Press Release: Statement by an IMF Mission to St. Kitts and Nevis

IMF News, June 26, 2012

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Canonical URL: Press Release: Statement by an IMF Mission to St. Kitts and Nevis

IMF staff mission to St. Kitts and Nevis visited Basseterre during June 4-18 to undertake the third review of the program under the Stand-By Arrangement (SBA) approved by the Fund’s Executive Board on July 27, 2011.
The mission’s focus:
- assess the quantitative performance at end-March 2012 under the SBA;
- review the ongoing macroeconomic and structural policies;
- examine the prospects for the remainder of the year.

All quantitative performance criteria were met at end-March 2012 despite weaker first-quarter economic activity.
Economic growth for 2012 has been revised downward to zero percent, reflecting the impact of the uncertain global economic environment and a still declining construction sector.
Modest growth in tourist arrivals noted, but domestic economic activity recovery described as hesitant and worrisome.

Softer-than-expected domestic demand resulted in lower imports that contributed to a narrowing of the external current account deficit.
Inflationary pressures abated during the first quarter reflecting lower international commodity prices.

Buoyant non-tax revenue and higher-than expected income tax receipts more than offset a slight decline in taxes on international trade.
Expenditure restraint, particularly on capital outlays, contributed to:
- a better-than-expected overall fiscal balance;
- a reduction in budgetary arrears.

Structural benchmarks at end-March 2012 were met.
Proposals presented to Cabinet:
- reform of the social safety nets;
- rationalization of the liquefied petroleum gas subsidies.
These proposals are described as important first steps toward consolidating the variety of social assistance and better targeting programs to the most vulnerable.

Notable progress with debt restructuring aimed at restoring debt sustainability:
- new bonds to complete the debt exchange have been issued and are being serviced as scheduled;
- an agreement to reschedule the debt owed to members of the Paris Club was reached in May 2012, which would extend the repayment period to twenty years with a seven-year grace period;
- the shareholders’ agreement for the special purpose vehicle (SPV) to facilitate the domestic debt for land swap has been signed and the company incorporated;
- negotiations with other domestic creditors are underway.
Treasury bills are excluded from the debt restructuring exercise.

The mission and the authorities agreed on a draft memorandum of economic and financial policies that maintains the fiscal targets and structural benchmarks for 2012.
The mission would recommend to the IMF Executive Board completion of the third review under the Stand-by Arrangement.
The IMF Board is expected to discuss the third review under the SBA in early August 2012.
The authorities reiterated strong commitment to the home-grown economic program aimed at restoring fiscal and debt sustainability.
Identified risks and policy discussion points:
- risks related to the uncertain global economy;
- the hesitant recovery in domestic economic activity;
- macroeconomic policies to spur growth discussed, including expenditure management to secure fiscal space for priority infrastructure and social projects; tax policy; and the environment for doing business.

IMF Press Release No. 12/228, June 26, 2012.