## IMF Executive Board Concludes 2018 Article IV Consultation with St. Kitts and Nevis _IMF News, November 21, 2022_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2018 Article IV Consultation with St. Kitts and Nevis](https://www.imf.org/en/news/articles/2022/11/21/pr22400-imf-executive-board-concludes-2018-article-iv-consultation-with-st-kitts-and-nevis) ## Other formats - [Markdown version](/en/news/articles/2022/11/21/pr22400-imf-executive-board-concludes-2018-article-iv-consultation-with-st-kitts-and-nevis/index.md) - [Structured JSON version](/en/news/articles/2022/11/21/pr22400-imf-executive-board-concludes-2018-article-iv-consultation-with-st-kitts-and-nevis/index.json) - [Bundle manifest](/en/news/articles/2022/11/21/pr22400-imf-executive-board-concludes-2018-article-iv-consultation-with-st-kitts-and-nevis/bundle-manifest.json) ## Bibliographic details - Published: November 21, 2022 --- ### Overview and context - On September 14, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with St. Kitts and Nevis. - Press Release No. 22/400; publication date on the landing page: November 21, 2022. - Key challenges identified: declining Citizenship By Investment (CBI) inflows, financial sector vulnerabilities, tighter global financial conditions, weather‑related shocks, and risks from regional financial challenges including loss of Corresponding Banking Relationships (CBRs). ### Recent economic performance (2017 and 2018 developments) - Growth decelerated marginally in 2017, linked to continued decline in CBI inflows and slower construction activity. - Consumer inflation was low in 2017, partly due to a small contraction in food prices. - The overall fiscal balance remained in surplus in 2017 but deteriorated markedly since its 2013 peak. - Debt-to-GDP ratio increased marginally from the previous year. - Current account deficit remained high and only marginally declined in 2017: decline in CBI receipts was more than offset by growing tourism receipts and a significant decrease in imports. - Foreign reserves at the ECCB remained at comfortable levels, well above various reserve-adequacy metrics. - Banking sector: reported capital and liquidity ratios well above regulatory minimums, but elevated NPLs and risks including delays in completing the debt-land swap arrangement and loss of CBRs. ### Medium-term projections and risks - Medium-term growth projection under current policies: fluctuate around 3 percent. - Projection: improve in 2018-20 as implementation of FDI projects in the tourism sector accelerates, then decelerate to around 2.7 percent over time as momentum slows. - Current account deficit projected to worsen over the medium term, driven by higher FDI-related imports associated with tourism projects and a tapering of CBI inflows, partially offset by growth in tourism receipts. - Downside risks: - Lower than projected CBI inflows. - Further delays in resolving the debt-land swap. - Failure to tackle worsening financial sector vulnerabilities. - Exposure to major natural disasters. - A tighter financial environment from higher U.S. interest rates. - Spillovers from regional financial challenges, including loss of CBRs. - Upside scenarios: - Stronger CBI inflows. - Higher growth in advanced economies supporting growth relative to the baseline. ### Executive Board assessment and policy recommendations - Directors welcomed recent good macroeconomic performance but noted slowed growth and a moderate medium‑term outlook. - Fiscal policy: - Absent corrective policies, public debt expected to increase over the medium term as CBI revenue declines. - A significant fiscal adjustment is needed to reverse debt dynamics. - Adjustment could focus on both revenue and expenditure measures, including: - Streamlining tax incentives. - Restructuring activities funded by the Sugar Industry Diversification Foundation. - Containing the wage bill through a multi‑year framework. - Recommendation to establish a Growth and Resilience Fund (GRF) linked to a fiscal responsibility framework: - GRF access could be used to respond to adverse shocks and to support natural disaster resilience investment projects. - GRF should have a sovereign wealth fund structure in line with international best practices. - Financial sector and CBI program governance: - Priority to resolve high level of nonperforming loans (NPLs). - Operationalize the Eastern Caribbean Asset Management Corporation and a credit bureau. - Strengthen foreclosure and insolvency legislation. - Implement IFRS9 and new regulations on provisioning and valuation. - Closely monitor banking system capitalization levels. - Accelerate land sales under the debt‑land swap arrangement to mitigate fiscal