## _cr10261 ## Source details **Canonical URL:** [_cr10261](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10261.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10261.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10261.pdf.json) --- ### Executive Summary — Economic and Political Context - Dominica depends on tourism, foreign investment and remittances, and has high debt, openness, and disaster risks. - Sectoral composition (2008 comparisons with ECCU averages): - Agriculture: 16 percent of GDP (Dominica) versus 5 percent of GDP (rest of ECCU). - Tourism: 8 percent of GDP (Dominica) versus 13 percent of GDP (rest of ECCU). - Demographics and social indicators: - More than 30 percent of the labor force has emigrated; the population is falling. - In 2003, around one third of the population was below the poverty line; inequality was high. - According to the 2003 Country Poverty Assessment, 40 percent of households are in poverty and 10 percent of households very poor. - Natural disasters: Hurricanes Dean and Omar in 2007–08 together caused damages of 35 percent of GDP. - Fiscal anchor and debt: - Fiscal anchor: 3 percent of GDP primary surplus. - Public debt-to-GDP ratio fell from 130 percent in 2003 to 84 percent in 2009. - Inflation: - Annual average inflation during 2001–07 was 1.9 percent. - Average inflation reached 6.4 percent in 2008 due to international fuel and food price hikes. - Growth and social objectives: - Growth and Social Protection Strategy (GSPS) aims to foster growth and reduce poverty while reducing public debt via prudent fiscal policies, strengthened financial oversight, structural reforms, and improved targeting of social assistance. - Governance and reforms: - National elections in December 2009 increased the Dominica Labour Party’s majority. - Reforms implemented or underway: automation of customs and land titling, appointment of a second judge to hear civil matters, improvement of airport facilities, continued participation in CCRIF. ### Recent Developments and Outlook - 2009 global downturn impacts: - Real GDP estimated to have declined by 0.3 percent in 2009. - Total tourism receipts contracted by 16 percent during 2009. - FDI inflows dropped by 51 percent in 2009. - Remittances inflows dropped by 18 percent in 2009. - Cruise arrivals grew extraordinarily, offsetting some decline in stayover arrivals. - Fiscal stance and VAT performance: - Government maintained capital spending in 2009 at the high post-hurricane level in 2008. - Overall fiscal position remained in surplus during FY 2008/09 and so far in FY 2009/10, reflecting strong VAT performance introduced in 2006. - VAT collections: 10 percent of GDP (FY 2006/07), 11 percent of GDP (FY 2007/08), 12 percent of GDP (FY 2008/09). - Inflation and external sector: - CPI increased by 4.4 percent (yoy) through February 2010; on a period average basis, inflation was close to zero. - External current account deficit decreased to 28 percent of GDP in 2009 (from 32 percent of GDP in 2008). - Monetary and banking sector: - In the 12 months to December 2009, banking sector credit to the private sector grew by 6.9 percent and broad money by 10 percent. - Prudential indicators: banks are liquid and well capitalized; nonperforming loans have declined though some loan restructurings occurred. - Average nonperforming loans ratio and capital-based soundness indicators remain above prudential norms; returns on assets have declined markedly in recent years. - Regional insurance and nonbank exposures: - Total exposure of residents to two CL Financial Group insurance subsidiaries offering deposit-like annuity products: about EC$194 million (19.4 percent of GDP). - BAICO found insolvent and illiquid by KPMG judicial managers (October 2009); ECCU authorities progressing toward creating a new company to take over BAICO’s operations. - CLICO faces liquidity problems and has been barred from writing new insurance business in Barbados. - Exchange rate and competitiveness: - CPI-based real effective exchange rate has declined since 2002 and is an estimated 2 percent below equilibrium using fundamentals-based approach. - PPP-based approach suggests undervaluation of 9 percent at end-2008; macroeconomic balance approach indicates overvaluation of 7 percent. - Conflicting indicators may reflect structural changes and external shocks; Dominica’s increased share of ECCU and Caribbean stayover arrivals suggests competitiveness may be improving. - Social progress: - Primary enrollment reached 99 percent; gender disparities in education eliminated; child mortality reduced from 23 per 1000 in 1990 to 13 per 1000 in 2006. - Near- to medium-term outlook: - Real GDP expected to grow by 1½ percent in 2010. - Downside risks: slow recovery in advanced economies and rebalancing of global demand could weaken tourism demand from main source markets. ### Fiscal Policy and Reforms — Findings and Recommendations - Fiscal stance and recent performance: - Prudent fiscal stance anchored on a 3 percent of GDP primary surplus enabled steady public debt decline. - VAT introduced in 2006 contributed to sustained tax revenue increases; authorities contained current expenditure; grants and concessional loans financed capital expenditure. - Despite improvements, public debt remains high. - China financing and implications: - Concessional loan agreed with Export-Import Bank of China: US$40 million (11 percent of GDP) for education and infrastructure. - About US$24 million (7 percent of GDP) represent new expenditure and external financing not previously included in fiscal projections. - Loan terms: 2 percent interest, 5 years grace, 20 years maturity, implying a grant element of 36 percent. - Authorities believed the 3 percent of GDP primary surplus achievable in FY2009/10; capital spending expected to slow slightly in second half of fiscal year. - The US$40 million loan and existing financing pipeline will imply a weakening in the primary surplus during FY2010/11–FY2012/13. - Proposed US$60 million China loan for tourism resort: - Proposed amount: US$60 million (16 percent of GDP). - Mission assessment: projects of this nature carry considerable commercial risks and uncertain rates of return; likely better managed by the private sector. - Scenario assumption referenced: project increases rate of GDP growth by 0.3 percentage points in 2010–12, and by one percentage point in each of the five subsequent years. - Such additional borrowing would likely prevent Dominica from reaching the ECCB debt-to-GDP ratio target of 60 percent by 2020 unless the project generates a considerable positive impact on GDP growth. - Policy recommendations: - Maintain a primary surplus of at least 1 percent of GDP during FY2010/11–FY2012/13 and return to a 3 percent of GDP primary surplus as soon as possible thereafter. - Base any decision on the US$60 million loan on a rigorous, independent assessment of project viability. - Secure concessional terms for any borrowing and involve a private strategic partner if proceeding. - Carefully evaluate project viability and consider impacts on debt dynamics and credibility. - Debt trajectory with recommended policy: - With the recommended policy (primary surplus at least 1 percent then return to 3 percent), Dominica could reach the ECCB target of 60 percent of GDP by 2017 (one year later than anticipated in July 2009 RAC-ESF), but still three years ahead of ECCB’s 2020 target date. ### Financial Sector Policies and Risks - Systemic and nonbank vulnerabilities: - Collapse of CL Financial Group exposed regional weaknesses in regulation of nonbanks. - Large role of credit unions and CL Financial fallout underscore need to strengthen the Financial Services Unit (FSU). - One credit union is larger than all but two commercial banks; nonperforming loans of credit unions were 8.7 percent of total assets as of end-June 2009. - Some smaller institutions have significant exposure to the CL Financial Group. - BAICO resolution: - Committee discussing with strategic investors establishment of a new company to take over BAICO operations regionally. - Strategy: transfer property insurance portfolio to an existing insurance company and establish a Medical Claims Support Fund. - Capitalization challenges: haircuts or rephasing of payments likely; Trinidad and Tobago government contributed US$50 million to date and ECCU governments expected to contribute US$75 million to capitalization of the new company. - Mission recommended resolution adhere to principles: (i) avoid systemic contamination; (ii) minimize fiscal costs; (iii) give priority to claims up to a low threshold to protect vulnerable groups. - Agricultural and Industrial Development Bank (AID Bank): - Refocused on original mandate as a development bank and placed under FSU supervision. - No longer takes deposits or makes consumer loans and has reduced its large portfolio of NPLs. - Bank contracted loans amounting to US$22.4 million (6 percent of GDP) to finance its operations. - Mission emphasized need for close monitoring due to potential contingent fiscal liabilities and recommended an on-site examination by the FSU. - Policy recommendations: - Strengthen supervision and capacity of the Financial Services Unit. - Make FSU fully operational through supporting legislation; ensure adequate staffing and capacity building. - Conduct on-site examinations of insurance companies, credit unions, and institutions with potential contingent fiscal liabilities. - Work closely with ECCB to improve bank supervision, including more frequent on-site examinations. - Ensure insurance companies place assets under trusteeship in their statutory funds to back up local insurance liabilities. - Keep the SDR allocation (SDR 7.2 million) as a shared buffer for ECCU members. ### Medium-Term Outlook and Structural Reform Priorities - Growth strategy and comparative advantages: - Medium-term annual growth objective: 3 percent. - Comparative advantages: eco-tourism, agro-industries, niche-focused agriculture and fisheries, and geothermal energy. - Growth prospects driven by industries related to the environment, water and energy sources. - Policy recommendations to achieve 3 percent objective: - Formulate and implement a national export strategy. - Facilitate diversification of agricultural exports from bananas