- Months of imports of goods and services: 4.4, 4.2, 4.4, 5.9, 9.3, 8.5, 7.8, 8.0, 8.2, 8.5, 8.5

### Banking System Summary Accounts (Active Scenario, end-period, EC$ millions)
- Net foreign assets (total): 545.0 (2012), 527.9 (2013), 611.9 (2014), 755.5 (2015), 1,090.3 (2016), 1,108.3 (2017), 1,129.4 (2018), 1,135.1 (2019), 1,141.0 (2020), 1,146.8 (2021), 1,152.5 (2022)
- Central Bank NFA: 248.0, 230.5, 269.8, 338.7, 596.4, 603.0, 609.5, 615.2, 621.0, 626.9, 632.6
- Commercial Banks (net) NFA: 297.0, 297.4, 342.1, 416.8, 493.9, 505.4, 519.9, 519.9, 519.9, 519.9, 519.9
- Money and quasi-money (M2): 1,131.8, 1,156.3, 1,246.7, 1,296.6, 1,374.5, 1,443.5, 1,511.8, 1,571.7, 1,633.5, 1,695.0, 1,754.8
- Private sector credit (real terms): series with levels and growth rates reported (real terms series included in table).
- Interest rates (end-of-period): ECCB policy rate 6.5 (across years shown), U.S. policy rate series 0.1, 0.1, 0.1, 0.4, 0.6 (years shown).

### Central Government Operations (Active Scenario) — key fiscal aggregates (EC$ millions and percent of GDP)
- Revenue (EC$ millions): 406.3 (2012), 419.9 (2013), 389.0 (2014), 475.3 (2015), 540.4 (2016), 554.6 (2017), 533.5 (2018), 537.8 (2019), 551.0 (2020), 561.4 (2021), 578.9 (2022)
- Taxes (EC$ millions): 297.5, 305.0, 317.0, 342.0, 366.9, 372.0, 387.0, 403.6, 422.3, 437.7, 452.3
- Of which: CBI revenues (other nontax revenue): 50.7, 49.7, 23.0, 72.7, 136.0, 133.9, 87.8, 70.0, 62.7, 56.0, 57.1 (EC$ millions)
- Expenditure (EC$ millions): 478.2, 459.6, 454.9, 488.3, 558.0, 550.5, 532.0, 535.4, 546.2, 547.4, 553.5
- Net acquisition of nonfinancial assets (capital expenditure, EC$ millions): 140.0, 125.0, 98.2, 113.0, 180.6, 162.5, 142.5, 141.5, 140.0, 136.3, 135.4
- Natural disaster (ND) annualised cost (EC$ millions): 0.0, 0.0, 0.0, 0.0, 22.6, 23.5, 24.4, 25.3, 26.2, 27.1 (series labeled; rounding/presentation as in table)
- Primary balance (EC$ millions): -45.4, -11.5, -43.2, 15.3, 11.7, 34.5, 31.9, 33.5, 36.1, 46.6, 57.6
- Primary balance (percent of GDP): -3.4, -0.8, -3.1, 1.1, 0.8, 2.3, 2.0, 2.1, 2.1, 2.7, 3.2
- Primary balance excluding CBI (percent of GDP): -7.2, -4.4, -4.7, -4.1, -8.6, -6.6, -3.6, -2.2, -1.6, -0.5, 0.0
- Overall balance (incl. ND cost, percent of GDP): -5.4, -2.8, -4.7, -0.9, -1.2, -1.2, -1.4, -1.4, -1.2, -0.7, -0.1
- Central government debt (incl. guaranteed) (percent of GDP): 72.4, 80.1, 82.2, 82.9, 82.7, 80.1, 77.8, 75.7, 73.5, 70.9, 68.0
- Public sector debt composition (in percent of total): Domestic and external breakdowns shown in table.

