## cr17400-stvincentbundle ## Source details **Canonical URL:** [cr17400-stvincentbundle](https://www.imf.org/-/media/files/publications/cr/2017/cr17400-stvincentbundle.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2017/cr17400-stvincentbundle.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2017/cr17400-stvincentbundle.pdf.json) --- ### Background - International airport construction completed in February 2017 (started in 2008) to spur growth and address persistently high unemployment. - Growth: - Averaged 3.6 percent between 1997 and 2008. - Averaged 0.2 percent over 2009-2016. - Unemployment rate: has remained over 20 percent since 2001. - Poverty and income inequality declined between 1997 and 2008 alongside intensified poverty reduction programs, universal primary and secondary education access, robust primary health care, and gains in female labor force participation. ### Recent economic developments - Real GDP growth: - 2016: 0.8 percent (slightly below 0.9 percent in 2015). - Tourism: - Tourist arrivals fell by 3.7 percent y-o-y through July 2017. - Cruise passengers rose 40 percent. - Inflation: - Consumer inflation near 1 percent in 2016. - Inflation reached 1.9 percent y-o-y in September 2017 reflecting increases in the VAT and minimum wages. - External position and reserves: - Current account deficit widened from 14.9 percent of GDP in 2015 to 15.8 percent of GDP in 2016. - Imputed foreign reserves: 5.6 months of imports (comfortable and above reserve-adequacy metrics). - External position assessed weaker than level consistent with fundamentals and desirable policies (EBA-lite models); competitiveness challenges identified. - ECCB BOP data revision: - ECCB published revised BOP estimates for 2014-16 in July 2017 with improved tourism surveys, wider coverage, and transition to BPM6. - For St. Vincent and the Grenadines: current account deficit declined moderately as services balance improved; income accounts deteriorated; balance on goods trade barely altered. ### Financial sector and credit - Banking system: - Banks’ capital and liquidity ratios comfortably above regulatory requirements and regional averages. - Returns on equity and assets near zero; ROA series: 2014 = -0.2; 2015 = 0.2; 2016 = 0.0. - Non-performing loans (NPLs) at 9.7 percent (source text summary); prudential indicators: NPLs to total loans — 2014 = 10.0; 2015 = 8.7; 2016 = 9.2. - Real credit to the private sector remained relatively flat since end-2015; credit to private sector levels: 2016 = 1,084; 2017 = 1,095; 2018 = 1,106 (EC$ millions). - Correspondent banking relationships preserved but at higher cost; intensified AML/CFT compliance efforts. - July 2017: government repurchased 31 percent of the Bank of St. Vincent and the Grenadines (BoSVG); social security retains 20 percent. - Regulatory capital to risk-weighted assets: 2014 = 16.0; 2015 = 20.6; 2016 = 20.1. - Credit unions: - Assets stabilized near 20 percent of GDP since 2015. - Share of total financial sector’s loans to the private sector increased to 18 percent at end-June 2017. - Reported NPLs for credit unions remain stable and lower than in the banking sector; credit unions developing methodology for more accurate NPL measurement. - Monetary aggregates and liquidity: - Broad money (M2): 2016 = 1,521; 2017 = 1,596; 2018 = 1,675 (EC$ millions). - Net foreign assets: 2016 = 662; 2017 = 651; 2018 = 623 (EC$ millions). ### Fiscal outturns and public debt - Central government fiscal balances: - Overall balance: surplus of 1.1 percent of GDP in 2016 to an expected deficit of 2.4 percent of GDP in 2017. - Excluding one-off items, overall deficit would widen from 0.4 percent of GDP to 0.9 percent of GDP. - Public sector debt: - Expected to decline mainly due to completed debt relief (3.7 percent of GDP) provided by a bilateral creditor, but remain elevated at 77.5 percent of GDP in 2017. - Gross public sector debt (memorandum): 2016 = 82.9; 2017 = 77.5; 2018 = 78.5 (percent of GDP). - Drivers of fiscal deterioration in 2017: - New revenue measures estimated to yield 0.4 percent of GDP, but revenues expected to decline due to one-off receipts in 2016: 1.1 percent of GDP in tax arrears collections and 0.4 percent of GDP in exceptional dividends. - Collectible tax arrears estimated at some 8½ percent of GDP. - Wage bill expected to remain above 13 percent of GDP with recruitment of new police officers and medical personnel; wage increases occurred end-2015 and January 2016. - Transfers and capital outlays expected to increase; transfers projected to increase by over 1 pp to fund airport operating and marketing costs, pensions for new retirees, and contingencies fund. - One-off outlays to reacquire majority share in BoSVG: 1.5 percent of GDP, increasing capital spending. - External amortization: scheduled repayment of EC$128 million (5.9 percent of GDP) on multiple commercial loans due in 2017 compared with EC$55 million (2.7 percent of GDP) in 2016. - Budgetary arrears: EC$39.9 million (1.8 percent of GDP) end-September 2017; EC$36.7 million (1.8 percent of GDP) end-2016; EC$43.5 million (2 percent of GDP) end-October 2016. ### 2017 Budget — Key features and estimated yields (Box 2) - Objectives: raise taxes and fees to finance airport operating and marketing costs, strengthen financial buffers; buyback of BoSVG financed by issuing a new bond. - Revenue measures and yields (In percent of GDP): - Increase in VAT rate by 1 pp: 0.3 - Increase in the VAT registration threshold: -0.2 - Increase in aliens' landholding license rate (from 6 to 7½ percent): 0.1 - Increase in airport service charge (from EC$50 to EC$100): 0.2 - Other measures and specifics: - VAT rate raised effective May 2017 from 15 to 16 percent and from 10 to 11 percent for tourism accommodations and activities; proceeds earmarked for capitalizing the Contingencies Fund (0.5 percent of GDP from 2018 onwards and 0.3 percent of GDP in 2017). - VAT registration threshold increased from EC$120,000 to EC$300,000. - Aliens’ landholding license rate raised from 6 to 7½ percent on properties exceeding EC$100,000. - Telecommunication levy broadened (2 percent) to incoming calls and data; proceeds earmarked for the Zero Hunger Trust Fund (off-budget). - New expenditure: airport subsidy (0.2 percent of GDP), contingencies fund capitalization, bank buyback. ### Outlook and projections - Real GDP growth: - 2017 projection: 1 percent. - 2018 projection: 2.1 percent. - Medium-term projection: 3 percent (as potential reached with increased direct flights and private investment). - Inflation: - Projected to reach 2 percent this year. - Projected 1.5 percent over the medium term. - Current account and reserves: - Current account deficit projected to decline as food imports diminish and tourism increases; reserves expected to remain at comfortable levels. - Selected fiscal and external projection figures (percent of GDP): - Total revenue and grants: 2016 = 29.8; 2017 = 28.4; 2018 = 29.0. - Tax revenue: 2016 = 25.5; 2017 = 24.7; 2018 = 25.2. - Total expenditure and net lending: 2016 = 28.7; 2017 = 30.8; 2018 = 31.1. - Overall balance: 2016 = -2.1; 2017 = -1.1; 2018 = -2.4. - Current account (EC$ millions): 2016 = -505; 2017 = -304; 2018 = -329. - Current account (percent of GDP, memorandum): 2016 = -25.7; 2017 = -14.9; 2018 = -15.8. - Tourism receipts (percent of GDP, memorandum): 2016 = 24.1; 2017 = 26.8; 2018 = 27.1. ### Risks (Risk Assessment Matrix summary) - Upside risks: - Lower oil prices: Likelihood low; Impact medium (Medium-Term). Policy: Allow pass-through of international prices; use opportunity to adjust excise taxation on automotive fuels. - Successful implementation of the geothermal project: Likelihood medium; Impact medium (Medium-Term). Policy: Monitor developments, including emerging contingent fiscal liabilities. - Increased activity from the new airport: Likelihood medium; Impact high. Policy: Assess full fiscal impact of the airport; accelerate structural reforms to buttress competitiveness in agriculture and tourism-related activities. - Downside risks: - Tighter global financial conditions: Likelihood high; Impact medium (Short term). Policy: Maintain a prudent debt profile; adopt a credible medium-term fiscal framework. - Deterioration in PetroCaribe financing: Likelihood high; Impact high. Policy: Prepare contingent sources of financing; manage PetroCaribe flows prudently. - Structurally weak growth in advanced economies/key tourism sources or weak competitiveness implementation: Likelihood high/medium; Impact medium. Policy: Improve competitiveness vis-a-vis regional competitors; diversify the economy and tourism base. - Larger and more frequent natural disasters: Likelihood medium (Short-term); Impact high. Policy: Develop comprehensive disaster management combining adaptation policies, risk transfer policies, and building fiscal buffers. - Reduced correspondent banking services ("de-risking"): Likelihood medium; Impact medium. Policy: Strengthen AML/CFT and international tax cooperation frameworks; promote bank consolidation; explore alternative options for correspondent banking services. ### Policy discussions and priorities - Immediate priorities for authorities: - Accelerate implementation of policies to improve competitiveness. - Lower debt and build buffers against natural disasters. - Continue to bolster the financial system. - Fund advice highlights: - Medium-term fiscal consolidation needed to meet ECCU regional debt target of 60 percent of GDP by 2030. - Implement adjustment measures yielding 1 percent of GDP in 2018 and 1.8 percent of GDP in 2019 and onwards to reach a primary surplus of 1.5 percent of GDP in 2018 and 2.5 percent of GDP in 2019 until 2030. - Contain the wage bill (wage bill at 13.1 percent of GDP) and curb growing public pensions (public pension spending at 3 percent of GDP, representing half of public transfers at end-2015). - Broaden the tax base: improve progressivity of income tax, reduce ad hoc exemptions, and review VAT structure (exempt and zero-rated goods and services amount to one-third of the value of items taxable under the VAT). - Prepare and implement legislation on tax administration procedures including assigning a unique Tax Identification Number (TIN). - Accelerate PFM reforms: implement IPSAS-based cash accounting, reporting, and management practices; articulate and execute a plan for clearing existing arrears. ### Natural disasters, contingencies funding, and infrastructure resilience - Average annual damages from natural disasters estimated at 1.2 percent of GDP, of which about 0.9 percent of GDP are considered fiscal costs. - Contingencies Fund allocations: - 2017: projected funding 0.3 percent of GDP. - 2018 onwards: envisaged 0.5 percent of GDP. - Assessment: 0.3 percent and 0.5 percent allocations are a promising first step but fall short of needed annual amounts. - Ongoing infrastructure resilience measures: rehabilitating roads damaged during the December 2014 and November 2016 tropical depressions. - Preparedness and planning recommendations: - Strengthen the Building Code and Physical Planning Laws and improve enforcement. - Enhance powers of the National Emergency Management Office (NEMO) through legislation. - Articulate and implement a strategy to rezone areas and relocate populations deemed at risk. ### Energy transition and sectoral strategies - Geothermal energy: - Authorities developing the geothermal industry to reduce reliance on fossil fuels. - Status: public infrastructure investments needed by private partners have progressed, but a Power Purchase Agreement between partners and VINLEC remains pending. - Tourism and agriculture: - Tourism and agriculture represent 38 percent of GDP and employ about 40 percent of workers (including many low-income). - Tourism recommendations: expand and upgrade tourism infrastructure; limit tax concessions for tourism development; improve enforcement of government tourism