towards agro-industries and high value specialty crops. - Improve quality standards and land titling. - Exploit geothermal energy resources to reduce electricity costs and potentially export power to neighboring islands. - Emphasize infrastructure investments complementary to Dominica’s comparative advantages (e.g., off-shore education and cruise tourism). - Improve business environment: improve customs clearance and contract enforcement. - Structural reforms progress: - Automation of customs and land titling, appointment of a second judge to hear civil matters, improvement of airport facilities. - continued focus on roads, airport, and seaports; Doing Business ranking has slipped recently. ### Appendix III — Debt Sustainability Analysis (DSA) — Summary and Risks - Updated DSA shows some deterioration relative to previous exercise. - Previous baseline assumptions: - Real GDP growth of 3 percent annually over the medium term. - Primary fiscal surplus of at least 3 percent of GDP from FY 2010/11 onwards. - Under previous baseline, Dominica would reach ECCB 60 percent debt-to-GDP target in 2016. - New baseline scenario: - US$40 million loan from China reduces primary surplus to only 1.3 percent of GDP during FY 2010/11 to FY 2012/13. - Primary surplus returns to 3 percent of GDP thereafter. - Maintaining same real GDP growth rate, public debt ratio would reach 60 percent of GDP in 2017 (one year later than before). - Risks to debt sustainability: - Proposed US$60 million loan from China (16 percent of GDP) for a tourism resort would prevent achieving ECCB target by 2020 without a strong growth impact. - New borrowing would increase the PV of debt-to-GDP ratio in 2010–14 above the 50 percent threshold. - Scenario assumption for the resort: project increases GDP growth by 0.3 percentage points in 2010–12 and by 1 percentage point in each of the five subsequent years. - Vulnerability to external shocks and natural disasters, volatility of grant inflows, degree of concessionality, and possible contingent liabilities from CL Financial insurance shortfalls. ### Appendix IV — Debt Management: Risks, Strategy, and Institutional Strengthening - Risks and outlook: - High public debt level, vulnerability to external shocks and regional financial risks present substantial risk to long-term sustainability. - Staff baseline: public debt ratio has been falling and set to continue downward on staff’s assumptions. - Historical risk: debt stock almost doubled to about 130 percent of GDP in 2003 before restructuring. - Policy recommendations: - Pursue debt sustainability vigilantly: continue prudent fiscal policies and vigorous debt management. - Strengthen control of public corporations and management of their guaranteed debt. - Avoid aggressive accumulation of debt in near-term, including build-up of concessional debt. - Implement a medium-term debt management strategy emphasizing grants and concessional financing and managing refinancing risk. - Institutional capacity building: - Develop capacity to analyze, manage and control debt and guarantees; improve debt data recording. - Require public corporations to supply debt data and disbursement plans. - Implement operational risk management, a Code of Conduct, and staff training over next year. - Consider introducing a public debt law and establish a Public Debt Committee chaired by the Minister of Finance with ECCB participation as appropriate. - Market development: - Seek cautiously to expand investor base via the Regional Government Securities Market (RGSM): start with small volumes of short maturity securities with option to expand. ### Appendix I — Fund Relations (selected) - Membership: Joined 12/12/78; Article VIII. - Quota: 8.20 SDR Million; Percent of Quota: 100.00. - Net cumulative SDR allocation: 7.84 SDR Million; Holdings: 6.94 SDR Million. - Outstanding purchases and loans: - Emergency Assistance: 2.05 SDR Million; Percent of Quota: 25.00. - ESF RAC Loan: 3.28 SDR Million; Percent of Quota: 40.00. - ECF Arrangements: 7.12 SDR Million; Percent of Quota: 86.88. - Exchange rate arrangement: member of ECCU; Eastern Caribbean dollar pegged to U.S. dollar at EC$2.70 per U.S. dollar since July 1976. - SDR allocation recommended to be kept as shared buffer for ECCU members: SDR 7.2 million. - Technical assistance highlights: - CARTAC: National Income Accounts rebasing assistance (December 2009 and August 2009). - MCM: debt management assistance (October 2009). - FAD: customs and tax administration reforms (January/February 2009). - Other missions on VAT, pension reform, AML/CFT, and revenue administration. ### Appendix IV — Statistical Issues: Data Weaknesses and Recommendations - Main assessment: - Data provision broadly adequate for surveillance but weaknesses in coverage, accuracy, frequency, and timeliness remain. - Priority: improve compilation and dissemination of national accounts, especially tourism, agriculture and labor statistics. - Metadata for national accounts, external sector and government finance statistics have not been updated since December 2002. - Real sector and price statistics: - Ongoing rebasing to 2006 with CARTAC assistance; newly revised GDP expected by February 2010. - CPI compiled with a two-month lag; weights based on 1997/1998 Household Expenditure Survey. - Shortage of staff limits development of XMPIs and CPI methodology improvements. - Employment data limited; no official producer prices or private-sector wage data; 2001 census results not yet published. - Government finance statistics: - Fiscal data incomplete and subject to frequent revisions; operations outside consolidated fund not fully captured. - Capital expenditure data require donor financing supplements; PSIP reporting delays from line ministries. - Automation of expenditure execution: LPO electronic system installed in 2005. - Financing and debt data: progress in measuring government debt but concerns about under-recording commitments; no consolidated nonfinancial public sector data. - No government finance data reported to STA for IFS or GFS Yearbook. - Monetary and external sector statistics: - Monetary statistics compiled by ECCB monthly since July 2006; institutional coverage needs improvement (mortgage companies, building societies, credit unions, insurance companies). - BOP compiled annually by ECCB but not in BPM5 format; data to STA becoming more timely but volatile errors and omissions remain. - Ministry of Finance maintains public and publicly-guaranteed external loans database; Treasury maintains bond data—databases not consolidated. - Key statistical recommendations: - Improve national accounts compilation and dissemination; update GDDS metadata. - Strengthen staff capacity in price statistics and develop XMPIs. - Improve completeness and timeliness of government finance statistics and consolidate debt databases. - Broaden institutional coverage of monetary statistics and improve coordination between ECCB and single regulatory unit. - Align BOP compilation with BPM5 and make creditor payment schedules available monthly. ### Key Quantitative Findings, Scenarios, and Selected Indicators (as reported) - Proposed China loan for tourism resort: US$60 million (16 percent of GDP). - China concessional loan agreed: US$40 million (11 percent of GDP); about US$24 million (7 percent of GDP) new expenditure. - Scenario growth impact assumption for US$60 million resort: increases rate of GDP growth by 0.3 percentage points in 2010–12, and by one percentage point in each of the five subsequent years. - Nonperforming loans of credit unions: 8.7 percent of total assets as of end-June 2009. - AID Bank contracted loans amounting to US$22.4 million (6 percent of GDP). - SDR allocation recommended as shared buffer: SDR 7.2 million. - ECCU regional public debt level cited: 90 percent of GDP at end 2008. - ECCB reserves: Gross international reserves US$895 million at end 2009 (5.2 months of imports) compared to US$759 million at end 2008 (3.4 months of imports). - ECCU regional GDP projection: real regional GDP expected to contract by about 6 percent in 2009 (from positive growth of 2 percent in 2008); slow recovery with growth only in 2011. - Government revenue losses from income tax reform: about 1 percent of GDP each year in FY 2007/08 and FY 2008/09. - Selected baseline indicators (percent of GDP unless otherwise indicated): - Total revenue and grants: 55.1 (2008), 55.8 (2009), 50.1 (2019), 50.0 (2025), 49.9 (2029). - Primary (noninterest) expenditure: 51.8 (2008), 53.3 (2009), 47.2 (2019), 47.0 (2025), 46.7 (2029). - Primary balance (including grants): -3.4 (2008), -2.5 (2009), -2.9 (2019), -3.0 (2025), -3.1 (2029). - Public debt: 84.9 (2008), 83.7 (2009), 53.1 (2019), 34.8 (2025), 23.1 (2029). - External current account: -31.9 (2008), -27.7 (2009), -21.3 (2019), -22.1 (2025), -22.4 (2029). - Real GDP growth (percent): 1.4 (2008), 0.5 (2009), 3.0 (2019), 3.0 (2025), 3.0 (2029). - Inflation rate (average; percent): 1.6 (2008), 0.9 (2009), 1.5 (2019), 1.5 (2025), 1.5 (2029). - Public sector debt stock (nominal and composition, fiscal year 2008/09, EC$ millions and percent of GDP where shown): - Nonfinancial public sector total debt: 833.0. - Central government: 783.8. - External (total): 577.9. - Multilateral: 378.8 (CDB 220.8; IDA 70.9; IMF 39.8). - Official bilateral: 85.3 (China 24.9). - Domestic debt: 255.1. - Nominal GDP (Fiscal year): 988.2. - Public sector debt projections (percent of GDP selected points): - Public sector debt: 95.7 (2006), 90.9 (2007), 84.3 (2008), 83.1 (2009), 82.7 (2010), 51.6 (2019), 19.3 (2029). - PV of public sector debt: 81.7 (2006), 77.4 (2007), 72.2 (2008), 70.5 (2009), 71.8 (2010), 47.5 (2019), 24.9 (2029). - Sensitivity analysis — selected scenario outcomes: - Baseline PV of Debt-to-GDP Ratio (percent): 70.5 (2009), 71.8 (2010), 70.0 (2011), 67.7 (2012), 64.9 (2013), 61.5 (2014), 47.5 (2019), 24.9 (2029). - Alternative A4 (Baseline with US$60 million loan): 70.5 (2009), 75.6 (2010), 77.5 (2011), 78.6 (2012), 75.8 (2013), 72.4 (2014), 57.6 (2019), 32.8 (2029). - Alternative A5 (US$60 million loan with growth impact): 70.5 (2009), 75.4 (2010), 77.0 (2011), 77.9 (2012), 74.3 (2013), 70.3 (2014), 53.7 (2019), 29.2 (2029). - Other selected macro figures and short-term projections: - Real GDP: 2006 4.8; 2007 2.5; 2008 3.2; 2009 -0.3; 2010 1.4. - Consumer prices (end of period): 2006 1.8; 2007 6.0; 2008 2.1; 2009 3.2; 2010 1.5. - Calendar year nominal GDP at market prices (EC$): 2006 856; 2007 921; 2008 984; 2009 978; 2010 1,012. - Net imputed international reserves (U.S. dollars millions; end-of-period): 2006 63.0; 2007 60.4; 2008 55.1; 2009 64.5; 2010 64.5. *Source: IMF staff report Executive Summary, Appendices III–IV, and informational annex for Dominica (Staff Report for the 2010 Article IV Consultation).