### Central Government Financing Needs and Sources (Active Scenario)
- Gross financing needs (EC$ millions): 291.7 (2015), 212.8 (2016), 160.6 (2017), 150.1 (2018), 199.4 (2019), 188.9 (2020), 190.1 (2021), 199.8 (2022)
- Overall deficit (incl. ND cost) (EC$ millions): 13.0, 17.6, 18.4, 22.0, 22.0, 20.5, 12.3, 1.7
- Debt repayments (EC$ millions): 82.5, 91.5, 142.2, 128.1, 177.3, 168.4, 177.8, 198.1
  - External repayments: 55.3, 56.8, 80.6, 87.4, 119.5, 105.4, 110.9, 127.4
  - Domestic repayments: 27.1, 34.6, 61.5, 40.7, 57.9, 63.0, 66.9, 70.7
- Accumulation of deposits (EC$ millions): 196.2 (2015), 103.7 (2016), 0.0 thereafter in projection period presented.
- Debt issuance (EC$ millions): 56.0 (2015), 109.1 (2016), 141.8 (2017), 128.4 (2018), 174.5 (2019), 162.1 (2020), 161.1 (2021), 170.8 (2022)
  - External issuance: 33.5, 69.8, 80.4, 87.6, 117.4, 100.8, 98.6, 107.3
  - Domestic issuance: 22.5, 39.3, 61.5, 40.8, 57.1, 61.3, 62.5, 63.5
- Use of deposits as financing source (EC$ millions): 0.0 (2015), 0.0 (2016), 18.8 (2017), 21.7 (2018), 24.9 (2019), 26.7 (2020), 29.0 (2021), 28.9 (2022)
- Financing gap (EC$ millions): 23.5 (2015), 0.0 thereafter in projection period.
- Memo: central government deposits (EC$ millions): 265 (2015), 369 (2016), 350 (2017), 328 (2018), 304 (2019), 277 (2020), 248 (2021), 219 (2022)
- Memo: VF for natural disasters (EC$ millions): 0 (2015), 0 (2016), 2 (2017), 3 (2018), 4 (2019), 5 (2020), 6 (2021), 7 (2022)

_Italic: Source — IMF staff estimates and projections as presented in the supplied content._

### Annex I. Debt Sustainability Analysis

### Annex I. Debt Sustainability Analysis

### Risk summary
- Risk of external debt distress: High  
- Dominica continues to be assessed at high risk of debt distress.
- Setting public and external debt on a declining path requires reaching the fiscal consolidation target of over 6 percent of GDP by FY2020/21 committed by the authorities in the RCF disbursement.
- Given lower projected grant flows, reaching the regional debt target of 60 percent of GDP by 2030 calls for the use of accumulated citizenship-by-investment (CBI) deposits for debt reduction.
- Main risks to the debt sustainability outlook:
  - Failure to advance with the fiscal consolidation.
  - A sudden stop in CBI revenues.
  - Further weakening of the prospects for donor grants.
  - Another large natural disaster would leave the government with no buffers.

### Background
- Public sector debt developments:
  - As of end-FY 2015/16, stock of public sector debt (central government and rest of the public sector) is estimated to be around 83 percent of GDP.
  - Over ¾ of this stock is external debt; the remaining is held domestically, mostly by commercial banks and other financial institutions.
  - Debt of the rest of public sector (state owned enterprises and Petrocaribe debts) is about 20 percent of GDP.
- Impact of Tropical Storm Erika (August 2015):
  - Damages estimated at 96 percent of GDP.
  - RCF disbursement provided short-term financing relief and a medium-term fiscal consolidation plan including measures targeting a cumulative adjustment of over 6 percent of GDP over a five-year period to reach the regional debt target of 60 percent of GDP by 2030.
- Government policy stance:
  - Pursuing gradual fiscal consolidation including reforms to increase tax revenues, broaden the tax base, and contain current expenditures.
  - Initial fiscal measures from the RCF disbursement adopted; further technical assistance delivered or expected before end of FY2016/17.
  - Additional government measures passed to strengthen the fiscal position.
- Fiscal resilience:
  - Debt sustainability outlook includes an annualized cost of rehabilitation and reconstruction after natural disasters of 1.5 percent of GDP per year.

### Underlying assumptions
- Active scenario assumptions (2016-36 summary in Box A1):
  - Fiscal consolidation of over 6 percent of GDP through 2016-22.
  - Public investment projected to increase for reconstruction after Tropical Storm Erika, accelerating near-term growth and declining toward a potential growth rate of 1.5 percent.
  - Real GDP: Real GDP growth increases to over 3 percent in the near term and gradually declines towards the potential rate of 1.5 percent by 2022.
  - Inflation: projected to remain near 2 percent.
  - Balance of Payments: Current account deficit remains high throughout the projection period financed mainly with FDI and official debt flows.
- Main differences from the 2016 DSA that increase PV of public sector external debt in 2016:
  - Potential growth rate revised down.
  - Long-term fiscal outlook deteriorated due to downward revisions in projected grants.
  - Observed CBI revenues higher than previously estimated but are unpredictable and subject to risk of a sudden stop, increasing overall risk.
  - Grants revised to less than half of previous projections.
  - Revisions and corrections to historical debt data affecting PV calculations.