standards. - Agriculture recommendations: transition from subsistence to agribusiness; improve feeder roads, water supply and irrigation, technology, access to property for young persons, and risk-sharing mechanisms; enhance public infrastructure to reach new markets via OECS Agri-Export Strategy Initiative. ### Competitiveness, labor market, and business environment - REER and wages: - REER appreciated since 2010 with estimated overvaluation between 11 and 45 percent (EBA-lite and current account models). - CPI-based REER appreciated by roughly 12 percent in 2015 relative to 2014; appreciated against the rest of the currency union especially in 2016. - Real wages increased by 25 percent over the last 15 years; productivity improved by 23 percent. - Wage moderation and aligning labor costs with productivity gains essential to address competitiveness. - Business environment priorities: - Accelerate risk management practices at Customs by optimizing ASYCUDA World and significantly reducing container inspections. - Improve access to credit; absence of a credit registry and bureau hampers access. - Streamline land title registration procedures (time increased from 38 days in 2015 to 47 in 2016). - Prepare and implement an Investment Act. - Address labor market rigidities and improve vocational training with World Bank and CDB assistance. ### Financial system stability, resolution, and supervision - Financial stability risks: CFSM scores exhibit low to moderate risks declining over time. - Key vulnerabilities: - High capital and liquidity but scarce bankable projects and high NPLs dampen profitability and credit growth. - NPL rise since the global financial crisis largely from low growth and tourism setbacks. - Recommended measures: - Full operationalization of the Eastern Caribbean Asset Management Corporation (ECAMC) by the ECCB, combined with St. Vincent’s insolvency law, to facilitate collection and disposal of distressed assets. - Establish out-of-court settlement mechanisms to overcome legal bottlenecks. - Implement the OECS Harmonised Credit Reporting Act preparations toward 2018 implementation (Act enacted in St. Vincent and the Grenadines in August 2017). - Strengthen supervision and governance of credit unions; expand quarterly reporting requirements to the FSA with granular NPL and provisioning data; introduce routine stress testing. - Strengthen FSA supervisory powers by approving implementing regulations of the FSA Act; adopt the Building Societies Act to modernize regulatory framework. - Intensify AML/CFT actions; issue regulation on non-profit organizations to move toward compliance with 2012 FATF recommendations. ### Debt sustainability: scenarios, indicators, and key projections - Public sector debt (percent of GDP) — selected series: - 2014: 79.5 - 2015: 79.4 - 2016: 82.9 - 2017: 77.5 - 2018: 78.5 - 2019: 78.6 - 2020: 78.4 - 2021: 77.9 - 2022: 77.7 - 2028–2036 average: 65.9 - Baseline Policy Scenario: - Under passive policies with historical-frequency natural disasters and domestic financing to close gaps: public debt projected at 85.8 percent of GDP in 2030 (text summary). - Low Growth Scenario: - Constant 1 percent real GDP growth starting in 2018 with projected expenditures in EC$ million; domestic financing assumed available — shows unsustainable debt trajectory. - Active Policy Scenario (proactive fiscal measures to reach ECCU target by 2030): - Budgetary savings of 1 percent of GDP in 2018 and 1.8 percent of GDP in 2019 and beyond. - Projection outcomes: - Without natural disasters: public debt declines to 47.4 percent of GDP by 2030. - With recurrent natural disasters: debt declines more slowly, reaching about 60 percent of GDP by 2030. - External debt and financing: - External public debt (end of period, percent of GDP): 2016 = 46.4; 2017 = 56.7; 2018 = 50.1. - External public debt service (In percent of exports of goods and services): 2016 = 10.4; 2017 = 28.5; 2018 = 9.6. - Medium-term projection: staff projects external debt would narrow to about 33 percent of GDP by 2030, driven mainly by tourism expansion. - Gross financing need (percent of GDP): 2014 = 11.8; 2015 = 8.3; 2016 = 10.6; selected projection years vary as shown in tables. ### Social statistics and labor market snapshot (2015) - Unemployment: - Overall unemployment rate: 25 percent. - Youth (15-24) unemployment: around 46 percent. - 2001 unemployment: 20.9 percent; 2012: 21.5 percent. - Employment by sector: Agriculture and wholesale and retail each absorb around 13 percent of total workers. - Education and public sector employment: - 55 percent of university graduates work in the public sector, education or health services. - Labor force participation and gender: - Female participation increased from 45 percent to 62 percent between 2001 and 2015; male participation remained stable. - Female unemployment rose from 18 percent to 30 percent over the same period. - Inactive population: 24.3 percent of the population inactive; nearly one-half of inactive are retired or in school. ### World Bank, CDB and donor-supported projects and assistance (selected) - World Bank projects and allocations: - OECS Regional Tourism Competitiveness: IDA allocation to St. Vincent and the Grenadines: US$5,000,000.00. - Human Development Service Delivery Project (Approved May 2017): IDA: US$10,700,000.00. - OECS Regional Agriculture Competitiveness Project (Approved May 2017): allocation to Grenada and St. Vincent and the Grenadines: US$4,300,000.00. - World Bank portfolio financials (selected): - Total Original Principal (St. Vincent and the Grenadines Only): 87,520,000.00 - Disbursed: 18,885,494.95 - Undisbursed Balance: 68,634,505.05 - CDB active programs and financing: - Financing commitments up to US$86.7 million (2014-18 strategy), including US$21 million SFR and US$65.7 million OCR. - Energy Efficiency Measures and Solar Voltaic Plant project estimated cost: US$6.026 million. - CDB approvals and disbursements for 2017 to date: Approved US$4.2 million; disbursed US$3.1 million. - Cumulative loans approved since 1970: US$214.2 million; disbursed US$171.5 million; disbursed debt outstanding US$110.3 million. ### Data adequacy, statistical issues and IMF recommendations - General assessment: data provision has shortcomings but broadly adequate for surveillance. - National accounts: - CSO produces annual GDP estimates at current and constant 2006 prices; quarterly GDP estimates not yet disseminated. - Mission in June 2016 assisted with developing quarterly GDP estimates and SNA 2008 consistency; medium-term action plan requires increased CSO staffing and resources. - Price and trade indices: - CPI base January 2010 introduced June 2011; PPI and export/import price indices not produced. - Government finance statistics and PFM: - Monthly central government revenue and expenditure reported with some lag; discrepancies exist between fiscal and monetary accounts and in reporting of public enterprise finances. - Fiscal data based on GFSM 1986; migration to GFSM 2014 desirable. - Recent PFM steps: Cabinet approved establishing a Cash Management Committee; recommendation to implement IPSAS-based cash accounting and link commitments to available cash. - Monetary and external statistics: - Monthly monetary statistics compiled by ECCB since July 2006; shortcomings include incomplete institutional coverage. - July 2017: ECCB released detailed balance of payments statistics and comprehensive IIP statistics following BPM6; services exports now include education-related services by offshore universities. - Reporting and dissemination: - Table of Common Indicators Required for Surveillance shows latest observations and frequencies (selected entries: exchange rate fixed rate latest 11/2017; CPI latest 9/2017; government finance latest 9/2017; external current account latest 2016). - Participation: St. Vincent and the Grenadines in GDDS since September 2000 and currently in e-GDDS. *International Monetary Fund. CR17400 — St. Vincent and the Grenadines chapter excerpt.* ### 1. ECCU Balance of Payment Data Revision and St. Vincent and the Grenadines ____________________ 5 ### 1. ECCU Balance of Payment Data Revision and St. Vincent and the Grenadines ____________________ 5 ### Background - The international airport construction was completed in February 2017 (started in 2008), a key step to spur growth and tackle persistently high unemployment. - Growth averaged 3.6 percent between 1997 and 2008; growth averaged 0.2 percent over 2009-2016. - The unemployment rate has remained over 20 percent since 2001. - Poverty and income inequality declined between 1997 and 2008, coinciding with intensified poverty reduction programs, universal access to primary and secondary education, a relatively robust system of primary health care, and gains in female labor force participation. ### Recent economic developments - 2016 growth and tourism: - Real GDP growth in 2016: 0.8 percent (slightly below 0.9 percent in 2015). - Tourism: tourist arrivals fell by 3.7 percent y-o-y through July 2017; cruise passengers rose 40 percent. - Inflation: - Consumer inflation near 1 percent in 2016. - Inflation reached 1.9 percent y-o-y in September 2017, reflecting increases in the VAT and minimum wages. - External position and reserves: - Current account deficit widened from 14.9 percent of GDP in 2015 to 15.8 percent of GDP in 2016. - Imputed foreign reserves: 5.6 months of imports (noted as comfortable and above reserve-adequacy metrics). - EBA-lite models and external stability assessment: external position weaker than level consistent with fundamentals and desirable policies; competitiveness challenges identified. - ECCB BOP data revision (Box 1): - ECCB published revised BOP estimates for 2014-16 in July 2017, enhanced by improved tourism surveys, wider coverage, and transition to BPM6. - For St. Vincent and the Grenadines: current account deficit declined moderately as services balance improved; income accounts deteriorated; balance on goods trade barely altered. ### Financial sector and credit - Banking system: - Banks’ capital and liquidity ratios comfortably above regulatory requirements and regional averages. - Returns on equity and assets near zero. - Non-performing loans (NPLs) at 9.7 percent. - Real credit to the private sector remained relatively flat since end-2015. - Correspondent banking relationships (CBRs) preserved but at higher cost; intensified AML/CFT compliance efforts. - In July 2017, government repurchased 31 percent of the Bank of St. Vincent and the Grenadines (BoSVG); social security retains 20 percent. - Credit unions: - Assets stabilized near 20 percent of GDP since 2015. - Share of total financial sector’s loans to the private sector increased to 18 percent at end-June 2017. - Reported NPLs for credit unions remain stable and lower than in the banking sector, though credit unions are developing a methodology for more accurate NPL measurement. ### Fiscal outturns and public debt - Central government fiscal balances: - Overall balance: surplus of 1.1 percent of GDP in 2016 to an expected deficit of 2.4 percent of GDP in 2017. - Excluding one-off items, overall deficit would widen from 0.4 percent of GDP to 0.9 percent of GDP. - Public sector debt: - Expected to decline mainly due to completed debt relief (3.7 percent of GDP) provided by a bilateral creditor, but remain elevated at 77.5 percent of GDP in 2017. - Drivers of fiscal deterioration in 2017: - New revenue measures estimated to yield 0.4 percent of GDP (Box 2), but revenues expected to decline due to one-off receipts in 2016 (1.1 percent of GDP in tax arrears collections and 0.4 percent of GDP in exceptional dividends). - Collectible tax arrears estimated at some 8½ percent of GDP. - Wage bill expected to remain above 13 percent of GDP with recruitment of new police officers and medical personnel; wage increases occurred end-2015 and January 2016. - Transfers and capital outlays expected to