* ### Executive Summary .......................................................................................... ### Executive Summary ### Economic and Political Context - Dominica depends on tourism, foreign investment and remittances, and has high debt, openness, and disaster risks. - Dominica is an outlier within the ECCU with a less-developed tourism sector and a larger share of agriculture in GDP: - In 2008, agriculture accounted for 16 percent of GDP, compared to an average of 5 percent of GDP in the rest of the ECCU. - In 2008, tourism accounted for 8 percent of GDP, compared to an average of 13 percent of GDP in the rest of the ECCU. - Emigration and poverty: - More than 30 percent of the labor force has emigrated; the population is falling. - In 2003, around one third of the population was below the poverty line; inequality was high. - According to the 2003 Country Poverty Assessment, 40 percent of households are in poverty and 10 percent of households very poor (noted later). - Natural disasters: Hurricanes Dean and Omar in 2007–08 together caused damages of 35 percent of GDP. - Fiscal progress and anchor: - Dominica established a fiscal anchor of a 3 percent of GDP primary surplus. - Public debt-to-GDP ratio fell from 130 percent in 2003 to 84 percent in 2009. - Inflation: - Annual average inflation during 2001–07 was 1.9 percent. - Average inflation reached 6.4 percent in 2008 due to international fuel and food price hikes. - Growth and social objectives: - Dominica’s Growth and Social Protection Strategy (GSPS) aims to foster growth and reduce poverty while reducing public debt, via prudent fiscal policies, strengthened financial oversight, structural reforms, and improved targeting of social assistance. - Governance and reforms: - National elections in December 2009 increased the Dominica Labour Party’s majority. - Reforms implemented or underway: automation of customs and land titling, appointment of a second judge to hear civil matters, improvement of airport facilities, continued participation in CCRIF. ### Recent Developments and Outlook - 2009 economic impact of the global downturn: - Real GDP is estimated to have declined by 0.3 percent in 2009. - Total tourism receipts contracted by 16 percent during 2009. - FDI inflows dropped by 51 percent in 2009. - Remittances inflows dropped by 18 percent in 2009. - Cruise arrivals grew extraordinarily, offsetting some decline in stayover arrivals. - Fiscal stance and VAT performance: - The government maintained capital spending in 2009 at the high post-hurricane level in 2008. - The overall fiscal position remained in surplus during FY 2008/09 and so far in FY 2009/10, reflecting strong VAT performance introduced in 2006. - VAT collections were 10 percent, 11 percent and 12 percent of GDP in FY 2006/07, FY 2007/08 and FY 2008/09, respectively. - Inflation and external sector: - CPI increased by 4.4 percent (yoy) through February 2010; on a period average basis, inflation was close to zero. - External current account deficit decreased to 28 percent of GDP in 2009 (from 32 percent of GDP in 2008). - Monetary and banking sector: - In the 12 months to December 2009, banking sector credit to the private sector grew by 6.9 percent and broad money by 10 percent. - Prudential indicators suggest banks are liquid and well capitalized; nonperforming loans have declined though some loan restructurings occurred. - The average nonperforming loans ratio and capital-based soundness indicators remain above prudential norms; returns on assets have declined markedly in recent years. - Regional insurance and nonbank exposures: - Total exposure of residents to two CL Financial Group insurance subsidiaries offering deposit-like annuity products amounts to about EC$194 million (19.4 percent of GDP). - BAICO was found insolvent and illiquid by KPMG judicial managers (October 2009); ECCU authorities are progressing toward creating a new company to take over BAICO’s operations. - CLICO faces liquidity problems and has been barred from writing new insurance business in Barbados. - Exchange rate and competitiveness: - CPI-based real effective exchange rate has declined since 2002 and is an estimated 2 percent below equilibrium using fundamentals-based approach. - PPP-based approach suggests undervaluation of 9 percent at end-2008; macroeconomic balance approach indicates overvaluation of 7 percent. - Conflicting indicators may reflect structural changes and external shocks; Dominica’s increased share of ECCU and Caribbean stayover arrivals suggests competitiveness may be improving. - Social progress: - Primary enrollment reached 99 percent; gender disparities in education eliminated; child mortality reduced from 23 per 1000 in 1990 to 13 per 1000 in 2006. - Near- to medium-term outlook: - Real GDP is expected to grow by 1½ percent in 2010. - Downside risks: slow recovery in advanced economies and a rebalancing of global demand that could weaken tourism demand from main source markets. ### Policy Discussions — Fiscal Policy and Reforms Findings: - Dominica has generally maintained a prudent fiscal stance anchored on a 3 percent of GDP primary surplus, enabling steady public debt decline. - The VAT introduced in 2006 contributed to sustained tax revenue increases; authorities contained current expenditure; use of grants and concessional loans financed capital expenditure. - Despite improvements, public debt remains high. Recent developments and concerns: - The authorities believe the 3 percent of GDP primary surplus is achievable in FY2009/10; capital spending expected to slow slightly in the second half of the fiscal year. - The government agreed with the Export-Import Bank of China on a concessional loan of US$40 million (11 percent of GDP) for education and infrastructure: - About US$24 million (7 percent of GDP) would represent new expenditure and external financing not previously included in fiscal projections. - Loan terms: 2 percent interest, 5 years grace, and 20 years maturity, implying a grant element of 36 percent. - The loan and existing financing pipeline will imply a weakening in the primary surplus during FY2010/11–FY2012/13. - The government was considering an additional loan of US$60 million (16 percent of GDP) for a tourism resort; such additional borrowing would likely prevent Dominica from reaching the ECCB debt-to-GDP ratio target of 60 percent by the target date of 2020. Policy recommendations: - Staff encourages maintaining a primary surplus of at least 1 percent of GDP during FY2010/11–FY2012/13 and returning to a 3 percent of GDP primary surplus as soon as possible thereafter. - The mission noted the deviation from the fiscal anchor will result in less favorable debt dynamics and may entail credibility costs. - With the recommended policy (primary surplus at least 1 percent then return to 3 percent), Dominica could reach the ECCB target of reducing the debt-to-GDP ratio to 60 percent by 2017 (one year later than anticipated in July 2009 RAC-ESF), but still three years ahead of the ECCB’s 2020 target date. - Regarding the potential US$60 million tourism loan, staff stressed the paramount importance of carefully evaluating project viability and involving a private strategic partner. ### Financial Sector Policies Findings and risks: - The collapse of the CL Financial Group exposed regional weaknesses in regulation of nonbanks. - The large role of credit unions and the CL Financial fallout underscore the need to strengthen the Financial Services Unit. - ECCU members are progressing toward creating a new company to take over BAICO, but capitalizing the new company will be challenging. - Financial difficulties at CLICO require close monitoring. - The mission emphasized close monitoring of the Agricultural and Industrial Development Bank due to potential contingent fiscal liabilities and recommended an on-site examination. Policy recommendations: - Strengthen supervision and capacity of the Financial Services Unit. - Closely monitor and, where appropriate, examine on-site institutions with potential contingent fiscal liabilities (e.g., Agricultural and Industrial Development Bank). - Seek adequate capitalization solutions for regional insurance resolution efforts (BAICO). ### Medium-Term Outlook and Structural Reforms Findings: - Progress with structural reforms has been substantial and includes automation of customs and land titling, appointment of a second judge to hear civil matters, and improvement of airport facilities. - Medium-term growth challenge is to manage transition from bananas to tourism and diversified agro industries, and to foster private sector-led growth and poverty reduction. Policy implications: - Continue structural reforms to improve business climate and competitiveness. - Promote diversification toward tourism and agro-industry while fostering private sector participation and poverty reduction measures. *Source: IMF staff report Executive Summary for Dominica* ### 21. Moreover, the government was considering a large additional loan from China ### _cr10261 - 21. Moreover, the government was considering a large additional loan from China ### Debt implications of the proposed China loan and project viability - Government was considering a large additional loan from China of US$60 million (16 percent of GDP) to finance construction of a tourism resort. - Mission assessment: - Projects of this nature carry considerable commercial risks and uncertain rates of return, and are likely to be more successfully managed by the private sector. - This particular project would likely prevent Dominica from reaching the ECCB debt-to-GDP target by 2020: only with a considerable positive impact of the resort project on GDP growth would the target be reached (Appendix III). - Scenario assumption referenced: the project increases