### External DSA (public and publicly guaranteed external debt)
- Rating: PPG external debt assigned “high risk of debt distress”.
- Active policies scenario:
  - In the active scenario, and without further shocks, the PV of debt-to-GDP ratio is breached.
  - Other debt stock and debt service measures remain below policy-dependent indicative thresholds during the entire forecast period in the active scenario.
- Historical and alternative scenarios:
  - Under the historical scenario (assumes non-interest current account balance, FDI, real GDP growth, and GDP deflator remain at their 10-year historical average), the PV of debt-to-GDP threshold is breached for the entire period, and PV of public external debt increases.
  - PV of debt-to-exports, debt service-to-exports, and debt service-to-revenue ratios also breach thresholds under the historical scenario.
  - Under a combination shock (growth, exports, GDP deflator, and non-debt creating flows shocks using one-half standard deviation in 2017-2018), the PV of debt-to-GDP ratio returns below threshold levels only by 2032; debt service-to-revenue ratio is briefly breached under a one-time depreciation shock.
  - For most other indicators, PV of external debt remains below thresholds under temporary shock scenarios.
- Customized scenarios:
  - Passive scenario (remaining fiscal consolidation not passed): public debt takes an increasing trajectory.
  - Sudden stop in CBI revenues in FY2018/19 (in the active policies scenario): materialization results in permanent breach of the PV of debt-to-GDP ratio threshold with an upward trajectory, rendering debt dynamics unsustainable.
- Assessment rationale:
  - Threshold breaches across active, shock, and customized scenarios justify classification of “high risk of external debt distress”.
  - Customized scenarios are given significant weight because they capture vulnerabilities not fully reflected in standardized tests.
  - If planned fiscal consolidation takes hold and confidence in the active policies scenario increases, an upgrade of the risk rating could be considered in a future assessment.

### Public DSA (public sector debt)
- Active policies scenario:
  - Public debt assessed to be sustainable under the active policies scenario assuming completion of fiscal consolidation plan.
  - PV of public sector debt estimated at 73 percent of GDP in 2016 and expected to remain on a declining trajectory below the public debt threshold during the entire projection period.
  - PV of debt-to-revenue ratio declines, while debt service-to-revenue ratio increases over the forecast horizon.
- Alternative shock simulations:
  - The most extreme shock (growth shock: real GDP set to historical average minus one standard deviation in 2017-18) leads to an unsustainable and increasing PV of debt-to-GDP ratio.
  - Historical scenario (primary balance-to-GDP and real GDP growth set to historical averages) and fixed primary balance scenario (primary balance-to-GDP set to its value in 2016) generate stable debt trajectories, implying no margin for unexpected negative shocks.
- Customized scenarios:
  - Under two customized scenarios, PV of debt-to-GDP, debt-to-revenue, and debt-service-to-revenue ratios increase throughout the forecast period, breaching the public debt benchmark in 2018.

### Conclusion and policy implications
- Conclusion:
  - The large debt level and significant risks warrant classification of Dominica as “high risk of external debt distress”.
  - This assessment is based on debt dynamics in the active policies scenario, alternative scenarios, and the customized scenarios that capture additional significant risks.
- Policy implications and priorities implied by the analysis:
  - Fully implement fiscal consolidation measures to achieve over 6 percent of GDP adjustment by FY2020/21.
  - Strengthen and safeguard grant financing or find alternatives given grants revised to less than half of prior projections.
  - Reduce reliance on unpredictable CBI revenues and consider using accumulated CBI deposits for debt reduction to reach the regional debt target of 60 percent of GDP by 2030.
  - Build fiscal buffers to increase resilience to natural disasters, acknowledging an assumed annualized rehabilitation and reconstruction cost of 1.5 percent of GDP.

*Annex I. Debt Sustainability Analysis (cr17391-dominicabundle).*

### 14. The authorities agreed with Staff that Dominica remains at high risk of debt distress.

### 14. The authorities agreed with Staff that Dominica remains at high risk of debt distress.

### Assessment and policy stance
- Dominica remains at high risk of debt distress.
- The authorities agreed that efforts to reduce debt levels must continue.
- They agreed that debt dynamics could become unsustainable if the fiscal consolidation package committed under the Rapid Credit Facility (RCF) was not implemented.
- The authorities reiterated their commitment to the fiscal consolidation targets in the RCF disbursement and agreed with Staff on the need to consider contingent fiscal measures.

### Financing needs and role of grants and CBI
- The authorities acknowledged the importance of grants and CBI flows to finance the post-Erika capital program and for debt reduction, without which the debt thresholds would be breached.
- The "Sudden stop in CBI" scenario assumes a complete stop of CBI inflows starting in FY2018/19.
- Scenario labels used in projections include: Active policies scenario, Passive scenario, and Sudden stop in CBI scenario.