increase (transfers projected to increase by over 1 pp to fund airport operating and marketing costs, pensions for new retirees, and contingencies fund). - One-off outlays to reacquire majority share in BoSVG: 1.5 percent of GDP, increasing capital spending. - External amortization needs intensified: scheduled repayment of EC$128 million (5.9 percent of GDP) on multiple commercial loans due in 2017 compared with EC$55 million (2.7 percent of GDP) in 2016. - Budgetary arrears: EC$39.9 million (1.8 percent of GDP) end-September 2017; EC$36.7 million (1.8 percent of GDP) end-2016; EC$43.5 million (2 percent of GDP) end-October 2016. ### 2017 Budget — Key features and estimated yields (Box 2) - Objectives: raise taxes and fees to finance airport operating and marketing costs, strengthen financial buffers; buyback of BoSVG financed by issuing a new bond. - Revenue measures and yields (In percent of GDP): - Increase in VAT rate by 1 pp: 0.3 - Increase in the VAT registration threshold: -0.2 - Increase in aliens' landholding license rate (from 6 to 7½ percent): 0.1 - Increase in airport service charge (from EC$50 to EC$100): 0.2 - Other measures: - VAT rate raised effective May 2017 from 15 to 16 percent and from 10 to 11 percent for tourism accommodations and activities; proceeds earmarked for capitalizing the Contingencies Fund (0.5 percent of GDP from 2018 onwards and 0.3 percent of GDP in 2017). - VAT registration threshold increased from EC$120,000 to EC$300,000. - Aliens’ landholding license rate raised from 6 to 7½ percent on properties exceeding EC$100,000. - Telecommunication levy broadened (2 percent) to incoming calls and data; proceeds earmarked for the Zero Hunger Trust Fund (off-budget). - New expenditure: airport subsidy (0.2 percent of GDP), contingencies fund capitalization, bank buyback. ### Outlook and projections - Real GDP growth: - 2017 projection: 1 percent (growth expected to remain relatively flat in 2017 before picking up). - 2018 projection: 2.1 percent. - Medium-term projection: 3 percent (as potential reached with increased direct flights and private investment). - Inflation: - Projected to reach 2 percent this year. - Projected 1.5 percent over the medium term. - Current account and reserves: - Current account deficit projected to decline as food imports diminish and tourism increases; reserves expected to remain at comfortable levels. ### Risks (summary from Risk Assessment Matrix) - Upside risks: - Lower oil prices: Likelihood low; Impact medium (Medium-Term). Policy advice: Allow pass-through of international prices; use opportunity to adjust excise taxation on automotive fuels. - Successful implementation of the geothermal project: Likelihood medium; Impact medium (Medium-Term). Policy advice: Monitor developments, including emerging contingent fiscal liabilities. - Increased activity from the new airport: Likelihood medium; Impact high. Policy advice: Assess full fiscal impact of the airport; accelerate structural reforms to buttress competitiveness in agriculture and tourism-related activities. - Downside risks: - Tighter global financial conditions: Likelihood high; Impact medium (Short term). Policy advice: Maintain a prudent debt profile; adopt a credible medium-term fiscal framework. - Deterioration in PetroCaribe financing: Likelihood high; Impact high. Policy advice: Prepare contingent sources of financing; manage PetroCaribe flows prudently. - Structurally weak growth in advanced economies/key tourism sources or weak competitiveness implementation: Likelihood high/medium; Impact medium. Policy advice: Improve competitiveness vis-a-vis regional competitors; diversify the economy and tourism base. - Larger and more frequent natural disasters: Likelihood medium (Short-term); Impact high. Policy advice: Develop comprehensive disaster management combining adaptation policies, risk transfer policies, and building fiscal buffers. - Reduced correspondent banking services ("de-risking"): Likelihood medium; Impact medium. Policy advice: Strengthen AML/CFT and international tax cooperation frameworks; promote bank consolidation; explore alternative options for correspondent banking services. ### Policy discussions and priorities - Authorities need to accelerate implementation of policies to: - Improve competitiveness. - Lower debt and build buffers against natural disasters. - Continue to bolster the financial system. - Traction with Fund policy recommendations has been mixed (Annex I referenced). *International Monetary Fund — St. Vincent and the Grenadines country document (excerpt).* ### 10. While the government is improving preparedness and infrastructure resilience to ### 10. While the government is improving preparedness and infrastructure resilience to ### Natural disasters, contingencies funding, and infrastructure resilience - Average annual damages from natural disasters in St. Vincent and the Grenadines have been estimated at 1.2 percent of GDP, of which about 0.9 percent of GDP are considered fiscal costs. - The authorities funded the Contingencies Fund with a projected 0.3 percent of GDP in 2017 and an envisaged 0.5 percent of GDP in 2018 onwards. - Assessment: the 0.3 percent and 0.5 percent of GDP allocations are a promising first step but fall short of what is needed on an annual basis. - Ongoing infrastructure resilience measures: rehabilitating roads damaged during the December 2014 and November 2016 tropical depressions. ### Preparedness, planning, and enforcement recommendations - Strengthen the Building Code and Physical Planning Laws and improve enforcement. - Enhance the powers of the National Emergency Management Office (NEMO) through legislation. - Articulate and implement a strategy to rezone areas and relocate populations deemed at risk. ### Energy transition - Authorities continue developing the geothermal energy industry to reduce reliance on fossil fuels. - Status: public infrastructure investments needed by private partners have progressed, but a Power Purchase Agreement between the partners and the state electricity company VINLEC remains pending. ### Reducing unemployment and boosting growth — competitiveness and business environment - The real exchange rate (REER) has appreciated since 2010, with estimated overvaluation between 11 and 45 percent. - Given the fixed nominal exchange rate, reducing overvaluation and improving competitiveness hinges on moderating wage growth and boosting productivity. - Priority business environment improvements: - Accelerate implementation of risk management practices at Customs by optimizing ASYCUDA World and significantly reducing container inspections. - Further improve access to credit; current access is hampered by the absence of a credit registry and bureau. - Streamline procedures to register land titles (required time increased from 38 days in 2015 to 47 in 2016). - Prepare and implement an Investment Act to streamline regulations. - Policy actions to boost labor productivity and competitiveness: - Upgrade overall infrastructure. - Develop policies to improve labor skills with World Bank and CDB assistance: strengthen delivery of education, enhance access by the poor, and improve vocational training. - Address labor market rigidities, including inflexible employment regulations (example noted: recent inclusion of a one hour lunch break in the statutory daily work hours). ### Sectoral strategies: tourism and agriculture - Tourism and agriculture represent 38 percent of GDP and employ about 40 percent of workers (including many low-income). - Tourism: - Expand and upgrade tourism infrastructure; new high-end projects and a nearly operational marina in Canouan noted. - Recommendation: limit the use of tax concessions to develop tourism, as these undermine revenue administration and have contributed to erosion of tax systems. - Improve enforcement of government tourism standards as accommodations upgrade facilities. - Agriculture: - Transition from subsistence to agribusiness; aim to improve productivity and linkages between tourism and agriculture with European Union and World Bank assistance. - Key farmer challenges: poor access to markets due to lack of feeder roads, inadequate water supply and irrigation, technological gaps, difficulties for young persons to access property, and underdeveloped risk-sharing mechanisms. - Recommendation: enhanced public infrastructure to help farmers reach new markets, including through the OECS Agri-Export Strategy Initiative. ### Social statistics and monitoring - Continue to develop social statistics to better gauge policy impact. - Build on progress quantifying the unemployment rate (Annex III) and improve availability and quality of data on poverty, inequality, and labor market constraints. ### Fiscal framework, projections, and required consolidation - Baseline fiscal projection (without additional measures): - Overall deficit projected to decline from 2.4 percent of GDP in 2017 to 2.0 percent in 2018. - Primary surplus projected to increase from 0.2 percent of GDP in 2017 to 0.5 percent of GDP in 2018. - Tax revenue expected to increase with the full year effect of the 2017 revenue measures; higher airport operations and tourism marketing expenses, and contributions to the contingencies fund over a full year are envisaged to raise transfers. - Fiscal risks from recurrent natural disasters: - Assuming natural disasters occur at their historical frequency and magnitude, on current policies public debt would reach 86 percent of GDP by 2030. - ECCU debt target: 60 percent of GDP by 2030. - Recommended adjustment measures to meet the public debt target: - Implement adjustment measures yielding to 1 percent of GDP in 2018 and 1.8 percent of GDP in 2019 and onwards. - Outcome: primary surplus would reach 1.5 percent of GDP in 2018 and 2.5 percent of GDP in 2019 until 2030. - Fiscal structure and revenue measures: - St. Vincent and the Grenadines has the highest tax revenue and wage bill to GDP of the ECCU; containing the wage bill is essential. - Curb growing public pensions and redirect funds to growth-enhancing human capital and infrastructure investments. - Scope for broadening the tax base: improve progressivity of the income tax, reduce ad hoc exemptions, and review the VAT structure (exempt and zero-rated goods and services amount to one-third of the value of items taxable under the VAT). - Government has recently increased VAT rates by 1 pp. - Well-targeted social transfers can better achieve social objectives than broad VAT exemptions; revision of social transfers with World Bank assistance is underway. - Medium-term fiscal consolidation and public financial management reforms: - Prepare and implement legislation on tax administration procedures, including assignment of a unique Tax Identification Number (TIN) to each taxpayer to facilitate routine identification and cross-checking of tax declarations by Customs and Excises and Inland Revenue departments. - Accelerate reforms in public financial management: implement IPSAS-based cash accounting, reporting, and management practices linking expenditure commitments to available cash to help prevent accumulation of budgetary arrears. - Articulate and execute a plan for clearing existing arrears. - Medium-term fiscal strategy should present fiscal risks explicitly, particularly given Public Private Partnership (PPPs) in the pipeline or already in operation. ### Financial system stability and credit conditions - Financial stability risks: scores in the Country Financial Stability Map (CFSM) exhibit low to moderate risks which have declined over time. - Capital and liquidity in banks are high, but scarce bankable projects and high NPLs contribute to low profitability and inhibit credit growth. - NPL rise since the global financial crisis has resulted largely from low growth and tourism setbacks. - Measures to improve resolution and credit conditions: - Full operationalization of the Eastern Caribbean Asset