the rate of GDP growth by 0.3 percentage points in 2010–12, and by one percentage point in each of the five subsequent years. - Policy recommendations: - Base decision on a rigorous, independent assessment of the resort project’s viability. - Secure concessional terms for any borrowing. - Involve a private strategic partner if proceeding. - Authorities’ response: noted they were already exploring potential partnership arrangements. ### Debt management and regional financing options - Authorities are strengthening debt management and developing a medium-term debt management strategy, with MCM assistance. - Objectives of the debt management strategy: - Improve institutional arrangements. - Continue focus on less costly sources of financing. - Contain a plan for managing financial risk and accessing grant financing. - Staff suggestion: consider cautiously expanding the investor base via the ECCU’s Regional Government Securities Market (RGSM). ### Fiscal reforms and tax administration - Ongoing fiscal reforms include completing income tax reform, improving tax administration, modernizing customs, and moving towards a medium-term expenditure framework (MTEF). - Income tax reform: - Final phase of a three-year income tax reform became effective on January 1, 2010. - Reduced personal income tax rates by 3 percentage points in each of the respective tax brackets. - Revenue losses from the income tax reform have been lower than expected—about 1 percent of GDP each year in FY 2007/08 and FY 2008/09. - Tax administration reform: - IRD reorganization in phases: phase one focus on large and medium-sized taxpayer unit; phases two and three to establish planning unit and small taxpayer unit. - Proposed structure: integrated operations; audit and enforcement organized separately for large/medium and small taxpayers—goal of higher efficiency and lower compliance burden. - Customs administration reform: - Passage of a new Customs Act and major upgrade to ASYCUDA World IT infrastructure to allow risk-based inspections and electronic manifests and signatures; expected reduced clearance times. - Duty-free concessions approved by cabinet to be processed at customs, providing reports on concessions granted and duties foregone. - Medium-term expenditure framework (MTEF): - Government continuing move towards a MTEF to improve predictability of capital expenditure and its consistency with medium-term fiscal objectives. - Budget already incorporates projections over a three-year horizon. - Income tax schedule (Eastern Caribbean dollars and percentages) preserved as presented: - Old Regime / New Regime from Jan-08 Jan-09 Jan-10 - Non taxable allowance: 15,000 / 18,000 20,000 20,000 - Tax rate for each taxable income bracket: - 1-15,000: 20 / 1-20,000: 18 16 15 - 15,001-48,000: 30 / 20,001-50,000: 28 26 25 - Over 48,000: 40 / Over 50,001: 38 36 35 ### Social security (DSS) sustainability issues - Dominica Social Security (DSS) is burdened by an aging and shrinking population and very high labor force emigration. - 2007 reform package included immediate rise in contribution rates; several other measures announced in 2007 were not implemented as planned in January 2009 (e.g., increase in retirement age from 60 to 61 and a second round of contribution rate increases). - Government decision in context of global financial crisis: wait for results of the tenth actuarial review to be completed shortly. - Authorities emphasize high importance of ensuring DSS sustainability. ### Financial sector policies and risks - BAICO resolution: - Committee discussing with strategic investors establishment of a new company to take over BAICO operations regionally. - Strategy: transfer property insurance portfolio to an existing insurance company and establish a Medical Claims Support Fund. - Capitalization challenges: haircuts or rephasing of payments likely; Trinidad and Tobago government contributed US$50 million to date and ECCU governments are expected to contribute US$75 million to the capitalization of the new company. - Mission recommended resolution adhere to principles: (i) avoid systemic contamination; (ii) minimize fiscal costs; (iii) give priority to claims up to a low threshold to protect vulnerable groups. - Nonbank sector and FSU: - Collapse of CL Financial Group and large role of credit unions highlight need to strengthen the Financial Services Unit (FSU), the Single Regulatory Unit for the nonbank financial sector. - One credit union is larger than all but two commercial banks; nonperforming loans of credit unions were 8.7 percent of total assets as of end-June 2009. - Some smaller institutions have significant exposure to the CL Financial Group. - Recommendations: make FSU fully operational through supporting legislation; adequate staffing; capacity building; and on-site examination of insurance companies and credit unions. - Importance of working closely with the ECCB to improve bank supervision, including more frequent on-site examinations. - Ensure insurance companies place assets under trusteeship in their statutory funds to back up local insurance liabilities. - Mission advised keeping the SDR allocation (SDR 7.2 million) as a shared buffer for ECCU members. - Agricultural and Industrial Development Bank (AID Bank): - Refocused on original mandate as a development bank and placed under FSU supervision. - No longer takes deposits or makes consumer loans and has reduced its large portfolio of NPLs. - Bank contracted loans amounting to US$22.4 million (6 percent of GDP) to finance its operations. - Mission emphasized need for close monitoring due to potential contingent fiscal liabilities and recommended an on-site examination by the FSU. ### Medium-term outlook and structural reform priorities - Growth prospects driven by industries related to the environment, water and energy sources. - Comparative advantages to exploit: eco-tourism, agro-industries, niche focused agriculture and fisheries, and geothermal energy. - Authorities’ progress: measures to improve competitiveness, ease infrastructure bottlenecks, reduce costs of doing business; intensified infrastructure focus on roads, airport, and seaports. Doing Business ranking has slipped recently. - Medium-term annual growth objective: 3 percent. - Mission recommendations to achieve the 3 percent objective: - Formulate and implement a national export strategy; facilitate diversification of agricultural exports from bananas towards agro-industries and high value specialty crops; improve quality standards and land titling. - Exploit geothermal energy resources to reduce electricity costs and potentially export power to neighboring islands. - Emphasize infrastructure investments complementary to Dominica’s comparative advantages (e.g., off-shore education and cruise tourism). - Undertake measures to improve the business environment: improve customs clearance and contract enforcement. ### Statistical issues - Central Statistical Office improvements in national accounts compilation with CARTAC assistance. - Concern: GDP may be underestimated due to incomplete information from an offshore university—one of the largest employers; mission encouraged authorities to obtain this information. - Note: analogous case—when a similar institution in Grenada provided information, 2006 GDP was revised upward by 7 percent. ### Staff appraisal: fiscal stance, debt trajectory, and recommendations - Recent prudent fiscal policy improved debt sustainability; introduction of VAT, expenditure containment, and successful debt restructuring after 2001–02 crisis. - FY 2008/09 fiscal outturn far better than expected despite high reconstruction spending and lowering of income tax rates. - Prudent fiscal stance allowed maintenance of capital spending in 2009 and helped moderate impact of global downturn; VAT performance allowed maintenance of primary surplus target of 3 percent of GDP thus far. - Forward-looking priorities: - Further reduce public debt ratio and maintain room for natural disaster and external shock responses. - Continue additional fiscal reforms: improvements in tax administration and modernization of customs. - Enhance debt management given still high public debt ratios. - Specific cautions: - Large forthcoming projects financed by China risk slowing the downward trajectory for the public debt-to-GDP ratio. - Departure from the anchor of a 3 percent of GDP primary surplus expected temporary but would significantly affect debt dynamics and may entail credibility costs; staff urges return to the fiscal anchor as soon as possible. - Reiterated that expenditure contemplated on large new tourism resort carries considerable commercial risks better managed by the private sector; essential to obtain rigorous, independent assessment, concessional terms, and involve a private strategic partner if proceeding. - Financial sector recommendations reiterated: proceed promptly with BAICO resolution avoiding systemic spillovers while minimizing fiscal costs; monitor CLICO closely; strengthen FSU and expand on-site examinations. - AID Bank: welcome reform but monitor rapid portfolio growth and recent loans; recommended on-site FSU examination. - Structural reforms: progress notable but sustained and deepened reforms critical to achieve targeted growth and manage transition from bananas to tourism and diversified agro industries. - Statistics: generally adequate for Fund surveillance but encourage addressing possible GDP underestimation. - Next Article IV consultation expected on the standard 12-month cycle. ### Key regional and macro statistics (as presented) - Proposed China loan: US$60 million (16 percent of GDP). - Scenario growth impact assumption: increases rate of GDP growth by 0.3 percentage points in 2010–12, and by one percentage point in each of the five subsequent years. - Nonperforming loans of credit unions: 8.7 percent of total assets as of end-June 2009. - AID Bank contracted loans amounting to US$22.4 million (6 percent of GDP). - SDR allocation recommended to be kept as shared buffer: SDR 7.2 million. - ECCU regional public debt level cited: 90 percent of GDP at end 2008. - ECCB reserves: Gross international reserves US$895 million at end 2009 (5.2 months of imports) compared to US$759 million at end 2008 (3.4 months of imports). - ECCU regional GDP projection: real regional GDP expected to contract by about 6 percent in 2009 (from positive growth of 2 percent in 2008); slow recovery with growth only in 2011. - Government revenue losses and fiscal deficit: projected overall fiscal deficit for region 9 percent of GDP in 2009 from 3 percent in 2008. - World Bank Doing Business ranking for Dominica: 83rd among 183 countries in the full sample; 15th out of 32 in Latin American and Caribbean region; ranked 26th among 42 upper middle income countries; 34th among 61 small population countries. - Dominica’s Doing Business strengths and weaknesses: starting a business (5th), protecting investors (5th), dealing with construction permits (7th); poor in enforcing contracts and closing business (28th respectively). *Source: IMF staff report content as provided in the supplied PDF excerpt.