### Petrocaribe treatment
- The authorities noted that only the portion of Petrocaribe funds which has been approved as grants has been utilized, and therefore questioned the inclusion of Petrocaribe obligations in the stock of public debt.
- Staff position: Petrocaribe debt remains a gross liability of the government.

### Key projections and indicators (selected figures from staff tables and charts)
- External debt (nominal) series (in percent of GDP, selected values shown in source): 88.29, 92.8, 100.7, 103.1, 100.5, 96.4, 91.7, 87.7, 83.6, 66.2, 55.4.
- Public and publicly guaranteed (PPG) external debt (percent of GDP, selected value indicated in table): 62.8 (historical point).
- PV of external debt (percent of GDP, selected values shown in source): 90.2, 93.6, 91.7, 88.3, 83.8, 80.0, 76.1, 59.1, 47.8.
- PV of PPG external debt (in percent of exports, selected values shown in source): 129.0, 126.5, 114.5, 114.8, 115.6, 114.4, 112.3, 101.2, 83.3.
- Debt service-to-exports ratio (in percent, selected values shown in source): 14.6, 14.9, 19.4, 15.2, 17.2, 17.4, 21.5, 18.4, 18.3, 15.6, 14.4.
- Grant-equivalent financing (in percent of GDP, selected values shown in source): 1.6, 2.2, 2.6, 3.1, 3.0, 2.8, 2.7, 2.3, 2.6.
- Government revenues (excluding grants, in percent of GDP, selected values shown in source): 36.4, 34.0, 40.6, 46.1, 45.0, 41.4, 40.2, 39.8, 39.2, 37.9, 38.7.

### Stress tests and sensitivity analysis (high-level)
- Sensitivity analyses include alternative scenarios and bound tests for PV of debt-to-GDP, PV of debt-to-exports, and PV of debt-to-revenue ratios under shocks such as:
  - Key variables at historical averages in 2016-2036.
  - New public sector loans on less favorable terms (interest rate on new borrowing higher by 2 percentage points).
  - Real GDP growth at historical average minus one standard deviation in 2017-2018.
  - Export value growth at historical average minus one standard deviation in 2017-2018.
  - One-time 30 percent nominal depreciation relative to the baseline in 2017.
- The most extreme stress test is defined as the test that yields the highest ratio on or before 2026 (varies by indicator; e.g., combination shock, exports shock, one-time depreciation).

*Source: IMF staff report chapter "14. The authorities agreed with Staff that Dominica remains at high risk of debt distress."*

### Annex II. External Sector Assessment

### Annex II. External Sector Assessment

### Overall assessment
- Dominica’s external position in 2016 is assessed to be weaker than the level consistent with medium-term fundamentals and desirable policy settings.
- Achieving a strong and sustainable external sector requires policies and structural reforms geared at increasing external competitiveness over the medium term.
- Reserves are assessed to be adequate, with sufficient shock-absorbing capacity.

### Current account developments and near-term outlook
- The current account deficit is estimated to have widened from 8.0 percent of GDP in 2015 to 11.8 percent of GDP in 2016.
- Drivers of the 2015–16 deterioration:
  - Collapse of manufacturing exports.
  - Reconstruction-driven increase in imports.
  - Decline in transfers.
  - Partially offset by: decline in oil imports, higher-than-expected tourism receipts, and citizenship-by-investment (CBI) revenues.
- Outlook: Given the projected further increase in imports for reconstruction activity and the moderation in CBI revenues, the current account deficit is expected to widen further over the next three years before normalizing at a lower level.

### Nominal and real effective exchange rate (NEER/REER) assessment
- NEER: Dominica’s NEER appreciated by 3.6 percent on average in 2016, mainly because of the strengthening of the U.S. dollar to which the EC dollar is pegged.
- REER: CPI-based REER appreciated by 0.9 percent in 2016.
- Competitiveness: Measures of the REER in tourism-competitor Caribbean countries suggest a mild deterioration of about 2.5 percent in Dominica’s competitiveness in 2016.
- Risks of further appreciation:
  - Continued U.S. dollar strength if relatively stronger growth and higher interest rates in the United States persist.
  - Uncertainty around Brexit could contribute to U.S. dollar strength.
  - Inflation is expected to accelerate to around 2 percent in the medium term in Dominica, providing an additional boost to real exchange rate appreciation.