Management Corporation (ECAMC) by the ECCB, combined with St. Vincent and the Grenadines’ insolvency law, will facilitate collection and disposal of distressed assets. - Out-of-court settlement mechanisms would be helpful given legal bottlenecks. - Implement the OECS Harmonised Credit Reporting Act preparations toward 2018 implementation (Act enacted in St. Vincent and the Grenadines in August 2017). - Banking consolidation: - The recent buyback of the BoSVG blocks an envisaged merger that could have improved competitiveness through regional diversification; authorities are exploring alternative consolidation/amalgamation possibilities. - Evidence suggests low diversification is a factor for lack of competitiveness of ECCU indigenous banks; intra-regional bank mergers may reduce risk through scale and diversification. ### Credit unions, supervision, and AML/CFT - Strengthen supervision and governance of credit unions to address vulnerabilities; banks are increasingly vulnerable to credit union shocks. - Recommendations for the Financial Supervisory Authority (FSA) and regulation: - Strengthen FSA supervisory powers by approving implementing regulations of the FSA Act. - Adopt the Building Societies Act to modernize the regulatory framework, including corporate governance and financial reporting. - Continue to closely monitor and address developments in credit unions, particularly as they implement IFRS 9 required by January 2018, including efforts to recover debt and reduce operating costs and NPLs. - Expand quarterly reporting requirements from credit unions to the FSA to include more granularity on NPLs, provisioning, lending distribution and short term collateral. - Compile and publish data on balance sheet/income statements and indicators on credit union performance. - Introduce routine stress testing as a main supervisory tool for credit unions. - AML/CFT: - Intensify government and bank collaboration to reduce CBR risks and safeguard stability of financial and external sectors. - The 2014 enactment of AML/CFT Regulations has addressed several deficiencies from the 2010 Mutual Evaluation Report (MER). - Recommendation: swift issue of a regulation on non-profit organizations to move toward compliance with the 2012 FATF recommendations. ### Other issues: data provision - Further advances are needed for data provision, which are broadly adequate for key areas of surveillance. - Improvements noted: publication of the 2015 Labour Force Survey improved labor market indicators; BoP statistics revised according to BPM6 and including IIP statistics were released in 2017Q3. - The authorities’ chart of accounts is compliant with GFS. *International Monetary Fund. CR17400 — St. Vincent and the Grenadines chapter excerpt.* ### 2014. However, statistical coverage of the operations of public entities is weak, given that several do not ### St. Vincent and the Grenadines — IMF Staff Report (excerpts) ### Governance, public entities, and statistical coverage - Statistical coverage of the operations of public entities is weak, given that several do not comply with financial reporting requirements, including due to lack of capacity in some cases. - The 2016 updated safeguards assessment found that the Eastern Caribbean Central Bank (ECCB): - continues to maintain a governance framework that provides for independent oversight; - has maintained transparency in financial reporting and a sound external audit mechanism; - has an internal audit function that only partially conforms to international standards, with steps underway to address this weakness. ### Authorities’ views and planned actions - Resilience and disaster preparedness - Authorities expect actions, with external partner support, to adequately build resilience and address the costs of natural disasters. - They are elaborating regulations on using the Contingencies Fund and hope to endow it with external resources supplementing earmarked revenue from the VAT rate increase. - Plans include progressing the geothermal energy project and contemplating more green energy projects, mainly solar, for the Grenadines. - They plan more resilient roads and sea defenses, to further enforce the Building Code and Physical Planning Law, and to articulate and implement a strategy to rezone areas and relocate population deemed at risk. - Agreed that the powers of the National Emergency Management Organization (NEMO) should be enhanced through legislation. - Competitiveness and trade facilitation - Authorities acknowledged need for structural reforms but stressed that business operations are most impeded by difficulties in securing correspondent banking relationships. - On reducing container inspections at Customs, authorities noted many importers opted out of Customs’ fast track status preferring inspections to a possible post clearance audit; container inspections were seen as needed to safeguard Customs revenue collections. - Noted the recent Possession Recovery Land Act has been helpful to regularize land ownership. - Tourism and agriculture - Further developing tourism is the foundation of the growth strategy: engaging with airlines, prioritizing reopening a large hotel under new management, upgrading tourism infrastructure (ports and marinas, public transportation, and human capital). - Authorities claim St. Vincent and the Grenadines is a regional leader in establishing standards for all local stakeholders in the tourism industry. - Improving links from tourism to agriculture is paramount: importance of improved direct air connectivity, agribusiness initiatives in cocoa, coffee and seafood. - Some concessions for food imports by tourism operators compete with local agriculture but were needed until local product supply consistency improves. - Fiscal strategy and public investment - Expect the 2018 budget to be consistent with ongoing fiscal consolidation while accommodating staffing and investment needs. - Reviewing possible revenue mobilization measures, including streamlining current tax and customs concessions. - Aim to adjust salaries and positions of recent college-graduate teachers, staff the modern medical complex, address growing security needs, and better support public investment. - Elaborating a Medium-Term Fiscal Framework and will present a parliamentary resolution on fiscal responsibility; prefer a resolution over fiscal responsibility legislation. - Framework will pay attention to evolution of the wage bill and pensions, and to improving expenditure efficiency and performance of public entities. - Financial sector views - Authorities consider they have fostered a sound environment for the financial system. - Buyback of Bank of St. Vincent and the Grenadines motivated by a difference in strategic vision with the foreign consortium; intend to resell the bank in the medium term after enhancing its value. - Expect continued collaboration with indigenous banks to seek scope for consolidating bank functions. - Foreclosure laws are seen as better suited to facilitate assets disposal than those in the rest of the region. - Supervision of credit unions: authorities consider data received sufficient for regular monitoring but will request more granular data for the next stress testing exercise planned in mid-2018. - AML/CFT: view supervision as sound, with expansion of the AML code in August 2017 addressing most of the outstanding 2012 FATF recommendations. ### Staff appraisal — outlook and risks - Growth and external factors - Economic activity is expected to remain relatively flat in 2017 but recover in 2018 owing to enhanced connectivity with key tourism source countries. - Strong spillovers from the new airport, construction of a modern port, and launching the geothermal project could support growth in the medium term. - Risks to the projection are tilted to the downside given the inadequate policy stance, the uncertain global environment, and vulnerability to natural disasters. - Fiscal outlook and debt - The fiscal position is expected to deteriorate in 2017-18, as new revenue measures only partially cover higher outlays. - Public debt will resume rising despite some debt relief. - Under current policies, public debt is projected to continue to rise from its already high level. - Additional fiscal measures are needed in 2018 and over the medium-term to pay arrears and put public debt on a clear downward path, mitigate debt distress, and achieve the regional debt target. - The authorities should implement measures yielding 1.8 percent of GDP over the next two years, which would provide the needed savings to a contingency fund to address natural disasters. - Fiscal consolidation priorities - Containing the wage bill and curbing the growth of public pensions should be key pillars. - Revenue scope: broadening the tax base by streamlining tax concessions and exemptions, and collecting tax arrears where practical. - Public financial management and structural reforms - Prepare and implement legislation on tax administration procedures, with a provision for assigning a Tax Identification Number (TIN) to each taxpayer. - Improve efficiency of public expenditure and cash management to stop accumulation of budgetary arrears. - Expand fiscal reporting to capture the widest possible fiscal perimeter and present fiscal risks explicitly, particularly given PPPs in the pipeline or already in operation and the substantial role of SOEs. - Address operating losses at the state-owned and run airport. - The purchase by the state of a bank should be a short transitory step to facilitate moving ahead with the ECCU’s bank consolidation strategy. - Disaster resilience and infrastructure - Increase resources for the contingencies fund and implement initiatives to build resilience against natural disasters; current earmarked revenue for the contingencies fund is insufficient. - Promote more resilient infrastructure; strengthen and further enforce the Building Code and Physical Planning Law; enhance NEMO powers through legislation; articulate and implement a strategy to rezone areas and relocate populations deemed at risk. - Competitiveness, trade, and labor - The external position is weaker than the level consistent with fundamentals and desirable policies. - Private sector would benefit from enhanced connectivity if competitiveness and the business climate were improved. - Critical actions: moderate wage growth; accelerate implementation of risk management practices at Customs and significantly reduce container inspections. - Prepare the Investment Act to streamline regulations, develop the vocational training program, and improve land title registration. - Enhance labor market flexibility and improve access to credit. - Enforce the government’s new tourism standards. - In agriculture, execute the World Bank project to reorient the sector from subsistence to agribusiness and strengthen links to tourism. - Intensify actions to bridge infrastructure gaps, facilitate access to property by the younger generation, and improve risk-sharing mechanisms. - Financial sector strengthening - Implement the OECS Harmonised Credit Reporting Act to improve information about borrowers. - Full operationalization of the ECAMC, combined with the country’s new insolvency law, will help banks unwind their NPLs. - To strengthen supervision of non-banks, swift approval of implementing regulations to the FSA Act is needed. - Continue addressing AML/CFT shortcomings by swiftly issuing a regulation on non-profit organizations and moving towards compliance with the 2012 FATF recommendations, including to reduce CBR risks. - Following the recent buyback of the BoSVG, authorities are encouraged to redouble efforts to explore alternative amalgamation options. ### Key numerical and timing points - 2016: updated safeguards assessment of the ECCB. - August 2017: expansion of the AML code. - mid-2018: next stress testing exercise for credit unions planned. - 2017: economic activity expected to remain relatively flat; economy expected to grow by 1.0 percent in 2017 (figure caption). - 2018: budget expected to be consistent with ongoing fiscal consolidation; recovery in economic activity expected in 2018. - Measures yielding 1.8 percent of GDP over the next two years recommended to provide savings to a contingency fund. *IMF staff report excerpts.