* ### Appendix III ### Appendix III: Debt Sustainability Analysis (DSA) ### Updated DSA—summary - The updated DSA shows some deterioration relative to the previous exercise. - Previous baseline scenario assumptions: - real GDP growth of 3 percent annually over the medium term; - a primary fiscal surplus of at least 3 percent of GDP from FY 2010/11 onwards. - Under the previous baseline, Dominica would reach the ECCB target of 60 percent for the debt-to-GDP ratio in 2016 (four years ahead of the ECCB’s 2020 target). - In the new baseline scenario: - the US$40 million loan from China reduces the primary surplus to only 1.3 percent of GDP during FY 2010/11 to FY 2012/13; - the primary surplus remains at 3 percent of GDP thereafter; - maintaining the same real GDP growth rate, the public debt ratio would reach the 60 percent of GDP target in 2017 (one year later than before). ### Risks to the debt sustainability outlook - Proposed large new borrowing: - The government was considering an additional loan from China of US$60 million (16 percent of GDP) for a tourism resort. - The additional borrowing would prevent Dominica from achieving the ECCB target by 2020 without a strong growth impact. - The new borrowing would increase the PV of debt-to-GDP ratio in 2010–14 above the 50 percent threshold. - Assuming a considerable positive impact of the resort project on GDP growth, the 60 percent target level would be reached in 2020. - Vulnerability to external shocks and natural disasters: - Commodity price shocks, downturns in tourism, and hurricanes (like those in the last two consecutive years) could slow growth and undermine the fiscal position. - Volatility of grant inflows: - Projected grant financing at around 6.6 percent of GDP over the medium term implies a decline from the average of 12 percent in 2007–08, but is still higher than the historical average of close to 5 percent for 1990–2006. - If grant inflows were lower than expected, capital expenditure would need to be scaled back further to keep the debt-to-GDP ratio on a downward trajectory. - Degree of concessionality: - Multilateral borrowing is assumed to be available on concessional terms, reflecting current Caribbean Development Bank lending policies for small countries like Dominica. - Possible contingent liabilities: - The large capital shortfall of the CL Financial insurance subsidiaries could represent a large potential contingent liability. *Appendix III — Debt Sustainability Analysis (DSA).* ### Appendix IV ### Appendix IV — Debt Management ### Risks and outlook - Dominica’s high public debt level, coupled with vulnerability to external shocks, natural disasters and regional financial risks, presents a substantial risk to the economy and challenges to long-term debt sustainability. - Staff’s baseline assessment: the public debt ratio has been falling and is set to continue its downward trajectory on staff’s baseline assumptions. - Historical risk example: the debt stock almost doubled in five years to about 130 percent of GDP in 2003, before undergoing a debt restructuring. - Debt Sustainability Analysis (DSA) finding: In the baseline scenario, Dominica would reach the ECCB’s 60 percent debt-to-GDP ratio target in 2017, three years before the target date of 2020; a large potential loan to build a tourist resort would delay achieving the target until after 2017. ### Policy recommendations — fiscal and debt management stance - Pursue debt sustainability vigilantly: - Continue prudent fiscal policies and vigorous debt management to maintain the downward path of the debt to GDP ratio. - Strengthen control of public corporations and management of their guaranteed debt to minimize potential shocks from guarantees being called. - In the near-term, avoid aggressive accumulation of debt, including the build-up of concessional debt, as this could jeopardize gains made in controlling the public debt. - Implement a medium-term debt management strategy: - Identify clear debt management objectives. - Formulate and implement a medium-term debt management strategy aimed at meeting these objectives. - Given restricted access to commercial borrowing, the strategy should emphasize reliance on grants and concessional sources of financing, and contain a clear plan for managing refinancing risk. ### Strengthening institutions and capacity - Strengthen debt management capacity and institutional arrangements: - Develop capacity to analyze, manage and control debt and guarantees. - Improve debt data recording. - Introduce procedures requiring public corporations to supply information such as debt data and disbursement plans. - Implement further reforms over the next year, including development of operational risk management, introduction of a Code of Conduct, and a staff training program. - Consider introducing a public debt law. - Establish a Public Debt Committee, chaired by the Minister of Finance, with the participation of the ECCB as appropriate, responsible for approving the debt strategy and the associated annual financing plan. ### Market development and investor base - Seek cautiously to expand the investor base via the Regional Government Securities Market (RGSM): - The RGSM provides a platform to expand the investor base, reduce costs, and possibly refinance maturing restructured Eastern Caribbean dollar bonds if necessary. - Approach expansion cautiously: establish a presence with small volumes of short maturity securities, with the option to expand over time. *Prepared by the Staff of the International Monetary Fund (Appendix IV: Debt Management).* ### 2020. Relative to the thresholds based on Dominica’s Country Policy and Institutional ### _cr10261 - 2020. Relative to the thresholds based on Dominica’s Country Policy and Institutional ### Context - The Dominican authorities implemented a reform agenda supported by a Stand-by Arrangement (2001–03) and a PRGF Arrangement (2004–06). - Public debt-to-GDP declined from 130 percent in 2003 to 84 percent in 2009. - The VAT introduced in 2006 and a cooperative debt restructuring in 2004–05 were major factors behind the improvement in debt prospects. - The global economic downturn reduced inflows from tourist arrivals, FDI and remittances; however, real GDP declined only modestly partly because the government maintained public capital spending in 2009 at the high post-hurricane level in 2008. - Debt management capacity requires strengthening and a medium-term debt management strategy should be implemented; recommended actions include strengthening institutional arrangements, managing financial risk, accessing grant financing, and cautiously expanding the investor base via the Regional Government Securities Market (RGSM). - Dominica’s 2008 CPIA three year average is 3.84, categorizing the country as a “strong performer”. ### Underlying assumptions (Baseline, 2010–29) - Real GDP growth: projected to reach 3 percent in the medium term; past ten-year average 0.9 percent; average excluding 2001–02 crisis years 3.4 percent. - Inflation: expected to remain at about 1.5 percent from 2011 onwards. - Primary surplus (including grants): averaged 4.8 percent of GDP in FY2006/07–FY2008/09; expected to be 3 percent in FY2009/10; assumed to be around 1.3 percent of GDP in FY2010/11–FY2012/13 because of infrastructure spending associated with the China loan; assumed to return to around 3 percent of GDP thereafter. - Grants: peaked at 11.6 percent of GDP in FY2008/09; projected grant financing around 7.2 percent of GDP over the medium-term; historical average during FY2000/01–FY2006/07 was 6.3 percent. - External current account deficit: peaked at 32 percent of GDP in 2008; expected to stay close to 23–25 percent of GDP in 2010–12 and stabilize at around 20–21 percent afterwards. - Exports: expected to stabilize after an 11 percent reduction in 2009 and a somewhat slow recovery in 2010–14. - FDI: expected to finance around half of the current account deficit from 2013 onwards. - Concessional lending: majority of external debt, primarily from CDB and IDA; other concessional sources include China and Venezuela. - Baseline incorporates a US$40 million concessional loan from the Export-Import Bank China financing education and infrastructure projects, reducing the primary surplus to around 1.3 percent of GDP in the next three fiscal years. Key baseline indicators (selected, percent of GDP unless otherwise indicated) - Total revenue and grants: 55.1 (2008), 55.8 (2009), 50.1 (2019), 50.0 (2025), 49.9 (2029) - Primary (noninterest) expenditure: 51.8 (2008), 53.3 (2009), 47.2 (2019), 47.0 (2025), 46.7 (2029) - Primary balance (including grants): -3.4 (2008), -2.5 (2009), -2.9 (2019), -3.0 (2025), -3.1 (2029) - Public debt: 84.9 (2008), 83.7 (2009), 53.1 (2019), 34.8 (2025), 23.1 (2029) - External current account: -31.9 (2008), -27.7 (2009), -21.3 (2019), -22.1 (2025), -22.4 (2029) - Exports of goods and services: 39.8 (2008), 35.5 (2009), 37.5 (2019), 37.1 (2025), 36.9 (2029) - Real GDP growth (in percent): 1.4 (2008), 0.5 (2009), 3.0 (2019), 3.0 (2025), 3.0 (2029) - Inflation rate (average; in percent): 1.6 (2008), 0.9 (2009), 1.5 (2019), 1.5 (2025), 1.5 (2029) ### Evaluation of public sector debt sustainability - Public debt composition (end-June 2009): - External debt: 73 percent of total public sector debt - Domestic debt: 27 percent - Among external creditors: multilateral 66 percent, commercial banks 16 percent, bilateral sources 15 percent - Central government accounts for 94 percent of