### External stability assessments (quantitative estimates)
- EBA-Lite current account (CA) regression model (after accounting for Dominica-specific factors), 2016:
  - Cyclically-adjusted current account balance: -12.2 percent of GDP.
  - Cyclically-adjusted current account norm: 0.7 percent of GDP.
  - Resulting current account gap: -12.9 percent of GDP.
  - Contribution of macroeconomic policies to the gap: +2.0 percent of GDP, largely driven by:
    - Fiscal policy: 1.5 percent of GDP.
    - Private credit: 0.3 percent of GDP.
    - Reserve adequacy (change in reserves): 0.2 percent of GDP.
    - Capital controls: 0.0 percent of GDP.
  - Residual (to be closed by structural policies): -14.8 percent of GDP.
- External sustainability (ES) approach:
  - Medium-term current account norm that would bring net foreign assets-to-GDP to zero in ten years: deficit of 6.4 percent of GDP.
  - Underlying current account deficit: 10.3 percent of GDP.
- REER gap estimates (EBA-Lite methodologies):
  - CA model implies a required REER adjustment of 50 percent to close the current account gap of -14.8 percent of GDP.
  - ES approach implies REER needs adjustment by 15 percent.
  - Index REER model implies REER needs adjustment by 5 percent.
  - All methods indicate the REER is overvalued.

### Wages, productivity, and unit labor costs
- Since 2008, private sector wages have increased by 18 percent in excess of average labor productivity, leading to an increase in unit labor costs.
- Public sector: cumulative wage growth was broadly aligned with labor productivity changes, though public sector compensation shows significant volatility due to triennial back-payments typically agreed with labor unions.

### Reserve adequacy
- Imputed reserves estimate for Dominica at end-2016: US$229 million.
- Coverage metrics:
  - Imputed reserves covered 9.4 months of imports (forward cover).
  - Imputed reserves covered 45 percent of broad money.
  - These metrics exceed typical benchmarks of reserve adequacy: 3 months of imports and 20 percent of broad money.
- Methodological note: Dominica is a member of the Eastern Caribbean Currency Union; under the quasi-currency board arrangement, foreign assets and liabilities of the Eastern Caribbean Central Bank (ECCB) cannot be directly assigned to an individual country. The imputed reserves method is used as a proxy for net foreign assets held with the ECCB.
- Drivers and outlook:
  - The significant increase in the level of reserves in 2016 is presumed to be driven by unrecorded CBI flows.
  - In the active scenario, reserve levels are expected to remain adequate for cushioning external shocks and preventing disorderly market conditions.
- Data limitations: Information on short term debt and other liabilities is unavailable; consequently assessments against other reserve adequacy metrics such as the IMF’s composite Assessment Reserve Adequacy (ARA) metric cannot be computed.

### Conclusion
- Dominica’s external position in 2016 is weaker than fundamentals and desirable policies would imply and will require structural policies to improve competitiveness.
- Reserves are adequate and provide shock-absorbing capacity, but the large current account gap and overvalued REER point to the need for medium-term competitiveness-enhancing reforms.

*IMF staff assessment contained in Annex II. External Sector Assessment.*

### 6. Dominica’s external position is assessed to be weaker than the level consistent with

### 6. Dominica’s external position is assessed to be weaker than the level consistent with

### External position assessment and outlook
- In 2016, Dominica’s external position is assessed to be weaker than the level consistent with medium-term fundamentals and desirable policy settings.
- Notwithstanding the adequate foreign exchange reserves, staff estimates that the external position would weaken further over the medium term.
- Fiscal consolidation aiming for a small primary surplus while providing space for infrastructure spending to ease supply bottlenecks would improve the current account position and help stabilize reserves.
- Supportive structural reforms are necessary to boost productivity, improve competitiveness, and prospects for export diversification. These include:
  - improving labor productivity,
  - reducing the electricity costs,
  - increasing access to finance,
  - reforms to promote the business environment.