* ### 2017. reflecting the recent depreciation in the U.S. dollar. ### cr17400-stvincentbundle - 2017. reflecting the recent depreciation in the U.S. dollar. ### Fiscal position and near-term outlook - The primary fiscal position is expected to deteriorate in 2017. - Deterioration drivers (as stated): - "driven by higher capital outlays and transfers..." - "...and a persistent relatively high wage bill." - "Tax receipts are projected below their 2016 level..." - "The projected 2017 overall budget deficit puts additional pressure on overall financing needs, adding to growing amortization." ### Revenue, expenditure, and balances (selected exact figures from Tables 1, 2a, 2b, 7) - Total revenue and grants (percent of GDP): 2016 = 29.8; 2017 = 28.4; 2018 = 29.0. - Current revenue (percent of GDP): 2016 = 28.5; 2017 = 27.1; 2018 = 27.6. - Tax revenue (percent of GDP): 2016 = 25.5; 2017 = 24.7; 2018 = 25.2. - Total expenditure and net lending (percent of GDP): 2016 = 28.7; 2017 = 30.8; 2018 = 31.1. - Current expenditure (percent of GDP): 2016 = 24.9; 2017 = 26.7; 2018 = 27.3. - Wages and salaries (percent of GDP): 2016 = 13.2; 2017 = 13.1; 2018 = 13.2. - Capital expenditure (percent of GDP): 2016 = 3.8; 2017 = 4.0; 2018 = 3.8. - Overall balance (percent of GDP): 2016 = -2.1; 2017 = -1.1; 2018 = -2.4. - Overall balance (excl. grants) (percent of GDP): 2016 = -3.3; 2017 = -0.1; 2018 = -3.4. - Primary balance (percent of GDP): 2016 = 0.1; 2017 = 3.2; 2018 = 0.2. - Primary balance (excl. grants) (percent of GDP): 2016 = -1.1; 2017 = 1.9; 2018 = -0.8. - Gross public sector debt (percent of GDP, memorandum): 2016 = 82.9; 2017 = 77.5; 2018 = 78.5. - Public sector external debt (end of period, percent of GDP): 2016 = 46.4; 2017 = 56.7; 2018 = 50.1. - External public debt service (In percent of exports of goods and services): 2016 = 10.4; 2017 = 28.5; 2018 = 9.6. ### Financing, cash flow, and arrears - Identified financing (percent of GDP): 2016 = -1.1; 2017 = 1.9; 2018 = 2.5. - Net external financing (percent of GDP): 2016 = -0.5; 2017 = -0.9; 2018 = 0.8. - Net domestic financing (percent of GDP): 2016 = 1.7; 2017 = 2.3; 2018 = 3.0. - Change in arrears (percent of GDP): 2016 = -1.1; 2017 = 0.4; 2018 = -0.4. - Table 3 gross cash inflows and outflows (selected levels, EC$ millions): 2016 gross cash inflows = 204.2; 2016 gross cash outflows = 229.2; net cash flow 2016 = 27.1 (net cash flow printed as positive for 2016 in table, with earlier years negative). ### External sector and balance of payments (selected exact figures) - Current account (EC$ millions): 2016 = -505; 2017 = -304; 2018 = -329. - Current account (percent of GDP, memorandum): 2016 = -25.7; 2017 = -14.9; 2018 = -15.8. - Trade balance (EC$ millions): 2016 = -729; 2017 = -671; 2018 = -669. - Exports f.o.b. (EC$ millions): 2016 = 134; 2017 = 125; 2018 = 126. - Imports f.o.b. (EC$ millions): 2016 = 863; 2017 = 796; 2018 = 795. - Tourism receipts (percent of GDP, memorandum): 2016 = 24.1; 2017 = 26.8; 2018 = 27.1. - Net Foreign Direct Investment (EC$ millions): 2016 = -292; 2017 = -129; 2018 = -243. - Available financing / Change in ECCB NFA (EC$ millions): 2016 = -60; 2017 = -42; 2018 = -54. ### Monetary and financial sector developments - Banks’ nonperforming loans: "Banks’ NPLs have remained relatively stable but declined elsewhere in the region reflecting exceptional measures to repair balance sheets." - Bank profitability: "as banks’ profitability has declined to very low levels. Nonetheless, commercial banks remain well capitalized." - Commercial Banks: ROA (Percent): 2014–2016 series shows very low values; table heading indicates ROA in percent (chart referenced). - Commercial Banks: Capital Adequacy Ratio (Percent) — chart indicates ratios well above required levels; in Table 6 regulatory capital to risk-weighted assets: 2014 = 16.0; 2015 = 20.6; 2016 = 20.1. - Credit unions: - "Credit unions have gained prominence since the global crisis..." - "including with increasing their share of total loans extended by the financial system." - Total assets of credit unions, 2009–2017Q2 shown in chart scale (Assets (US$ millions) up to 180M). - Monetary aggregates (Table 5, selected levels, EC$ millions): - Broad money (M2): 2016 = 1,521; 2017 = 1,596; 2018 = 1,675. - Net foreign assets: 2016 = 662; 2017 = 651; 2018 = 623. - Credit to private sector: 2016 = 1,084; 2017 = 1,095; 2018 = 1,106. - Prudential indicators (Table 6): - Nonperforming loans to total loans (percent): 2014 = 10.0; 2015 = 8.7; 2016 = 9.2. - Return on assets (percent): 2014 = -0.2; 2015 = 0.2; 2016 = 0.0. - Liquid assets to total assets (percent): 2014 = 37.6; 2015 = 38.3; 2016 = 40.0. ### Social and macro context (selected indicators) - Population (2016) total (thousands) = 110.1; density (per sq. km.) = 282.8; life expectancy at birth (years, 2015) = 73.1. - GDP (2016): (millions of US dollars) = 770; (millions of EC dollars) = 2,079; (US$ per capita) = 6,992. - Real GDP (factor cost) growth rates: 2016 = 0.9; 2017 Est. = 0.8; 2018 Proj. = 1.0. - Consumer prices, period average (percent change): 2016 = -1.7; 2017 = -0.2; 2018 = 2.0. - Gross public sector debt (memorandum, percent of GDP): 2016 = 82.9; 2017 = 77.5; 2018 = 78.5. ### Medium-term projections (2019–22 highlights from Tables 2a/2b/7) - Real GDP growth at factor cost (percent): 2019 = 2.5; 2020 = 2.8; 2021 = 3.0; 2022 = 3.0. - Consumer Price Index, end-of-period (percent change): steady at 1.5 for 2019–2022. - Total revenue and grants (percent of GDP): 2019 = 29.3; 2020 = 29.4; 2021 = 29.4; 2022 = 29.4. - Total expenditure and net lending (percent of GDP): 2019 = 31.3; 2020 = 31.2; 2021 = 31.1; 2022 = 31.1. - Overall balance (percent of GDP): 2019 = -1.9; 2020 = -1.8; 2021 = -1.8; 2022 = -1.7. - Gross public sector debt (percent of GDP): 2019 = 78.5; 2020 = 78.6; 2021 = 78.4; 2022 = 77.9. - Current account balance (percent of GDP): 2019 = -13.6; 2020 = -13.3; 2021 = -12.5; 2022 = -11.6. *Source: cr17400-stvincentbundle - 2017. reflecting the recent depreciation in the U.S. dollar. (IMF staff estimates and projections as presented in the supplied content).* ### Annex I. Implementation of Previous Staff Advice ### Annex I. Implementation of Previous Staff Advice ### Strengthening the Fiscal Framework — Implementation Status (2016 Article IV recommendations) - Staff stressed need for an ambitious yet credible fiscal consolidation to meet the ECCU regional debt target of 60 percent of GDP in 2030. - i. Create a fiscal buffer for natural disasters - The 2017 budget provides for the creation of a contingencies funds, including to address the impact of natural disasters. - ii. Streamline ad-hoc concessions and tax incentives - Policy guidelines are currently being reviewed with a view to streamlining ad-hoc exemptions. To be submitted for Cabinet approval. - iii. Continue restraining the wage bill - Following the 1.5 percent salary increase in January 2016, the wage bill restraint is ongoing, including due to an exceptional number of retirements from the civil service in 2016. There was no further salary increase to date. - iv. Improve the sustainability of the public service pension scheme and the National Insurance Service (NIS) - No progress on the public pension scheme, but parametric reforms of the NIS recommended in 2014 are ongoing. - v. Upgrade the information technology at the IRD - No progress. - vi. Implementing recommendations on the report on the Data Matching Projects between the IRD and the CED - No progress. - vii. Adopt and enact the Procurement Bill and implementing regulations - Work in progress. TA is being provided by the World Bank to complete the draft legislation and prepare a Procurement Reform Strategic Plan. - viii. Accelerate adoption of trade facilitation measures - Despite the recent upgrade to the ASYCUDA World declaration processing system the cargo clearance process does not conform to modern standards of best practices, including with extensive physical examinations, determined on an ad hoc basis. - ix. Enforce requirements for timely reporting of public enterprises - Not yet implemented. - x. Strengthen the capacities of the Ministry of Finance in internal audit, financial management information systems, and cash management - Cabinet approved establishing a Cash Management Committee. ### Boosting Growth, Building Climate Resilience and Enhancing Competitiveness — Implementation Status - i. Appoint Office of Private Sector Development - Not yet implemented. - ii. Formation of a credit bureau - Under way, as part of a regional project by the ECCU. - iii. Accelerate implementation of policy agenda to improve climate resilience - No progress. - iv. Adopt comprehensive disaster management policy - No progress. *Italicized source attribution line provided separately by pipeline.* ### Annex II. External Stability Assessment and Competitiveness ### REER and External Position Findings - The CPI-based real effective exchange rate (REER) appreciated by roughly 12 percent in 2015 relative to 2014. - The REER appreciated against the rest of the currency union especially in 2016. - Standard EBA-lite model estimates indicate the external position is weaker than implied by fundamentals and desirable policies; models suggest an overvaluation ranging from 11 percent to 45 percent. - REER model indicates an overvaluation of 11 percent. - Current account model: actual current account balance of -15.8 percent of GDP in 2016 vs. estimated norm of -4.3 percent of GDP, implying a 45 percent REER depreciation would be needed to close the current account gap (staff notes the current account model may have poor fit for small, tourism-dependent countries). - Revised BOP statistics under BPM6 reduced the current account deficit in 2016 to -15.8 percent of GDP from -18.9 percent previously reported; services balance improved by about 8 pp of GDP. ### Reserve Adequacy and External Buffers - ECCU reserves rose sharply, including due to CBI inflows, benefiting imputed reserves in St. Vincent. - As of 2016: - Imputed reserve coverage at a comfortable level based on the traditional benchmark of 3 months of imports of goods and services. - Reserves at 5.6 months of imports. - Reserves are well above the 20 percent of broad money (M2) benchmark and above one standard deviation of FDI inflows. - Reserves are projected to remain stable over the medium-term. ### Labor Costs, Productivity and Competitiveness - Real wages increased by 25 percent over the last 15 years; productivity improved by 23 percent. - Real wages outpaced productivity gains every year since 2000 until recently, with a catch up in recent years. - St. Vincent has high hiring costs relative to productivity in the public sector; second highest in the ECCU. - Wage moderation and aligning labor costs with productivity gains are key to addressing competitiveness challenges. ### Doing Business and Tourism - Doing Business ranking: overall Ease of Doing Business ranking at 125 out of 190, slightly below ECCU average. - Outperforms ECCU peers in “enforcing contracts”, “paying taxes” and “dealing with construction permits”. - Weaknesses in “getting electricity” and “registering property”. - The 2014 insolvency law becoming tested could improve insolvency criteria and DB rank. - Tourism: - Tourism receipts recovered since the Global Financial Crisis and natural disasters in 2013, driven by stayover visitors. - Setback observed in 2017, particularly a decline of UK stayover visitors. - St. Vincent has lagged behind the Union since 2007. - The new international airport is expected to improve connectivity. ### Annex III. Snapshot of the