public debt - Domestic debt composition highlights: medium-long term securities 50 percent; T-bills 16 percent; other domestic 23 percent; overdrafts 4 percent; loans (excl. overdraft) 7 percent. - Multilateral debt composition highlights: CDB 58 percent; IDA 19 percent; IMF 11 percent; other multilateral 7 percent; EIB 2 percent; IBRD 1 percent; IFAD 2 percent. - Baseline debt outlook: - ECCU target of 60 percent debt-to-GDP ratio reached by 2017 (one year later than previous DSA but three years before the 2020 target date). - NPV of public debt-to-GDP projected to fall from 72 percent in 2008 to 25 percent in 2029. - NPV of external debt-to-GDP projected to fall from 46 percent in 2008 to 19 percent in 2029. - The US$40 million China loan: about US$24 million (7 percent of GDP) represents new expenditure and external financing not previously incorporated; weakens the primary surplus in FY2010/11–FY2012/13. - A proposed additional US$60 million loan from China (equivalent to 16 percent of GDP) is not included in the baseline and constitutes the main downside risk; its revenue stream is uncertain. - Assumed terms for analysis of the US$60 million loan: 2 percent interest, 5 years grace, 20 years maturity. Under that assumption: - Debt-to-GDP ratio in 2012 once fully disbursed would be 15 percentage points higher than under the baseline. - Achieving the same debt-to-GDP ratio in 2020 as in the baseline would require GDP to grow 2.8 percentage points faster each year during 2013–20. - Main risks surrounding baseline projections: - Additional borrowing (notably the proposed US$60 million loan). - Slower GDP growth due to a slow global recovery, rebalancing of global demand, external shocks, or lower-than-projected reform impact. - Potential contingent liabilities associated with the collapse of the CL Financial Group. - Exogenous shocks: commodity price shocks, natural disasters, reductions in grant inflows, volatility in tourism demand. - Changes in access to concessional lending; baseline assumes continued concessional multilateral borrowing in line with current CDB policies. ### Alternative scenarios and bound tests - Alternative scenarios generally worsen the debt outlook: permanently lower growth or GDP growth and primary balance reverting to historical averages yield higher debt-to-GDP trajectories than baseline. - If the primary balance remains unchanged at the 2009 level, the debt-to-GDP trajectory is very similar to the baseline. - The additional US$60 million loan disbursed in 2010–2012 would prevent reaching the 60 percent debt-to-GDP target by 2020 unless the resort project generates a considerable positive impact on GDP growth; with the optimistic growth impact assumption, the 60 percent target would be reached in 2020. - Bound tests: a reduction of GDP growth by one standard deviation from its historical average during 2010–11 would severely worsen debt projections: - PV of debt-to-GDP ratio would be 70 percent in 2029 compared to 25 percent under the baseline. - This shock produces the worst results for PV of debt-to-revenue and debt service-to-revenue ratios. - In most bound tests the PV of debt-to-GDP crosses the 50 percent threshold; other ratios generally remain under their thresholds. - Combination shocks to real GDP growth and non-debt-creating inflows have the largest impact on external debt outlook. ### External debt sustainability - In the baseline scenario: - The PV of the debt-to-GDP ratio is exceeded during 2010–12 relative to thresholds based on Dominica’s CPIA rating of “strong”; Dominica is considered to have a moderate risk of debt distress. - All other ratios—PV of debt to exports and revenue and debt service to exports and revenue—remain well below their corresponding thresholds. - The additional US$60 million loan would push the PV of debt-to-GDP ratio over its 50 percent threshold between 2010 and 2014; other four thresholds would not be breached. - Bound tests concentrate risks on the PV of debt-to-GDP ratio; in many scenarios it crosses the 50 percent threshold, while other ratios remain below thresholds. ### Conclusion and key findings - Dominica’s debt ratios have fallen sharply since 2003, driven by the 2004–05 cooperative debt restructuring and subsequent prudent fiscal policy. - The baseline shows a slight deterioration in the debt outlook relative to the previous DSA due to the global downturn and the US$40 million loan, yet the debt-to-GDP ratio is projected to reach the ECCU 60 percent target in 2017 (three years before the 2020 target). - Dominica is assessed as having a moderate risk of debt distress. - Significant risks remain, especially the potential US$60 million loan and shocks to GDP growth; several simulated shocks and additional borrowing plans could lead to breaches of debt burden thresholds. *Source: _cr10261 - 2020. Relative to the thresholds based on Dominica’s Country Policy and Institutional* ### 22. Large additional borrowing would delay achieving the ECCB target. The main ### 22. Large additional borrowing would delay achieving the ECCB target. The main ### Main risk and immediate implication - The main risk associated to the baseline scenario is a potential additional loan for US$60 million to build a tourist resort. - This additional borrowing implies that the ECCU target would not be reached by 2020. - The additional borrowing would imply that Dominica could be considered at moderate risk of debt distress, as one of the five thresholds of the PV of external debt-to-GDP ratio would be temporarily exceeded in the period 2010–2014. ### Public sector debt stock (2008/09) — key figures (in millions EC dollars) - Nonfinancial public sector: 833.0 (Total Debt), 100.0 (Percent of GDP?), 84.3 - Central government: 783.8; 94.1; 79.3 - Public enterprises: 49.2; 5.9; 5.0 - External (total): 577.9; 69.4; 58.5 - Central government external: 577.9; 69.4; 58.5 - Multilateral: 378.8; 45.5; 38.3 - CDB: 220.8; 26.5; 22.3 - EIB: 9.2; 1.1; 0.9 - IBRD: 3.9; 0.5; 0.4 - IDA: 70.9; 8.5; 7.2 - IFAD: 6.0; 0.7; 0.6 - IMF: 39.8; 4.8; 4.0 - Other multilateral: 28.2; 3.4; 2.9 - Official bilateral: 85.3; 10.2; 8.6 - Paris Club: 18.6; 2.2; 1.9 - France: 18.6; 2.2; 1.9 - Non-Paris Club: 66.8; 8.0; 6.8 - China: 24.9; 3.0; 2.5 - Bahamas: 4.1; 0.5; 0.4 - Barbados: 13.5; 1.6; 1.4 - Belize: 2.7; 0.3; 0.3 - Grenada: 2.7; 0.3; 0.3 - Trinidad and Tobago: 10.0; 1.2; 1.0 - Kuwait: 8.9; 1.1; 0.9 - Commercial, total 1/: 91.9; 11.0; 9.3 - Others: 21.8; 2.6; 2.2 - Domestic: 255.1; 30.6; 25.8 - By instruments: - Loans (excl. overdraft): 17.0; 2.0; 1.7 - Overdrafts: 11.3; 1.4; 1.1 - T-bills: 40.8; 4.9; 4.1 - Medium-long term securities: 126.5; 15.2; 12.8 - Other domestic: 59.5; 7.1; 6.0 - Memorandum items: - Central government debt: 205.9; 24.7; 20.8 - Public enterprise debt: 49.2; 5.9; 5.0 - Nominal GDP (Fiscal year): 988.2 Sources: Dominica authorities; and Fund staff estimates. 1/ Includes private and monetary authorities. 2/ Includes debt with Dominica Social Security. ### Public sector debt sustainability framework — selected indicators and projections (2006–2029) - Public sector debt (percent of GDP): 95.7 (2006), 90.9 (2007), 84.3 (2008), 83.1 (2009), 82.7 (2010), 80.5 (2011), 77.6 (2012), 73.6 (2013), 69.8 (2014), 51.6 (2019), 19.3 (2029) - o/w foreign-currency denominated (percent of GDP): 67.7 (2006), 63.6 (2007), 58.5 (2008), 59.5 (2009), 59.6 (2010), 58.7 (2011), 57.0 (2012), 53.7 (2013), 48.9 (2014), 32.4 (2019), 13.4 (2029) - Change in public sector debt: -4.7 (2006), -4.7 (2007), -6.6 (2008), -1.2 (2009), -0.3 (2010), -2.2 (2011), -2.9 (2012), -3.9 (2013), -3.8 (2014), -3.6 (2019), -3.2 (2029) - Identified debt-creating flows: -9.9 (2006), -8.4 (2007), -4.5 (2008), -1.0 (2009), -0.7 (2010), -2.2 (2011), -2.9 (2012), -3.9 (2013), -3.8 (2014), -3.6 (2019), -3.2 (2029) - Primary deficit: -6.2 (2006), -4.9 (2007), -3.4 (2008), 0.5 (2009), 6.1 (2010), -2.5 (2011), -1.0 (2012), -1.1 (2013), -1.8 (2014), -2.8 (2019), -2.9 (2029) - Revenue and grants (percent of GDP): 49.1 (2006), 53.6 (2007), 54.7 (2008), 55.4 (2009), 52.6 (2010), 51.2 (2011), 50.9 (2012), 49.8 (2013), 49.8 (2014), 49.6 (2019), 49.4 (2029) - of which: grants: 7.5 (2006), 11.3 (2007), 11.5 (2008), 11.2 (2009), 8.2 (2010), 7.0 (2011), 6.7 (2012), 5.6 (2013), 5.5 (2014), 5.5 (2019), 5.5 (2029) - Primary (noninterest) expenditure (percent of GDP): 43.0 (2006), 48.8 (2007), 51.4 (2008), 52.9 (2009), 51.7 (2010), 50.2 (2011), 49.1 (2012), 47.0 (2013), 46.8 (2014), 46.5 (2019), 46.2 (2029) - Automatic debt dynamics: -3.7 (2006), -3.6 (2007), -1.1 (2008), 1.5 (2009), 0.3 (2010), -1.2 (2011), -1.1 (2012), -1.1 (2013), -0.9 (2014), -0.4 (2019), 0.1 (2029) - Contribution from interest rate/growth differential: -3.8 (2006), -2.6 (2007), -1.0 (2008), 1.5 (2009), 0.6 (2010), -0.6 (2011), -1.1 (2012), -1.3 (2013), -1.1 (2014), -0.6 (2019), 0.0 (2029) - of which: contribution from average real interest rate: -0.3 (2006), 0.0 (2007), 0.3 (2008), 1.9 (2009), 2.2 (2010), 1.6 (2011), 1.2 (2012), 0.9 (2013), 1.0 (2014), 1.0 (2019), 0.7 (2029) - of which: contribution from real GDP growth: -3.5 (2006), -2.7 (2007), -1.3 (2008), -0.5 (2009), -1.6 (2010), -2.2 (2011), -2.3 (2012), -2.3 (2013), -2.1 (2014), -1.6 (2019), -0.7 (2029) - Residual, including asset changes: 5.1 (2006), 3.7 (2007), -2.2 (2008), -0.3 (2009), 0.3 (2010), 0.0 (2011–2029) - Other sustainability indicators — PV of public sector debt: 81.7 (2006), 77.4 (2007), 72.2 (2008), 70.5 (2009), 71.8 (2010), 70.0 (2011), 67.7 (2012), 64.9 (2013), 61.5 (2014), 47.5 (2019), 24.9 (2029) - o/w foreign-currency denominated (PV): 53.6 (2006), 50.1 (2007), 46.4 (2008), 46.9 (2009), 48.6 (2010), 48.3 (2011), 47.2 (2012), 44.9 (2013), 40.6 (2014), 28.3 (2019), 19.0 (2029) - Gross financing need: 0.2 (2006), 1.5 (2007), 2.2 (2008), 5.2 (2009), 4.5 (2010), 4.5 (2011), 3.5 (2012), 2.2 (2013), 3.3 (2014), 1.2 (2019), -0.9 (2029) - PV of public sector debt-to-revenue and grants ratio (percent): 127.1 (2009), 136.4 (2010), 136.6 (2011), 132.8 (2012), 130.3 (2013), 123.7 (2014), 95.6 (2019), 50.3 (2029) - PV of public sector debt-to-revenue ratio (percent): 196.1 (2006), 182.8 (2007), 167.0 (2008), 159.3 (2009), 161.5 (2010), 158.2 (2011), 152.9 (2012), 146.6 (2013), 139.0 (2014), 107.5 (2019), 56.6 (2029) - o/w external 5/: 128.8 (2006), 118.3 (2007), 107.3 (2008), 