### Fund relations (as of March 31, 2017)
- Membership Status: Joined 12/12/78; Article VIII.
- General Resources Account (SDR Million / Percent of Quota):
  - Quota 11.50 100.00
  - Fund holdings of currency 11.49 99.93
  - Reserve Tranche Position 0.01 0.08
- SDR Department (SDR Million / Percent of Allocation):
  - Net cumulative allocation 7.84   100.00
  - Holdings 0.91 11.59
- Outstanding Purchases and Loans (SDR Million / Percent of Quota):
  - RCF Loans 8.20 71.30
  - ESF RAC Loan 1.64 14.26
- Latest Financial Arrangements (Type / Approval Date / Expiration Date / Amount Approved / Amount Drawn (SDR Million)):
  - ECF 12/29/03 12/28/06 7.69 7.69
  - Stand-By 08/28/02 01/02/04 3.28 2.97
  - SAF 11/26/86 11/25/89 2.80 2.80
- Projected Payments to the Fund (SDR Million; Forthcoming 2017–2021):
  - Principal 0.53 1.07 1.07 0.41 1.64
  - Charges/Interest 0.02 0.03 0.03 0.03 0.03
  - Total 0.55 1.09 1.10 0.44 1.67
  - Note: Based on existing use of resources and present holdings of SDRs.
- Exchange Rate Arrangement:
  - Dominica is a member of the Eastern Caribbean Currency Union with the Eastern Caribbean dollar pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar since July 1976.
  - Dominica has accepted the obligations of Article VIII, Sections 2, 3, and 4.
- Safeguards Assessment (ECCB):
  - Update assessment completed in April 2016 found generally strong controls over key operations; external audit and financial reporting practices remain sound; financial statements compliant with International Financial Reporting Standards and published on a timely basis.
  - Internal audit function needs reform to align with leading international practices; oversight could be strengthened by enhancing financial expertise of the audit committee.
- Article IV Consultation:
  - Last consultation concluded by the Executive Board on July 13, 2016; document is IMF Country Report No. 16/244. Dominica is on a 12-month cycle.

### Technical assistance and capacity building (PFM, Revenue, Financial sector, Statistics, Macroeconomics)
- Public Financial Management (selected missions and topics, June 2013–March 2017):
  - Cash flow forecasting and planning; bank reconciliation; procurement assistance; oversight and monitoring of State Owned Enterprises; gap analysis of Internal Audit systems; PFM Action Plan following PEFA; PFM Legislation/Regulations Revisions; Treasury Assessment.
- Revenue Administration (selected missions and topics, June 2013–February 2017):
  - Tax and Customs Administration; Risk Management program (Support to SEMCAR); IRD reorganization and capacity building; PAYE audit training; Development of Audit Manual; Building Capacity and Establishment of LMTS; Small Business Reform – Revenue Modelling for VAT and Presumptive tax; Building Capacity in Data Analytics and Computer-Assisted Audit Techniques; Develop Taxpayer Service Strategy.
- Financial Sector (selected missions and topics, December 2013–January 2017):
  - Insurance Supervision and Credit Union Supervision; onsite review of offshore banks; Consolidated Supervision training; Risk Based Supervision; Supervisory Interventions Banks and Non-Banks; Development of a Stress-Testing Framework and Methodology for Credit Union Sector.
- Economic and Financial Statistics (selected missions, May 2013–June 2016):
  - National Accounts – Quarterly; Joint CARTAC/STA IIP Mission; Training for Survey Respondents (ECCU Countries); Balance of Payments Statistics and IIP.
- Macroeconomics and Programming (selected assistance, November 2013–November 2016):
  - Needs assessment of Macroeconomic Policy Unit; assist with medium-term macroeconomic framework; update macroeconomic projections; coordinate Macro Program with Macro Advisor.
- FSAP:
  - Joint IMF/World Bank assessment of ECCU financial sector in two missions—September 1–19 and October 20–31, 2003; FSSA discussed by the Executive Board on May 5, 2004.
- AML/CFT:
  - Most recent assessment by CFATF in 2009; Dominica has taken steps to strengthen its AML/CFT framework; Dominica has not yet been assessed against the prevailing 2012 FATF standard.

### Relations with the World Bank Group (as of April 2017)
- RPS for OECS (FY15-FY19) endorsed on November 13, 2014; organized around three areas:
  - Competitiveness (improve business environment; focus on tourism, agribusiness),
  - Public sector modernization (PFM, institutional capacity, PPPs),
  - Resilience (address social vulnerabilities and exposure to natural disasters).
- IFC and MIGA expected to contribute selectively; IFC focus includes crisis response, job creation, innovation, competitiveness, integration, and climate change; MIGA faces limited opportunities due to small market size.
- IBRD lending program for six OECS countries ~ US$120 million (up to US$20 million per country for FY15-19), subject to constraints.
- IDA allocations:
  - IDA17 (FY15-17) allocation for the OECS was SDR60.2 million; final IDA17 used by all OECS countries was SDR43.6 million. Dominica did not avail of any IDA17 resources.
  - IDA18 (FY18-FY20) allocation for the OECS is expected to be roughly SDR 200 million.