Labor Market in 2015 ### Key Labor Market Statistics - Overall unemployment rate: 25 percent. - Youth (15-24 years of age) unemployment: around 46 percent. - Unemployment in 2001 and 2012: 20.9 percent and 21.5 percent, respectively. - Unemployment highest among graduates of secondary schools; most university graduates employed (reflecting international labor mobility and professional opportunities). - Employment by sector: Agriculture and wholesale and retail each absorb around 13 percent of total workers. - Agriculture employs mostly low-skilled workers (Primary or less educational level). - Wholesale and retail workers are distributed across educational levels except university degree. - 55 percent of university graduates work in the public sector, education or health services. ### Labor Force Participation and Gender Dynamics - Female labor market participation increased from 45 percent to 62 percent between 2001 and 2015; male participation remained stable. - Female unemployment rose from 18 percent to 30 percent over the same period. - Around 24.3 percent of the population is inactive; nearly one-half of inactive are retired or in school. - Reasons for not seeking a job (percent breakdowns shown in source figures; examples include School training 26.8 percent, Retired 27.6 percent, Household duties 8.4 percent, Illness 11.8 percent). - Inactive population main means of financial support (percent breakdowns shown in source figures; examples include Spouse/Partner 38.3 percent, Social Security 24.5 percent, Pension 11.6 percent, Self 4.3 percent). ### Annex IV. Policies and Actions for Fiscal Adjustment ### Tax System: Scope for Reform and Revenue Yield - St. Vincent and the Grenadines has the highest tax to GDP ratio in the ECCU. - Short-term tax policy considerations: - Narrow the list of VAT exempt or zero-rated goods and services. - Replace the basic PIT exemption by a tax credit. - Unify the rates of the corporate income tax, remove exemptions and update depreciation schedules. - Curb tax and customs incentives. - Increase property tax rates. - Box findings: - VAT: one-third of goods and services subject to VAT in 2015 were exempted or zero-rated. - PIT: basic exemption of EC$18,000; replacing it with a EC$1,800 tax credit projected yield of 0.6 percent of GDP. - Corporate Income Tax: multiple rates should be unified; discretionary tax incentives should no longer be granted; foregone revenue of ad-hoc exemptions estimated at 1.7 percent of GDP in 2016. - Property tax: minimum tax should be increased to EC$40 accompanied by a basic hardship relief regime. ### Expenditure Rebalancing and Public Wage Bill - Rebalancing public expenditure is critical to create space for growth-enhancing outlays and ensure lasting fiscal consolidation. - Contain total expenditure while facilitating outlays for infrastructure and human capital by containing the wage bill and reducing transfers. - Recommendations: - Contain both the salary and the size of the civil service; hiring by attrition and redeployments facilitated. - Ensure future nominal pay increases are consistent with productivity trends and medium-term debt reduction objectives. - Key statistics: - Wage bill at 13.1 percent of GDP (highest in the ECCU). - Public pension spending at 3 percent of GDP, representing half of public transfers at end-2015. *Italicized source attribution line provided separately by pipeline.* ### 2011. Although public pensions ### cr17400-stvincentbundle - 2011. Although public pensions ### Pensions, social protection, and National Insurance Scheme (NIS) - Public pensions growth may moderate as retirements decline over the medium-term, but a reform is needed to contain benefits spending. - Recommendation: cap the replacement rate to avoid that public employees cumulating two pensions (they are also eligible for pensions by the National Insurance Fund (NIS)) end up with an overall pension higher than their pre-retirement income. - NIS sustainability concerns: - Recent studies suggest that the contribution rate should at least double the current one for the NIS to break even. - Scope to improve the NIS’s administrative efficiency, explore increasing contributor coverage, and reduce benefits. - Social assistance: - St. Vincent and the Grenadines social assistance outlays amounted to 1.7 percent of GDP in 2015, in line with upper middle income countries. - Programs suffer from fragmentation and their administration could be modernized. - Authorities are taking steps to articulate a comprehensive national social protection strategy in collaboration with the World Bank. ### Revenue administration and tax policy reforms - Issue a unique Tax Identification Number (TIN) to all taxpayers, controlled by the tax administration and used for all taxes, to enable proper cross-matching of tax declarations. - Recommendation: make the TIN a prerequisite for receiving transfers from the NIS, government contracts, or any other payment from the government to improve tax compliance. - Customs and Excises department reforms: - Accelerate implementation of key FAD and CARTAC TA recommendations such as the full adoption of ASYCUDA to automate and control all core activities and implement the risk management module. - Reduce the ratio of cargo examination from 80 to 30 percent—contingent on an importer’s track record—to redeploy Customs resources, lift excessive burden on businesses, and limit rent-seeking opportunities. - Implement key performance indicators to track reform progress. - Inland Revenue Department reforms: - Accelerate implementation of the new organizational structure, upgrade management information systems, and adopt stricter enforcement measures on stamp duty for land transfers. ### Public Financial Management (PFM) reforms - Recent measures adopted to improve cash management practices, including approving the Cash Management Committee. - Recommendation: introduce procedures for cash planning across the central government to tackle expenditure arrears, lower the cost of goods and services, and support private sector growth. - Recommendation: establish an internal audit unit at the Ministry of Finance to follow a risk-based plan. - Finalize and adopt the procurement bill, with World Bank assistance, to improve the tendering process and resource allocation. ### Debt sustainability: background and composition - Risk of public debt distress is high, evidenced by a sizeable stock of arrears. - Public sector debt evolution: - Between 2013 and 2017, public sector debt rose from 75.9 to 77.5 percent of GDP. - Inclusion of PetroCaribe debt (5.4 percent of GDP), starting in 2016, increased the debt figure. - Public sector debt composition (2017, as of August): - Total public sector debt: 79.5 percent of GDP in 2017 (as of August). - External debt: 53.2 percent of GDP. - Domestic debt: 26.3 percent of GDP. - Securities instruments (bonds and T-Bills) represent about 58 percent of the entire domestic debt. - Overdraft and accounts payables continue to remain important sources of domestic financing, each representing about 12 percent and 8 of the stock of domestic debt, respectively. - Currency composition (2015): US dollar, 54.1; EC dollar, 45.2; SDR, 9.8. ### Debt risks - Interest rate risk and refinancing risk are main risks of the debt portfolio. - About 40 percent of the external debt had been contracted at variable rates, which could be pushed up if an increase in US interest rates materialized. ### Debt sustainability: scenarios and projections - Baseline Policy Scenario (passive; no additional measures): - Assumes the financing gap is closed by domestic debt and natural disasters occur at their historical magnitude and frequency. - Result: public debt projected at 85.8 percent of GDP in 2030, above the ECCU target of 60 percent of GDP by 2030. - Low Growth Scenario: - Assumes a constant 1 percent real GDP growth over the medium and long terms, starting in 2018, and public expenditure maintained at their projected level (in EC$ million) for 2017. - Domestic financing assumed available to bridge financing gaps (strong assumption). - Illustrates that persistent low growth would make the public debt trajectory unsustainable even without natural disasters. - Active Policy Scenario (proactive fiscal measures to reach ECCU target by 2030): - Key policy: budgetary savings of 1 percent of GDP in 2018 and 1.8 in 2019 and beyond. - Medium-term primary surplus target: 2.5 percent of GDP in 2022 (this is 1.8 percent of GDP in budgetary savings added to the medium-term primary surplus under the baseline policy scenario, which is 0.7 percent of GDP). - Projections: - Without natural disasters: public debt declines steadily to 47.4 percent of GDP by 2030. - With recurrent natural disasters: debt declines more slowly, reaching about 60 percent of GDP by 2030. - Natural disaster assumption in stress tests: occur at 5-year intervals, lowering GDP growth in the first year and causing a 3-year primary balance deterioration associated to fiscal costs. _Italic: IMF staff estimates and analysis as presented in the source content._ ### 7. The significant envisaged improvement in the current account balance over the ### 7. The significant envisaged improvement in the current account balance over the ### Medium-term projection of external debt - External debt represents 50.1 percent of GDP in 2017. - Staff projects external debt would narrow to about 33 percent of GDP by 2030. - The main driver of this envisaged improvement is the expansion of the tourism industry. - Under the scenario with key variables held at historical levels, external debt would be on an upward trajectory (staff considers this scenario an unlikely outturn). ### Indicators of public debt under alternative scenarios (selected observations) - Figures present indicators for 2017–2035: PV of Debt-to-GDP Ratio, PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio, and Debt Service. - Scenario labels used in figures: Baseline; Public debt benchmark; Most extreme shock 1/; Historical scenario; Fix Primary Balance. - Footnote: 1/ The most extreme stress test is the test that yields the highest ratio on or before 2027. 