and financial contingent liabilities. - Remain vigilant to CBR risks, enhance the AML/CFT regime, and strengthen transparency of the CBI program. - Structural reforms: - Comprehensive structural reforms recommended to strengthen potential for diversified and inclusive growth and address competitiveness challenges. - Support ongoing efforts to improve ease‑of‑doing business, skills development, growth in tourism and other sectors, and strengthen social policies and security. - Improve labor productivity and promote trade integration at the regional and international level. ### Selected economic and financial indicators (2015–20; excerpted figures) - National income and prices - Real GDP (factor cost) 1/: 2015: 2.7; 2016: 2.9; 2017: 2.1; 2018 (Est.): 3.5 - Consumer prices, end-of-period 2/: 2015: -2.4; 2016: 0.0; 2017: 0.8; 2018 (Est.): 2.0 - Consumer prices, period average 2/: 2015: -2.3; 2016: -1.2; 2017: 0.4; 2018 (Est.): 1.4 - Real effective exchange rate appreciation (+) (end-of-period): 2015: -2.8; 2016: -0.4; 2017: -2.5; 2018: … - Banking system (change, in relation to broad money at the beginning of the period) 3/ - Change in net foreign assets: 2015: -5.3; 2016: -1.3; 2017: -7.8; 2018 (Est.): 3.6 - Credit to public sector: 2015: -0.8; 2016: -5.1; 2017: 0.7; 2018 (Est.): -3.7; 2019 (Proj.): 2.5; 2020 (Proj.): 3.2 - Credit to private sector: 2015: 1.5; 2016: 1.1; 2017: 1.2; 2018 (Est.): 1.3 - Broad money: 2015: -4.0; 2016: -3.4; 2017: 0.9; 2018 (Est.): 5.2; 2019 (Proj.): 4.5 - Public sector (In percent of GDP) 4/ - Total revenue and grants: 2015: 36.3; 2016: 32.2; 2017: 30.2; 2018 (Est.): 32.7; 2019 (Proj.): 27.6; 2020 (Proj.): 26.8 - o/w Tax revenue: 2015: 20.1; 2016: 19.3; 2017: 19.1; 2018 (Est.): 19.4 - o/w CBI fees: 2015: 11.6; 2016: 6.8; 2017: 5.7; 2018 (Est.): 7.4; 2019 (Proj.): 2.6 - Total expenditure and net lending: 2015: 31.0; 2016: 28.2; 2017: 29.6; 2018 (Est.): 29.2; 2019 (Proj.): 30.4; 2020 (Proj.): 30.3 - Current expenditure: 2015: 24.4; 2016: 24.0; 2017: 24.8; 2018 (Est.): 24.6; 2019 (Proj.): 26.1; 2020 (Proj.): 26.2 - Capital expenditure and net lending: 2015: 6.6; 2016: 4.2; 2017: 4.8; 2018 (Est.): 4.6; 2019 (Proj.): 4.3; 2020 (Proj.): 4.3 - Primary balance: 2015: 7.3; 2016: 5.6; 2017: 5.1; 2018 (Est.): -1.8 - Overall balance: 2015: 5.3; 2016: 4.0; 2017: 0.5; 2018 (Est.): -3.5 - Overall balance (less CBI inflows) 5/: 2015: -5.5; 2016: -3.0; 2017: -5.4 - Foreign financing: 2015: -6.8; 2016: -1.9; 2017: -0.9 - Domestic financing: 2015: -0.1; 2016: 3.3; 2017: 3.9 - Extraordinary financing 6/: 2015: 0.3 - Total public debt (end-of-period) 7/: 2015: 66.1; 2016: 61.5; 2017: 62.9; 2018 (Est.): 63.6; 2019 (Proj.): 63.4; 2020 (Proj.): 63.3 - Public debt service (percent of total revenue and grants): 2015: 24.5; 2016: 11.2; 2017: 8.5; 2018 (Est.): 7.6; 2019 (Proj.): 8.6; 2020 (Proj.): 9.6 - External sector - External current account balance: 2015: -9.2; 2016: -12.0; 2017: -11.2; 2018 (Est.): -10.9; 2019 (Proj.): -17.3; 2020 (Proj.): -17.8 - Trade balance: 2015: -26.5; 2016: -30.7; 2017: -27.9; 2018 (Est.): -30.4; 2019 (Proj.): -32.4 - Services, net: 2015: 27.8; 2016: 26.9; 2017: 25.1; 2018 (Est.): 27.4; 2019 (Proj.): 23.0; 2020 (Proj.): 22.6 - o/w Tourism receipts: 2015: 32.6; 2016: 33.4; 2017: 37.6; 2018 (Est.): 38.0; 2019 (Proj.): 38.3; 2020 (Proj.): 38.6 - FDI (net): 2015: 13.6; 2016: 13.3; 2017: 8.9; 2018 (Est.): 10.2; 2019 (Proj.): 12.8; 2020 (Proj.): 12.7 - External public debt (end-of-period): 2015: 25.2; 2016: 20.2; 2017: 16.1; 2018 (Est.): 14.2; 2019 (Proj.): 12.2; 2020 (Proj.): 10.4 - (In percent of exports of goods and nonfactor services) External public debt service: 2015: 3.8; 2016: 3.0; 2017: 44.9; 2018 (Est.): 38.7; 2019 (Proj.): 31.5; 2020 (Proj.): 26.6; 2021 (Proj.): 24.9; 2022 (Proj.): 21.5 - Memorandum items - Net international reserves, end-of-period (in millions of U.S. dollars): 2015: 280.4; 2016: 312.8; 2017: 358.2; 2018 (Est.): 354.5; 2019 (Proj.): 350.7 - (in percent of broad money): 2015: 25.0; 2016: 29.0; 2017: 34.4; 2018 (Est.): 34.1; 2019 (Proj.): 32.1 - Holdings of SDRs, in millions of U.S. dollars: 2015: 13.8; 2016: 14.8; 2017: 15.8; 2018 (Est.): 16.8; 2019 (Proj.): 17.8 - Nominal GDP at market prices (in millions of EC$): 2015: 2,528; 2016: 2,591; 2017: 2,602; 2018 (Est.): 2,714; 2019 (Proj.): 2,868; 2020 (Proj.): 3,031 *Source: IMF Executive Board press release "IMF Executive Board Concludes 2018 Article IV Consultation with St. Kitts and Nevis."* --- ## References - [St. Kitts and Nevis and the IMF](http://www.imf.org/external/country/KNA/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2022/11/21/pr22400-imf-executive-board-concludes-2018-article-iv-consultation-with-st-kitts-and-nevis_