106.0 (2009), 109.4 (2010), 109.1 (2011), 106.5 (2012), 101.5 (2013), 91.7 (2014), 64.0 (2019), 43.2 (2029) - Debt service-to-revenue and grants ratio (percent) 6/: 13.0 (2006), 12.0 (2007), 10.1 (2008), 13.8 (2009), 10.4 (2010), 10.9 (2011), 10.4 (2012), 10.1 (2013), 12.5 (2014), 8.8 (2019), 4.8 (2029) - Debt service-to-revenue ratio (percent) 6/: 15.4 (2006), 15.2 (2007), 12.8 (2008), 17.3 (2009), 12.3 (2010), 12.7 (2011), 11.9 (2012), 11.3 (2013), 14.0 (2014), 9.9 (2019), 5.3 (2029) - Primary deficit that stabilizes the debt-to-GDP ratio: -1.4 (2006), -0.2 (2007), 3.3 (2008), -1.3 (2009), -0.6 (2010), 1.2 (2011), 1.1 (2012), 1.1 (2013), 0.9 (2014), 0.4 (2019), -0.1 (2029) - Average nominal interest rate on forex debt (percent): 2.5 (2006), 2.1 (2007), 2.1 (2008), 3.4 (2009), 1.3 (2010), 2.1 (2011), 3.0 (2012), 2.3 (2013), 2.3 (2014), 2.3 (2019), 2.3 (2029) - Average nominal interest rate on domestic debt (percent): 3.7 (2006), 5.8 (2007), 3.4 (2008), 4.3 (2009), 1.3 (2010), 5.8 (2011), 3.9 (2012), 4.0 (2013), 5.0 (2014), 5.3 (2019), 6.0 (2029) - Inflation rate (GDP deflator, percent): 3.1 (2006), 4.2 (2007), 2.3 (2008), 2.5 (2009), 1.2 (2010), 0.8 (2011), 1.0 (2012), 1.5 (2013), 1.5 (2014), 1.5 (2019), 1.5 (2029) - US Inflation rate (GDP deflator, percent): 3.2 (2006), 2.7 (2007), 2.2 (2008), 2.4 (2009), 0.6 (2010), 0.9 (2011), 0.4 (2012), 0.6 (2013), 1.5 (2014), 1.9 (2019), 2.0 (2029) Sources: Dominican authorities; and Fund staff estimates and projections. Notes: 1/ Figures shown for a given calendar year relate to the fiscal year beginning on July 1 of that year. 2/ Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability. 3/ Nonfinancial public sector. 4/ 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. 5/ Revenues excluding grants. 6/ Debt service is defined as the sum of interest and amortization of medium and long-term debt. ### Sensitivity analysis — key outcomes (selected scenarios) - Baseline PV of Debt-to-GDP Ratio (percent): 70.5 (2009), 71.8 (2010), 70.0 (2011), 67.7 (2012), 64.9 (2013), 61.5 (2014), 47.5 (2019), 24.9 (2029) - Alternative scenario A4 (Baseline with US$60 million loan from China) — PV of Debt-to-GDP Ratio (percent): 70.5 (2009), 75.6 (2010), 77.5 (2011), 78.6 (2012), 75.8 (2013), 72.4 (2014), 57.6 (2019), 32.8 (2029) - Alternative scenario A5 (Baseline with US$60 million loan from China and growth impact) — PV of Debt-to-GDP Ratio (percent): 70.5 (2009), 75.4 (2010), 77.0 (2011), 77.9 (2012), 74.3 (2013), 70.3 (2014), 53.7 (2019), 29.2 (2029) - Baseline PV of Debt-to-Revenue Ratio (percent): 127.1 (2009), 136.4 (2010), 136.6 (2011), 132.8 (2012), 130.3 (2013), 123.7 (2014), 95.6 (2019), 50.3 (2029) - A4 (US$60 million loan from China): 127.1 (2009), 143.7 (2010), 151.2 (2011), 154.3 (2012), 152.1 (2013), 145.5 (2014), 115.9 (2019), 66.3 (2029) - A5 (US$60 million loan + growth impact): 127.1 (2009), 143.3 (2010), 150.4 (2011), 153.1 (2012), 149.5 (2013), 141.6 (2014), 108.8 (2019), 59.3 (2029) - Debt service-to-revenue ratio (baseline): 13.8 (2009), 10.4 (2010), 10.9 (2011), 10.4 (2012), 10.1 (2013), 12.5 (2014), 8.8 (2019), 4.8 (2029) - A4: 13.8 (2009), 10.4 (2010), 11.1 (2011), 10.7 (2012), 10.6 (2013), 13.0 (2014), 10.8 (2019), 6.8 (2029) - A5: 13.8 (2009), 10.4 (2010), 11.1 (2011), 10.7 (2012), 10.4 (2013), 12.7 (2014), 10.2 (2019), 6.2 (2029) ### External debt sustainability (selected metrics and scenarios) - External debt (nominal, percent of GDP): 67.7 (2006), 63.6 (2007), 58.5 (2008), 59.5 (2009), 59.6 (2010), 58.7 (2011), 57.0 (2012), 53.7 (2013), 48.9 (2014), 32.4 (2019), 13.4 (2029) - Change in external debt: -1.2 (2006), -4.1 (2007), -5.1 (2008), 1.0 (2009), 0.1 (2010), -0.8 (2011), -1.7 (2012), -3.4 (2013), -4.8 (2014), -3.0 (2019), -1.1 (2029) - Identified net debt-creating flows: 2.9 (2006), 4.6 (2007), 12.9 (2008), 18.9 (2009), 14.3 (2010), 10.5 (2011), 9.2 (2012), 8.3 (2013), 6.8 (2014), 8.0 (2019), 10.0 (2029) - PV of external debt (percent of GDP, selected): 46.4 (2008), 46.9 (2009), 48.6 (2010), 48.3 (2011), 47.2 (2012), 44.9 (2013), 40.6 (2014), 28.3 (2019), 19.0 (2029) - PV of PPG external debt (percent of exports): 117.4 (2008), 133.1 (2009), 135.4 (2010), 130.8 (2011), 127.2 (2012), 120.5 (2013), 108.8 (2014), 76.1 (2019), 51.9 (2029) - Debt service-to-exports ratio (percent): 11.2 (2006), 10.2 (2007), 10.2 (2008), 16.1 (2009), 11.7 (2010), 11.4 (2011), 10.1 (2012), 9.4 (2013), 12.4 (2014), 8.5 (2019), 5.0 (2029) - Total gross financing need (Millions of U.S. dollars): 34.8 (2006), 42.6 (2007), 65.9 (2008), 89.6 (2009), 70.3 (2010), 62.8 (2011), 59.2 (2012), 56.6 (2013), 57.1 (2014), 67.6 (2019), 105.7 (2029) ### Key macroeconomic assumptions (selected) - Real GDP growth (percent): 3.6 (2006), 2.9 (2007), 1.4 (2008), 0.9 (2009), 2.8 (2010), 0.5 (2011), 1.9 (2012), 2.7 (2013), 3.0 (2014), 3.0 (2019), 3.0 (2029) - GDP deflator in US dollar terms (change, percent): 3.1 (2006), 4.2 (2007), 2.3 (2008), 2.5 (2009), 1.2 (2010), 0.8 (2011), 1.0 (2012), 1.5 (2013), 1.5 (2014), 1.5 (2019), 1.5 (2029) - Effective interest rate (percent): 2.5 (2006), 2.1 (2007), 2.1 (2008), 3.4 (2009), 1.3 (2010), 2.1 (2011), 3.0 (2012), 2.3 (2013), 2.3 (2014), 2.3 (2019), 2.3 (2029) - Growth of exports of G&S (US dollar terms, percent): 11.7 (2006), 2.4 (2007), -2.3 (2008), 0.3 (2009), 8.7 (2010), -9.6 (2011), 5.0 (2012), 7.1 (2013), 5.0 (2014), 5.1 (2019), 4.6 (2029) - Growth of imports of G&S (US dollar terms, percent): 1.4 (2006), 19.6 (2007), 14.6 (2008), 5.1 (2009), 9.2 (2010), -11.6 (2011), -0.6 (2012), 3.8 (2013), 4.5 (2014), 4.7 (2019), 2.6 (2029) - Government revenues (excluding grants, percent of GDP): 41.6 (2006), 42.3 (2007), 43.2 (2008), 44.2 (2009), 44.5 (2010), 44.3 (2011–2019), 44.2 (2029) - Aid flows (Millions of US dollars): 24.7 (2006), 39.9 (2007), 42.2 (2008), 41.5 (2009), 31.2 (2010), 27.8 (2011), 27.8 (2012), 24.2 (2013), 25.0 (2014), 31.2 (2019), 48.4 (2029) - o/w Grants: same as Aid flows figures above Notes: Sources: Fund staff simulations and projections. Definitions and assumptions are provided in the tables. *Source: INTERNATIONAL MONETARY FUND — DOMINICA: Staff Report for the 2010 Article IV Consultation, Informational Annex, April 27, 2010.* ### Appendix I. Dominica: Fund Relations ### Appendix I. Dominica: Fund Relations ### I. Membership Status - Joined 12/12/78; Article VIII ### II. General Resources Account - Quota: 8.20 SDR Million; Percent of Quota: 100.00 - Fund holdings of currency: 10.24 SDR Million; Percent of Quota: 124.90 - Reserve position in Fund: 0.01 SDR Million; Percent of Quota: 0.11 ### III. SDR Department - Net cumulative allocation: 7.84 SDR Million; Percent of Allocation: 100.00 - Holdings: 6.94 SDR Million; Percent of Allocation: 88.57 ### IV. Outstanding Purchases and Loans - Emergency Assistance: 2.05 SDR Million; Percent of Quota: 25.00 - ESF RAC Loan: 3.28 SDR Million; Percent of Quota: 40.00 - ECF Arrangements: 7.12 SDR Million; Percent of Quota: 86.88 ### V. Latest Financial Arrangements (SDR Million) - ECF - Approval Date: 12/29/03 - Expiration Date: 12/28/06 - Amount Approved: 7.69 - Amount Drawn: 7.69 - Stand-By - Approval Date: 08/28/02 - Expiration Date: 01/02/04 - Amount Approved: 2.97 - Amount Drawn: 2.97 - SAF - Approval Date: 11/26/86 - Expiration Date: 11/25/89 - Amount Approved: 2.80 - Amount Drawn: 2.80 Projected Payments to the Fund on an Obligation Basis (SDR Million)1: - Forthcoming Principal by year: - 2010: 0.66 - 2011: 1.84 - 2012: 2.56 - 2013: 1.79 - 2014: 1.04 - Forthcoming Charges/Interest by year: - 2010: 0.02 - 2011: 0.03 - 2012: 0.03 - 2013: 0.02 - 2014: 0.02 - Total by year: - 2010: 0.68 - 2011: 1.87 - 2012: 2.60 - 2013: 1.81 - 2014: 1.05 1 Based on existing use of resources and present holdings of SDRs. ### VI. Exchange Rate Arrangement - Dominica is a member of the Eastern Caribbean Currency Union (ECCU) with a common central bank (Eastern Caribbean Central Bank) and currency (Eastern Caribbean dollar). - Since July 1976, the Eastern Caribbean dollar has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar. ### Safeguards Assessment (ECCB) - Under the Fund's safeguards assessment policy, the Eastern Caribbean Central Bank (ECCB) is subject to a full safeguards assessment under a four year cycle. - Most recent assessment: completed in July 2007. - Assessment conclusions and observations: - ECCB continues to have appropriate control mechanisms in place. - Controls have strengthened since the first assessment in 2003. - ECCB management emphasizes good governance and sound controls. - ECCB has enhanced transparency and accountability, including publication of financial statements that comply with International Financial Reporting Standards. - The assessment made some recommendations to sustain the ECCB's safeguards framework going forward. ### VII. Article IV Consultation - Last Article IV consultation concluded by the Executive Board on July 30, 2008. - Relevant document: IMF Country Report No. 08/310. - Dominica is on a 12-month cycle. ### VIII. Technical Assistance - December 2009 and August 2009: CARTAC mission provided technical assistance on National Income Accounts Statistics aimed at rebasing the GDP constant price estimates to 2006. - October 2009: MCM mission provided technical assistance on improving the debt management capacity of the government. - January/February 2009: FAD mission provided technical assistance on customs and tax administration reforms including capacity building, organizational restructuring, and considerations of revenue authority (RA) options. - September 2007: FAD mission reviewed tax policy aspects of VAT and excises and provided reform advice. - January 2007: FAD and CARTAC mission provided technical assistance on revenue administration and tax policy. - 2006: MCM mission provided technical assistance in drafting an action plan for AID Bank. - 2005: MCM mission provided technical assistance in strengthening the supervisory framework for AML/CFT in the nonbank sector. - FAD missions provided technical assistance on tax policy and administration, and social security reform. Most recent FAD missions included: - Pension reform options (2005) - TA on fiscal responsibility laws (2004) - VAT implementation (1999) - Urban property taxation (1997) - Tax policy and administration, and expenditure control (1995) - CARTAC in Barbados has complemented MCM and FAD assistance. - LEG has provided assistance with drafting and interpretation of VAT legislation. ### IX. FSAP and Financial Sector Work - A joint IMF/World Bank team assessed the financial sector of ECCB member states in two missions—September 1–19 and October 20−31, 2003. - Principal objectives: - Assist authorities in assessing development needs and opportunities for the financial sector. - Identify potential vulnerabilities of financial institutions and markets to macroeconomic shocks. - Identify risks to macroeconomic stability from weaknesses in the financial sector. - A detailed assessment of Dominica's AML/CFT regimes was conducted in September 2003 by CFATF. - The Financial System Stability Assessment (FSSA) was discussed by the Executive Board on May 5, 2004, and subsequently published on the IMF’s external website, including the Report on the Observance of Standards and Codes (ROSC) on Banking Supervision. *Appendix I. Dominica: Fund Relations (As of March 31, 2010).