2/ Revenues are defined inclusive of grants. - Sources cited: Country authorities; and staff estimates and projections. ### Indicators of public and publicly guaranteed external debt under alternative scenarios (selected observations) - Figures cover 2017–2032 with panels a–f including: Debt Accumulation; PV of debt-to GDP ratio; PV of debt-to-exports ratio; PV of debt-to-revenue ratio; Debt service-to-exports ratio; Debt service-to-revenue ratio. - Footnote linking most extreme shocks to specific tests: - In figure b. it corresponds to a One-time depreciation shock; - in c. to an Exports shock; - in d. to a One-time depreciation shock; - in e. to an Exports shock; - in f. to a One-time depreciation shock. - Sources cited: Country authorities; and staff estimates and projections. ### Public sector debt sustainability framework — Baseline scenario (key figures from Table 1) - Public sector debt (percent of GDP): - 2014: 79.5 - 2015: 79.4 - 2016: 82.9 - 2017: 77.5 - 2018: 78.5 - 2019: 78.6 - 2020: 78.4 - 2021: 77.9 - 2022: 77.7 - 2023: 77.0 - 2024: 76.3 - 2025: 75.5 - 2026: 75.9 - 2027: 75.1 - 2028–2036 average: 65.9 - Foreign-currency denominated share (percent of GDP): - 2014: 45.5 - 2015: 46.4 - 2016: 56.7 - 2017: 50.1 - 2018: 47.7 - 2019: 44.9 - 2020: 42.4 - 2021: 40.2 - 2022: 38.5 - 2023: 36.2 - 2024: 34.4 - 2025: 33.0 - 2026: 32.0 - 2027–2036 average: 31.5 - Change in public sector debt (percent of GDP): - 2014: 3.6 - 2015: -0.1 - 2016: 3.5 - 2017: -5.4 - 2018: 1.0 - 2019: 0.1 - 2020: -0.2 - 2021: -0.5 - 2022: -0.2 - 2023: -0.7 - 2024: -0.7 - 2025: -0.8 - 2026: 0.4 - 2027: -0.8 - 2028–2036 average: -1.5 - Identified debt-creating flows (percent of GDP): - 2014: 1.6 - 2015: -2.8 - 2016: -2.1 - 2017: -1.6 - 2018: -0.6 - 2019: -0.7 - 2020: -0.8 - 2021: -1.0 - 2022: -0.9 - 2023: -1.0 - 2024: -1.0 - 2025: -1.0 - 2026: -1.0 - 2027–2036 average: 0.2 (2017-22 average), -1.0 (2023-36 average), -1.4 (2027-36 average) - Primary deficit (percent of GDP): multiple entries with negative values; illustrative entries: - Historical: -0.8, -2.6, -3.3 - Projections show repeated -0.5 in many years and a sequence including -0.4, -0.5, -0.7, -0.5. - Revenue and grants (percent of GDP): mostly 46.8 in projection years; historical around 48.5–47.3. - Grants (percent of GDP): 4.1 (2014); 2.0 (2015); 1.2 (2016); projections show 1.4 repeated across many years. - Primary (noninterest) expenditure (percent of GDP): around 46.3–46.4 in many projection years. - Automatic debt dynamics (percent of GDP): - 2014: 2.4 - 2015: -0.2 - 2016: 1.1 - 2017: -1.3 - Projections include small negative contributions around -0.2 to -0.5 and a 0.7 in 2017-22 average vs -0.5 in 2023-36 average. - Contribution from interest rate/growth differential (percent of GDP): - 2014: 1.9 - 2015: 0.6 - 2016: 1.0 - 2017: -0.6 - Projections include values down to -0.9 in 2023-36 averages. - Contribution from average real interest rate and from real GDP growth provided in table (preserved as-is). - Residual, including asset changes (percent of GDP): ranges with entries such as 2.0 (2014), 2.7 (2015), 5.7 (2016), 1.3 (2017), declining into small positives and some negatives with -0.1 in later averages. - PV of public sector debt (percent of GDP) series (selected): - 2017: 81.9 (first projection column) - Subsequent years in table show values such as 80.5, 80.3, 78.1, 76.1, 74.2, 72.7, 71.0, 69.4, 67.9, 66.4, 65.0, 52.9 (later years). - Gross financing need (percent of GDP): - 2014: 11.8 - 2015: 8.3 - 2016: 10.6 - Projection years: 9.2, 7.7, 8.0, 7.9, 7.5, 7.5, 7.0, 6.4, 6.1, 6.9, 5.4, 3.7 (various years as shown). - PV of public sector debt-to-revenue and grants ratio (percent): values include 173.1, 175.5, 172.5, 166.8, 162.4, 158.3, 155.1, 151.6, 148.3, 145.0, 141.9, 138.9, 113.2 (across years). - Debt service-to-revenue and grants ratio (percent): examples include 16.4, 15.2, 29.3, 20.6, 17.5, 18.1, 18.0, 17.2, 17.0, 16.0, 14.8, 14.0, 15.7, 12.5, 9.3 across the time series. - Primary deficit that stabilizes the debt-to-GDP ratio: entries range including -4.4, -2.5, -6.8, 5.2, -1.4, -0.5, -0.3, 0.0, -0.3, 0.2, 0.2, 0.3, -0.9, 0.3, 0.9. ### External debt sustainability framework — Baseline scenario (key figures from Table 2) - External debt (nominal, percent of GDP): - 2014: 45.5 - 2015: 46.4 - 2016: 56.7 - 2017: 50.1 - 2018: 47.7 - 2019: 44.9 - 2020: 42.4 - 2021: 40.2 - 2022: 38.5 - 2023: 31.5 - 2024–2037 average: 35.0 - Change in external debt (percent of GDP): - 2014: 2.3 - 2015: 0.9 - 2016: 10.3 - 2017: -6.7 - 2018: -2.4 - 2019: -2.7 - 2020: -2.6 - 2021: -2.2 - 2022: -1.7 - 2023: -0.5 - 2024–2037 average: 0.2 - Identified net debt-creating flows (percent of GDP): 10.5 (2014), 6.9 (2015), 3.2 (2016), 2.2 (2017), 1.0 (2018), 0.6 (2019), -0.6 (2020), -1.1 (2021), -1.8 (2022), -1.4 (2023), -1.4 (2024–2037 average). - Non-interest current account deficit (percent of GDP): - 2014: 24.6 - 2015: 14.0 - 2016: 14.9 - 2017: 25.4 - Projections: 6.1, 13.7, 12.2, 12.0, 11.4, 10.8, 10.1, 9.6, 8.3, 9.1 shown across years and averages. - Deficit in balance of goods and services (percent of GDP): - 2014: 26.2 - 2015: 17.5 - 2016: 16.5 - 2017: 15.9 - Projections show values down to 8.7 in later years. - Exports (percent of GDP): 34.4 (2014), 37.0 (2015), 37.1 (2016), 37.1 (2017), 37.7 (2018), 37.8 (2019), 37.9 (2020), 37.8 (2021), 37.7 (2022), 34.5 (2023), 29.8 (2024– later). - Imports (percent of GDP): 60.6 (2014), 54.4 (2015), 53.7 (2016), 52.9 (2017), 52.2 (2018), 51.3 (2019), 50.5 (2020), 49.6 (2021), 48.7 (2022), 44.5 (2023), 38.5 (later). - Net current transfers (percent of GDP, negative = inflow): -4.3 (2014), -4.4 (2015), -3.9 (2016), -2.7 (2017), 1.2 (2018), -3.8 (2019), -3.5 (2020), -3.2 (2021), -3.0 (2022), -2.9 (2023), -2.8 (2024), -2.6, -2.2, -2.5 in later entries. - Net FDI (percent of GDP, negative = inflow): -14.9 (2014), -6.3 (2015), -11.7 (2016), -15.6 (2017), 4.9 (2018), -11.6 repeated in many projection years; averages include -10.1 for 2023-2037. - Endogenous debt dynamics (percent of GDP): series includes 0.8, -0.7, 0.1, 0.1, 0.4, 0.1, -0.2, -0.4, -0.4, -0.6, -0.6 in projection years. - Contribution from nominal interest rate (percent of GDP): 1.1 (2014), 1.0 (2015), 1.0 (2016), 0.6 (2017), 1.4 (2018), 1.2 (2019), 1.0 (2020), 0.9 (2021), 0.7 (2022), 0.3 (2023), 0.3 (later). - Contribution from real GDP growth (percent of GDP): -0.1 (2014), -0.4 (2015), -0.4 (2016), -0.5 (2017), -1.0 (2018), -1.2 (2019), -1.2 (2020), -1.2 (2021), -1.2 (2022), -0.8 (2023), -0.9 (later). - Residual (3-4) (percent of GDP): -8.1 (2014), -6.0 (2015), 7.1 (2016), -8.9 (2017), -3.4 (2018), -3.3 (2019), -2.0 (2020), -1.1 (2021), 0.1 (2022), 0.9 (2023), 1.6 (later). - PV of external debt (percent of GDP): - Series includes 55.7, 53.0, 49.4, 44.5, 40.0, 36.4, 33.4, 21.4, 22.0 as shown in table columns. - PV of external debt (in percent of exports): 149.9, 143.1, 131.0, 117.5, 105.6, 96.3, 88.5, 62.0, 73.9 (across years). - In percent of government revenues: 120.8, 118.2, 109.6, 97.6, 88.1, 80.2, 73.5, 47.1, 48.5 (across years). - Debt service-to-exports ratio (percent): 12.9, 10.4, 28.5, 18.5, 13.9, 13.9, 13.0, 11.4, 10.7, 3.8, 3.4. - PPG debt service-to-revenue ratio (percent): 10.0, 8.4, 22.9, 15.3, 11.6, 11.6, 10.9, 9.5, 8.9, 2.9, 2.2. - Total gross financing need (Billions of U.S. dollars): 0.1 in early years and 0.0 in many projection years. - Non-interest current account deficit that stabilizes debt ratio (percent of GDP): 22.3, 13.0, 4.6, 20.4, 14.6, 14.7, 14.0, 12.9, 11.9, 10.1, 8.1 (across sample). - Key macroeconomic assumptions (selected): - Real GDP growth (percent): 0.3 (2014), 0.9 (2015), 0.8 (2016), 0.4 (2017), 1.7 (2018), 1.0 (2019), 2.1 (2020), 2.5 (2021), 2.8 (2022), 3.0 (2023), 3.0 (2024), 2.4 (2025), 2.7 (2026), 2.7 (2027), 2.6 (2027–36 average). - GDP deflator in US dollar terms (change in percent): 0.6, 3.0, 1.1, 2.0, 2.5, 3.1, 2.1, 1.8, 1.5, 1.5, 1.3, 1.9, 1.6, 1.6, 1.7 across years. - Effective interest rate (percent): entries such as 2.6, 2.2, 2.1, 3.4, 1.1, 3.2, 2.9, 2.7, 2.4, 2.2, 2.1, 1.9, 2.6, 0.7, 0.9, 1.2 (as in table). - Growth of exports of G&S (US$ terms, percent): 37.4, 11.7, 2.3, 3.7, 13.1, 3.9, 6.1, 4.6, 4.5, 4.3, 4.2, 4.6, 2.7, 2.7, 2.6. - Growth of imports of G&S (US$ terms, percent): 5.3, -6.6, 0.4, 2.8, 9.2, 2.7, 2.7, 2.6, 2.6, 2.7, 2.6, 2.7, 2.7, 2.7, 2.6. - Grant element of new public sector borrowing (percent): series includes values such as 33.9, 64.0, 101.1, 93.5, 82.7, 75.2, 75.1, 97.9, 57.6, 76.2 in table entries. - Government revenues (excluding grants, percent of GDP): 44.4, 45.7, 46.1, 44.9, 45.1, 45.4, 45.4, 45.4, 45.4 repeated in projection years (45.4). - Memorandum items: - Nominal GDP (Billions of US dollars): 0.7, 0.8, 0.8, 0.8, 0.8, 0.9, 0.9, 1.0, 1.0, 1.2, 1.8 (across years). - PV of PPG external debt (Billions of US dollars): 0.4 across early years and 0.3–0.4 in projections. - (PVt-PVt-1)/GDPt-1 (percent): -0.5, -1.5, -3.0, -2.7, -1.9, -1.6, -1.9, -0.2, 1.1, 0.5 across years. - Gross workers' remittances (Billions of US dollars): mostly 0.0 with 0.1 in later years. - PV of PPG external debt (in percent of GDP + remittances): values such as 53.3, 50.8, 47.4, 42.7, 38.5, 35.1, 32.2, 20.7, 21.4. - PV of PPG external debt (in percent of exports + remittances): 133.9, 127.9, 117.8, 106.0, 95.5, 87.4, 80.6, 56.5, 67.3. - Debt service of PPG external debt (in percent of exports + remittances): 25.4, 16.5, 12.5, 12.5, 11.8, 10.4, 9.8, 3.5, 3.1. ### Key assumptions, risks, and notes from tables and figures - From Table 1 note: 1/ Refers to non-financial public sector gross debt. From 2016, reflects additional debt contracted with PetroCaribe but not previously recorded (EC$ 112 million or 5.4 percent of GDP in 2016). - Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period. - Revenues excluding grants are used in some ratios. - Debt service is defined as the sum of interest and amortization of medium and long-term debt. - Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability. - Table 2 notes: 1/ Includes both public and private sector external debt. 2/ Endogenous debt dynamics formula defined with r, g, ρ. 3/ Residual includes exceptional financing, changes in gross foreign assets, and valuation adjustments. 4/ Assumes PV of private sector debt is equivalent to its face value. 5/ Current-year interest payments divided by previous period debt stock. 6/ Historical averages and standard deviations derived over the past 10 years. 7/ Aid flows defined as grants, concessional loans, and debt relief. 8/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing. *Sources: Country authorities; and staff estimates and projections.* ### 2017. St. Vincent and the Grenadines received US$5 million in IDA funding. (St. Lucia and Grenada ### cr17400-stvincentbundle - 2017. St. Vincent and the Grenadines received US$5 million in IDA funding. (St. Lucia and Grenada are other participating countries.) ### World Bank—Major Projects and Objectives - OECS Regional Tourism Competitiveness (IDA allocation to St. Vincent and the Grenadines: US$5,000,000.00) - Objectives: - (i) facilitate the movement of tourists within the participating countries using ferries, - (ii) improve selected tourism sites, - (iii) strengthen implementation capacity for regional tourism market development. - Four components; principal component descriptions: - Component 1 (facilitation of movement of people): - (a) support for developing a single regional space for immigration and customs entry of international tourists; - (b) development of a pilot ferry system through TA, information technology (IT), and small infrastructure improvements. - Component 2 (pilot tourism infrastructure investments, market development and promotion capacity-building): - (i) support the refinement and operationalization of tourism plans for each participating country; - (ii) develop a regional market development effort to position participating countries as one travel destination. - Includes two subcomponents: support for tourism development, and preparation and implementation of a regional tourism market development program. - Component 4: project implementation support. - Human Development Service Delivery Project (Approved May 2017; IDA: US$10,700,000.00) - Objectives: strengthen the quality of service delivery in education; improve efficiency of social protection systems; improve effectiveness of labor market systems in Saint Vincent and the Grenadines. - Structured around four components: - First component: strengthening pedagogy for basic and special needs education - Delivery via two sub-components: (i) strengthening teaching capacity; (ii) developing capacity of school leaders to support teachers and build a pipeline of future school leaders. - Second component: building responsive social protection service delivery systems - Aims: (i) improve Social Protection and Labor (SPL) service delivery instruments to support a household approach to safety net benefits; (ii) strengthen human resource capacity for SPL programs and services; (iii) enhance institutional mechanisms and strategy for more efficient, coordinated, and transparent service delivery, and improved communication and education strategies for safety net beneficiaries. - The Project will finance poverty data collection and provide support to three implementing agencies: (i) support in completing an enhanced country poverty assessment (eCPA); (ii) support in strengthening the SP system (MONM). - Third component: strengthening labor market systems. - OECS Regional Agriculture Competitiveness Project (Approved May 2017; allocation to Grenada and St. Vincent and the Grenadines: US$4,300,000.00) - Objective: enhance access to markets and sales for competitively selected farmers and