A. Projects
- Active Bank-financed lending operation for Dominica:
  - Regional Disaster Vulnerability Reduction Project: total amount USD 38 million (of which USD 17 million IDA credit; USD 12 million Grant from Strategic Climate Fund; USD 9 million concessional loan).
  - Development objective: reduce vulnerability to natural hazards and climate change impacts through resilient infrastructure investments and improved hazard data collection and monitoring systems.
- Pipeline projects expected approval in WBG FY18:
  - OECS Small and Medium Enterprises (SME) Partial Credit Guarantee (PCG) Project: Dominica participating country; total IDA allocation about US$2 million; PDO to facilitate additional financial intermediation for SMEs and strengthen enabling environment for SME lending via regional partial guarantee fund.
  - Geothermal Risk Mitigation Project: Dominica expected to use IDA funding (US$ 9.5 million) and Clean Technology Fund grant (US$10 million); PDO to diversify domestic power generation mix by integrating geothermal energy and assess viability of exporting geothermal-based electricity to other regional islands.

B. Non-Lending Activities
- ASA products completed relating to public expenditure, fiscal and debt sustainability, growth and competitiveness, financial sector, public sector management and social protection.
- Comprehensive Debt Framework proposed for OECS around four pillars: Supporting private sector led growth; Enhancing fiscal sustainability; Improving climate change resilience and Disaster Risk Management; Debt resolution.
- Caribbean Growth Forum (CGF): multi-stakeholder platform; engaged more than 2,500 representatives; led to national CGF chapters and draft action plans with implementation details and periodic reporting (every 4-5 months).

Financial Relations (In millions of U.S. Dollars)
- Operation: Dominica Disaster Vulnerability Reduction Project
  - Original Principal 38
  - Available1 1.58
  - Disbursed1 0.73
- Total 38 36.7 0.76
  - 1/ Amounts may not add up to Original Principal due to changes in the SDR/US exchange rate since signing.

Disbursements and Debt Service (Fiscal Year, In millions of U.S. Dollars)
- Total disbursements by year: 2005 1.6; 2006 0.0; 2007 1.3; 2008 1.3; 2009 0.6; 2010 1.6; 2011 0.7; 2012 0.6; 2013 0.9; 2014 0.6; 2015 0.7; 2016 0.0; 2017 0.2
- Repayments by year: 2005 0.7; 2006 0.8; 2007 1.0; 2008 1.3; 2009 1.2; 2010 0.9; 2011 0.9; 2012 0.9; 2013 0.7; 2014 0.7; 2015 0.5; 2016 0.8; 2017 0.3
- Net disbursements by year: 2005 0.9; 2006 -0.8; 2007 0.2; 2008 0.2; 2009 -0.6; 2010 0.6; 2011 -0.2; 2012 -0.3; 2013 0.2; 2014 -0.1; 2015 0.1; 2016 -0.8; 2017 -0.1
- Interest and fees by year: 2005 0.4; 2006 0.4; 2007 0.4; 2008 0.3; 2009 0.3; 2010 0.3; 2011 0.2; 2012 0.2; 2013 0.2; 2014 0.2; 2015 0.1; 2016 0.2; 2017 0.1

### Relations with the Caribbean Development Bank (CDB) (as of March 31, 2017)
- Total loans and grants approved 1970–2015: USD272 million.
- At March 2017, CDB’s loan exposure to Dominica approximately USD87.4 million, representing 5.6 percent of CDB’s total disbursed debt outstanding.
- Resource flows from CDB to Dominica:
  - Net resource flows negative from 2006 through 2009.
  - Net resource flows positive between 2010 and 2012.
  - Since 2013 resource flows have been negative as projects neared completion.
  - Post-Tropical Storm Erika loans agreed in 2015; resource flow likely to turn positive again from 2016.
- Dominica: Loan Disbursement, Service and Resource Flow (In millions of U.S. dollars):
  - Net disbursement by year 2006–2016: -0.5 -1.1 -1.5 0.3 3.0 6.3 4.6 1.3 -1.0 -3.0 -4.7
  - Disbursement by year 2006–2016: 2.2 2.4 3.1 4.2 7.1 10.6 8.3 5.0 3.1 3.3 2.0
  - Amortization by year 2006–2016: 2.8 3.4 4.7 3.9 4.1 4.3 3.7 3.6 4.1 6.2 6.7
  - Interest and charges by year 2006–2016: 2.5 2.5 2.4 2.3 2.2 2.3 2.4 2.5 2.6 2.5 2.3
  - Net resource flow by year 2006–2016: -3.0 -3.6 -4.0 -1.9 0.8 4.1 2.2 -1.2 -3.6 -5.4 -6.9
  - 1 The Bank intends to prepare a new CSP for Dominica in 2017.