* ### Appendix IV. Dominica: Statistical Issues ### Appendix IV. Dominica: Statistical Issues ### Main assessment and priorities - While data provision for surveillance purposes is broadly adequate, weaknesses in coverage, accuracy, frequency, and timeliness continue to hamper effective economic analysis and policy formulation. - Priority should be given to compilation and dissemination of national accounts, in particular tourism, agriculture and labor statistics. - Despite progress, significant weaknesses remain in the compilation of fiscal accounts and the balance of payments. - Dominica participates in the General Data Dissemination System, but the metadata for national accounts, external sector and government finance statistics have not been updated since December 2002. ### Real sector — findings and ongoing work - Annual nominal GDP data are compiled using the production and the expenditure approaches. Estimates by economic activity are compiled using production approach at 1990 prices. - GDP estimates are available about four months after the end of the year. Data are revised frequently and are usually finalized with a two-year lag following completion of the National Accounts Survey. - Ongoing project to improve national accounts: rebasing to 2006 and expanding the basket with the Assistance of CARTAC and the ECCB. The newly revised GDP is expected to be released by February 2010. - CPI data are compiled with a two-month lag. The weights are based on the 1997/1998 Household Expenditure Survey. - There is a program to develop export and import price indices (XMPIs), but a shortage of staff working on price statistics limits developments in CPI methodology and the likelihood that XMPIs will be developed in the near future. - Data limitations: - Employment data are limited. - No official data on producer prices or wages in the private sector. - Results of the 2001 population census have not yet been published. ### Government finance — shortcomings and reforms - Statistical capacity problems affect the timely production of quality government finance statistics; data are subject to frequent revisions stemming in part from omissions and misclassifications. - Central government operations data are incomplete and must be supplemented with additional information from external sources; some operations are undertaken outside the consolidated fund, including certain investment spending, loan and grant receipts, and on-lending and transfers to public enterprises. - Capital expenditure data recorded by the Treasury must be supplemented with additional donor financing information because the public sector investment program (PSIP) data are not timely. Delays in reporting PSIP data reportedly stem from reporting delays from the line ministries. - Ongoing initiatives: - Effort to automate the expenditure execution process. A new automation technology was installed in all line ministries in 2005: all local purchase orders (LPOs) are generated electronically and tracked; commitments are charged against a specific budget allocation once LPOs are generated; all ministries and suppliers are compelled to use the new system. - Financing and debt data: - Only limited financing data are available. - Progress has been made in improving measurement of the government's debt, but concerns remain about under-recording of government commitments. - Authorities do not provide consolidated nonfinancial public sector data; data for the rest of the public sector—Dominica Social Security and the public enterprises—must be obtained directly from each entity during Fund Article IV consultation missions. - No government finance data are reported to STA for publication in the International Financial Statistics (IFS) or the Government Finance Statistics (GFS) Yearbook. ### Monetary statistics - Monetary statistics are compiled and reported to the Fund by the ECCB on a monthly basis based on a standardized report form since July 2006. - Institutional coverage needs improvement by including the accounts of mortgage companies, building societies, credit unions, and insurance companies. - Close coordination between the ECCB and the single regulatory unit (which supervises financial corporations other than those licensed under the Banking Act) is crucial. ### Balance of payments and external debt - Balance of payments (BOP) data are compiled by the ECCB on an annual basis but are not reported in the format recommended in the fifth edition of the IMF’s Balance of Payments Manual. - Data reported to STA are becoming more timely, but still suffer from relatively numerous and volatile errors and omissions. - External debt data: - The Ministry of Finance maintains a database on public and publicly-guaranteed external loans with detailed and reasonably current information on disbursements, debt service, and debt stocks. - The Treasury maintains data on bonds placed abroad. - Data from the two databases are not consolidated, requiring further adjustments to measure total debt stock. - Information on payments by creditor (actual and scheduled) should be available to compilation agencies at least on a monthly basis to produce timely debt stock data. ### Key statistical policy recommendations (extracted from source) - Give priority to improving compilation and dissemination of national accounts, especially tourism, agriculture, and labor statistics. - Update metadata for national accounts, external sector, and government finance statistics in the General Data Dissemination System (last updated December 2002). - Strengthen staff capacity in price statistics to support CPI methodology improvements and development of export and import price indices (XMPIs). - Improve completeness and timeliness of government finance statistics by: - Consolidating data on operations outside the consolidated fund. - Improving timeliness of PSIP reporting from line ministries. - Consolidating the Ministry of Finance and Treasury external debt/bond databases. - Broaden institutional coverage of monetary statistics to include mortgage companies, building societies, credit unions, and insurance companies, with coordination between ECCB and the single regulatory unit. - Improve BOP compilation to align with the fifth edition of the IMF’s Balance of Payments Manual and reduce errors and omissions. - Make creditor payment schedules (actual and scheduled) available monthly to compilation agencies. ### Selected findings, projections, and key statistics from the Article IV material (as reported) - Real Gross Domestic Product: estimated to have declined by only 0.3 percent in 2009. - Total tourism receipts: contracted by 16 percent during 2009. - FDI inflows: dropped by 51 percent in 2009. - Remittances inflows: dropped by 18 percent in 2009. - Fiscal position: overall fiscal position remained in surplus during FY 2008/09 (July–June) and so far in FY 2009/10, reflecting strong performance of the VAT introduced in 2006. - Consumer Price Index (CPI) increased by 4.4 percent (yoy) through February 2010; on a period average basis, inflation was close to zero. - External current account deficit: decreased to 28 percent of GDP in 2009 (was 32 percent of GDP in 2008). - IMF financing: Executive Board on July 10, 2009 approved a disbursement of SDR 3.28 million (about US$5.1 million) under the Rapid-Access Component of the Exogenous Shocks Facility. - Banking sector (12 months to December 2009): - Banking sector credit to the private sector grew by 6.9 percent. - Broad money grew by 10 percent. - Near- to medium-term growth outlook: "expected to grow by 1½ percent in 2010." (text) - Table projections and indicators (selected, as reported in the source table): - Real GDP: 2006 4.8; 2007 2.5; 2008 3.2; 2009 -0.3; 2010 1.4. - GDP deflator: 2006 -0.1; 2007 2.1; 2008 2.6; 2009 -0.3; 2010 2.0. - Consumer prices (end of period): 2006 1.8; 2007 6.0; 2008 2.1; 2009 3.2; 2010 1.5. - Net foreign assets of the banking system: 2006 15.6; 2007 5.7; 2008 3.9; 2009 6.0; 2010 3.0. - Liabilities to the private sector (M2): 2006 9.9; 2007 9.7; 2008 4.3; 2009 10.0; 2010 5.6. - Central government (In percent of GDP) — Revenue: 2006 32.7; 2007 33.4; 2008 34.6; 2009 35.6; 2010 35.7. - Grants: 2006 7.5; 2007 11.3; 2008 11.6; 2009 11.3; 2010 8.2. - Capital expenditure and net lending: 2006 9.9; 2007 14.2; 2008 16.0; 2009 16.0; 2010 15.4. - Primary balance: 2006 5.8; 2007 4.6; 2008 3.1; 2009 3.0; 2010 1.2. - Overall balance: 2006 3.6; 2007 2.2; 2008 0.9; 2009 0.8; 2010 -1.2. - Nonfinancial public sector debt (gross): 2006 95.7; 2007 90.9; 2008 84.9; 2009 83.8; 2010 83.1. - Current account balance (percent of GDP): 2006 -15.7; 2007 -25.0; 2008 -31.8; 2009 -28.1; 2010 -25.4. - Current account balance including net (percent of exports of goods and nonfactor services): 2006 -6.9; 2007 -15.8; 2008 -16.7; 2009 -13.3; 2010 -14.0. - External public debt service: 2006 11.2; 2007 10.6; 2008 10.3; 2009 12.9; 2010 15.3. - Calendar year nominal GDP at market prices (EC$): 2006 856; 2007 921; 2008 984; 2009 978; 2010 1,012. - Net imputed international reserves (U.S. dollars millions; end-of-period): 2006 63.0; 2007 60.4; 2008 55.1; 2009 64.5; 2010 64.5. *Source: Appendix IV. Dominica: Statistical Issues (IMF staff report content provided).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10261.pdf_