fishers, and allied aggregators and agro-processors. - Four components: - Component 1: Support for Preparation of Business Plans - (a) outreach to potential stakeholders and beneficiaries; (b) identify potential business opportunities for prioritized value chains; (c) prepare full business plans for selected proposals. - Component 2: Implementation of Business Plans - Provide matching grants to co-finance implementation of technically feasible, financially viable, economically profitable, socially responsible, and environmentally sustainable business plans. - Component 3: General Agricultural Services and Enabling Environment - Strengthen general agricultural public services linked to subprojects in Component 2. - Component 4: Project Management, Monitoring, and Evaluation. ### World Bank Portfolio—St. Vincent and the Grenadines (Selected Financials and Disbursement Data) - Projects table (selected rows): - Regional Disaster Vulnerability Reduction Project (IDA): Original Principal 10,920,000.00; Disbursed 5,199,972.02; Undisbursed Balance 5,720,027.98 - Caribbean Regional Communications Infrastructure Program (IDA; Operation 51180): Original Principal 6,000,000.00; Disbursed 3,914,186.67; Undisbursed Balance 2,085,813.33 - OECS Regional Tourism Competitiveness (IDA; Operation 60010): Original Principal 5,000,000.00; Disbursed 0.00; Undisbursed Balance 5,000,000.00 - Human Development Service Delivery Project (IDA; Operation 60600): Original Principal 10,700,000.00; Disbursed 0.00; Undisbursed Balance 10,700,000.00 - OECS Regional Agriculture Competitiveness Project (IDA; Operation 60640): Original Principal 4,300,000.00; Disbursed 0.00; Undisbursed Balance 4,300,000.00 - Total (St. Vincent and the Grenadines Only): - Original Principal: 87,520,000.00 - Disbursed: 18,885,494.95 - Undisbursed Balance: 68,634,505.05 - Note: "*Amounts may not add up to Original Principal due to changes in the SDR/USD exchange rate since signing." - Annual disbursement and related flows (Data as of November 2, 2017): - Total disbursement (2007–2017* by year, last entry 2017*): includes 500,000.00 for 2017* - Repayment (2007–2017): 2017 entry 1,388,321.20 - Net disbursement (2007–2017): 2017 entry -888,321.20 - Charges and Fees (selected annual figures): Charges 2017 entry 78,717.75; Fees 2017 entry 195,084.74 ### Analytical Services and Advisory (ASA) - Country-specific ASA: - “St. Vincent and the Grenadines Debt Management Performance Assessment (DEMPA)”, finalized March 2017. - Ongoing: “Strengthening Social Protection System for Disaster Preparedness and Response in Saint Vincent and the Grenadines”, scheduled for completion by June 2018. - Regional ASA completed during the RPS period (selected): - “Programmatic Engagement in Disaster Risk Management & Climate Change Adaptation” (completed May 2015) - “Linking Farmers and Agro-processors to the Tourism Industry in the OECS” (completed December 2015) - “OECS Growth Report” (completed June 2016) - “OECS Social Resilience and Human Development Technical Assistance” (completed December 2016) - “Programmatic TA for the Support for Economic Management in the Caribbean Region (SEMCAR) Phase 1” (completed May 2017) - Regional ongoing ASA examples: - Statistical capacity building: “Caribbean: Poverty and Equity Programmatic Approach” - Private sector-led growth: “Caribbean Growth Forum – Phase II” - South-South cooperation on social protection: “Knowledge Exchange on Adaptive Social Protection Systems as a Disaster Risk Mitigation Mechani[sm]” (text truncated in source). ### Caribbean Development Bank (CDB) — Strategic Objectives and Active Programs (As of October 12, 2017) - CDB country strategy objectives for SVG (2014-18): - (i) accelerate and sustain inclusive economic growth; - (ii) promote human and social development; - (iii) enhance environmental sustainability and disaster risk management. - Related assistance program: financing commitments of up to US$86.7 million inclusive of $21 million from Special Funds Resources (SFR), and $65.7 million from the Bank’s Ordinary Capital Resources. - Energy Efficiency Measures and Solar Voltaic Plant project (CDB financed; 2017 activity) - Project estimated cost: US$6.026 million - Counterpart contributions: GOSVG US$0.545 million; St. Vincent Electricity Services Limited US$0.306 million - Components: - Replace approximately 7,220 high pressure sodium and mercury vapour street lamps with LED street lamps; - Implement energy efficiency measures in 20 Government buildings; - Construct a 400 kW solar photovoltaic plant. - Expected outcome: reduced consumption of fossil-fuel generated electricity and lower greenhouse gas emissions. - Geothermal exploration (2016): CDB assisted financing of exploratory drilling to assess geothermal resource in La Soufrière region for electricity production. - Port Rationalisation Master Plan / New cargo port facility in Kingstown: - CDB approved technical assistance grants of two million, four hundred and twenty-four thousand pounds (£2,424,000) for consultancy services to conduct studies and assessments. Funds will disburse in 2018. - Planned studies: geotechnical, topographical and bathymetric surveys, Met-Ocean Data Collection, Wave and Storm Surge Modelling Report, Economic Impact Assessment, Climate Vulnerability and Impact Assessment, Environment, Social and Gender Impact Assessment. - Basic Needs Trust Fund (BNTF): - BNTF 7th and 8th cycles: grant envelope of US$5.18 million available for administration over 2012 to 2017; 29 sub-projects appraised and approved valued at US$ 5.08 million. - March 2017: US$ 2.9 million approved for allocation under BNTF 9. - CDB approvals and disbursements for 2017 to date: - Approved US$4.2 million; disbursed US$ 3.1 million. - Cumulative loans approved since 1970: US$214.2 million; of which US$171.5 million is disbursed. - Disbursed debt outstanding amounts to US$110.3 million. - CDB Current Loan Portfolio (In millions of U.S. dollars) — selected items: - Rehab/ Reconstruction – Hurricane Tomas: Approved 12.6; Undisbursed 7.9 - South Leeward Highway Rehabilitation: Approved 13.6; Undisbursed 5.2 - Rehab/ Reconstruction – Dec 2013 Trough: Approved 9.0; Undisbursed 7.9 - Technical and Vocational Education and Training Development: Approved 12.3; Undisbursed 11.1 - Energy Efficiency Measures and Solar Voltaic Plant: Approved 4.2; Undisbursed 4.2 - Government of St. Vincent and the Grenadines: Loan Disbursement (In millions of U.S. dollars; 2013–2017 Oct.) - Net disbursement: 2013 1.5; 2014 -0.6; 2015 -3.0; 2016 -2.8; 2017 Oct. -4.7 - Disbursement: 2013 7.2; 2014 6.6; 2015 4.6; 2016 7.1; 2017 Oct. 3.1 - Amortization: 2013 5.7; 2014 6.0; 2015 7.6; 2016 9.9; 2017 Oct. 7.8 - Interest and charges: 2013 4.1; 2014 4.4; 2015 4.1; 2016 3.4; 2017 Oct. 2.6 - Net resource flow: 2013 -2.6; 2014 -3.8; 2015 -7.1; 2016 -6.2; 2017 Oct. -7.3 ### Statistical Issues — Data Adequacy and Quality (As of October 24, 2017) - General assessment: Data provision has some shortcomings but is broadly adequate for surveillance. - National Accounts: - CSO produces annual GDP estimates at current and constant 2006 prices but has not disseminated quarterly GDP estimates. - Latest mission June 2016 assisted with development of quarterly GDP estimates and improvements in data sources and methodologies, including consistency with System of National Accounts 2008 (2008 SNA). - A medium-term action plan exists; implementation requires increased staffing and resources at the CSO. - Improvements needed on labor market data. - Price Statistics: - Current CPI index series (base January 2010) introduced June 2011 with CARTAC assistance; uses a Household Budget and Expenditure Survey (HBES) from 2008. - Producer Price Index (PPI) and export and import price indices (XMPIs) have not been produced. - Government Finance Statistics: - Monthly central government revenue and expenditure data are reported to the IMF with some lag due to delays in reporting capital expenditures by some ministries. - Discrepancies exist between fiscal and monetary accounts, between above and below the line budget data, and between financing and debt data. - Financial reports of public enterprises have about a two-year lag. - Fiscal data for surveillance based on GFSM 1986; migration to GFSM 2014 framework is desirable. - Monetary and Financial Statistics: - Monthly monetary statistics compiled and reported by the ECCB since July 2006 using SRF forms. - Shortcomings: incomplete institutional coverage (mortgage companies, finance companies, building societies, and credit unions not covered); accrued interest not incorporated in interest-bearing assets and liabilities; valuation adjustments included in other liabilities. - ECCB working on implementing a new reporting system for commercial banks to address 2014 MFS recommendations; expected implementation in the next few years. - Financial Sector Surveillance: - ECCB compiles financial soundness indicators (FSIs) for member countries; official reporting to the IMF being finalized in fall 2017. - External Sector Statistics: - Balance of payments and IIP compiled and disseminated by ECCB annually. - July 2017: ECCB released detailed balance of payments statistics and comprehensive IIP statistics following BPM6 for the eight ECCU member territories. - Education-related services by offshore universities now included in travel services exports. - Further work needed to improve recording of financial account transactions and positions of the nonfinancial private sector; ESS survey response rate is one of the lowest in the ECCU. - Methodological soundness, coverage, and classification require improvement; actions to be undertaken with ECCB coordination. - Data Standards and Quality: - St. Vincent and the Grenadines has participated in the General Data Dissemination System since September 2000 and currently participates in the e-GDDS. - The 2007 regional data ROSC provides an assessment on the ECCB’s monetary statistics; no data ROSC available for other sectors. ### Table of Common Indicators Required for Surveillance (As of November 14, 2017) — Selected entries - Exchange rate: Fixed rate — Date of Latest Observation 11/2017; Date Received 11/2017; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - International reserve assets and reserve liabilities of the monetary authorities: Latest observation 6/2017; Date Received 10/2/2017; Frequency of Data M; Frequency of Reporting Q; Frequency of Publication Q - Reserve/base money; Broad money; Central bank balance sheet; Consolidated balance sheet of the banking system; Interest rates: all latest observation 6/2017; Date Received 10/2/2017; Frequency of Data M; Frequency of Reporting Q; Frequency of Publication Q; Data Quality – Methodological soundness LO; Data Quality – Accuracy and reliability LO - Consumer price index: Latest observation 9/2017; Date Received 10/31/2017; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M - Revenue, expenditure, balance and composition of financing—central government: Latest observation 9/2017; Date Received 10/25/2017; Frequency of Data M; Frequency of Reporting M; Frequency of Publication H; Data Quality – Methodological soundness H - Stock of central government and central government-guaranteed debt: Latest observation 8/2017; Date Received 9/27/2017; Frequency Q; Data Quality – Methodological soundness H; Data Quality – Accuracy and reliability H - External current account balance: Latest observation 2016; Date Received 7/26/2017; Frequency A; Data Quality – Methodological soundness H; Data Quality – Accuracy and reliability H - GDP/GNP: Latest observation 2016; Date Received 11/2/2017; Frequency A; Frequency of Reporting A; Frequency of Publication A *Source: cr17400-stvincentbundle - 2017. St. Vincent and the Grenadines received US$5 million in IDA funding. (St. Lucia and Grenada) — PDF content provided by the IMF.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17400-stvincentbundle.pdf_