### Statistical issues and data shortcomings (as of March 31, 2017)
- Data provision has shortcomings due to capacity constraints in the statistical agency, including weaknesses in coverage, accuracy, frequency, and timeliness.
- Staff analysis would benefit from more timely and improved data on fiscal accounts, labor, agriculture, and the balance of payments.
- Quarterly national accounts would be welcome; authorities could explore centralizing statistics collection regionally.
- GDDS participation: metadata last updated January 2006 for national accounts and external sector statistics; December 2002 for government finance statistics.
- Real sector:
  - Nominal GDP compiled using production and expenditure approaches annually; real GDP compiled using production approach only.
  - Since 2011, real GDP estimates use 2006 base year.
  - GDP estimates available about four months after year-end and usually finalized with a two-year lag.
  - CPI compiled monthly; weights based on 2008/09 HIES with base period June 2010.
  - Program to develop export and import price indexes (XMPIs) exists but staff shortage limits progress.
  - Employment data sparse; no official producer price indices; census conducted in 2011.
- Government finance:
  - Monthly data available but with important shortcomings; fiscal data should be reconciled between IRD, Customs, and Treasury monthly.
  - Capital expenditure data fragmented and subject to continuous revisions; need to improve reporting and budgeting data for public sector investment program.
  - Very limited financing data; authorities do not provide consolidated nonfinancial public sector data.
  - No government finance data reported to STA for IFS or GFS Yearbook publication.
- Monetary statistics:
  - Compiled and reported to Fund by ECCB monthly based on standardized report adopted in 2006.
  - Institutional coverage needs improvement by including mortgage companies, building societies, credit unions, and insurance companies.
  - Lack of published credit union data is a serious shortcoming; coordination between ECCB and Dominica’s Financial Services Unit could help.
- External sector and balance of payments:
  - Balance of payments compiled by ECCB annually and published in IFS through 2012.
  - Not produced according to BPM6.
  - Need improved measurement of merchandise exports and resumption of monthly publication.
  - Improved statistics on remittances, compilation of BOP on a quarterly basis, and IIP on an annual basis are needed.
  - An external statistics expert has been appointed by CARTAC to assist Dominica and other ECCU members; authorities have received TA to prepare revamped external sector statistics under BPM6.
- External debt:
  - Ministry of Finance maintains database on public and publicly-guaranteed external loans with detailed information; Treasury maintains data on bonds placed abroad.
  - Databases not consolidated, requiring adjustments to measure total debt stock.
  - Payment information by creditor (actual and scheduled) should be available to compilation agencies at least on a monthly basis.
  - Data on private external debt stocks are not available, other than from monetary survey in case of commercial banks.

### Table of Common Indicators Required for Surveillance (As of March 28, 2017)
- Exchange Rates: Fixed Rate; NA for Date of Latest Observation / Date Received / Frequency of Data / Frequency of Reporting / Frequency of Publication.
- International Reserve Assets and Reserve liabilities of the Monetary Authorities:
  - Date of Latest Observation 1/31/2017; Date Received 3/21/2017; Frequency Datasets: M M M.
- Reserve/Base Money: 1/31/2017; 3/21/2017; M M M.
- Broad Money: 1/31/2017; 3/21/2017; M M M.
- Central Bank Balance Sheet: 1/31/2017; 3/21/2017; M M M.
- Consolidated Balance Sheet of the Banking System: 1/31/2017; 3/21/2017; M M M.
- Interest Rates: 12/31/2016; 3/21/2017; M M M.
- Consumer Price Index: 10/30/2016; 3/21/2017; M M M.
- Revenue, Expenditure, Balance, and Composition of Financing – Central Government:
  - 01/31/2017; 3/16/2017; M M Q.
- Stocks of Central Government and Central Government-Guaranteed Debt: 2015/2016; 3/08/2017; A A A.
- External Current Account Balance: 2015; 2/20/2016; A A A.
- Exports and Imports of Goods and Services: 2015; 2/20/2016; M A A.
- GDP/GNP: 2015; 1/23/2017; A A A.
- Gross External Debt: 2015; 2/20/2016; M M A.
- International Investment Position: NA; NA; NA NA NA.
- Footnotes and periodicity codes:
  - 1 Dominica is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (E.C. dollar) is pegged to the U.S. dollar at US$1 = EC$2.70.
  - 2 Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
  - 3 Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
  - 4 Foreign, domestic bank, and domestic nonbank financing.
  - 5 The general government consists of the central government and state and local governments.
  - 6 Currency and maturity composition are provided annually.
  - 7 Data is not available from the authorities.
  - 8 Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA); Not Applicable (n.a.).

*Prepared by Western Hemisphere Department (In consultation with other departments); April 27, 2017.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17391-dominicabundle.pdf_