Press Release: IMF Executive Board Completes Third and Fourth Reviews Under Dominica's PRGF Arrangement and Reviews Noncomplying Disbursement
March 8, 2005
The Executive Board of the International Monetary Fund (IMF) has completed the third and fourth reviews of Dominica's performance under its three-year Poverty Reduction and Growth Facility (PRGF) arrangement.
Dominica's macroeconomic performance under the program has remained very strong. All quantitative performance criteria were met during the June-December 2004 period, except for the continuous performance criterion on nonaccumulation of external payment arrears..
The Board also reviewed a noncomplying disbursement under the PRGF arrangement, which arose as a result of misreporting on the observance of the continuous performance criterion on nonaccumulation of external payments arrears due to administrative oversights. The Board was satisfied with the authorities' swift actions to correct this problem and granted a waiver for the noncomplying disbursement.
As a result of the Executive Board review, Dominica can draw an amount equivalent to SDR 1.2 million (about US$1.8 million) under the arrangement, which will bring total disbursements to SDR 4.2 million (about US$6.4 million). The Executive Board approved Dominica's three-year PRGF arrangement on December 29, 2003 (see Press Release No. 03/228) for an amount equivalent to SDR 7.7 million (about US$11.7 million).
Following the Executive Board's discussion of Dominica, on March 7, 2005, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair, said:
"The Dominican authorities deserve much credit for the continued successful implementation of their economic program. Significant fiscal consolidation has been achieved ahead of schedule, and substantial progress has been made in debt restructuring. As a result, recent macroeconomic trends are positive. In particular, the economic recovery is gathering strength, notwithstanding the earthquake late last year, and inflation has declined.
"The conduct of fiscal policy, the corner-stone of Dominica's adjustment program, has been especially commendable. Higher-than-anticipated revenues have been saved, providing a budgetary cushion which the authorities appropriately have decided to use toward meeting pressing rehabilitation and reconstruction needs following the earthquake, which caused an estimated damage to public infrastructure amounting to 7 percent of GDP. Less urgent earthquake-related projects will be incorporated into the government's medium-term investment program which, together with strengthened public expenditure management, will help ensure overall budgetary discipline going forward.
"Dominica continues to make progress in resolving its debt problems. The authorities have followed international best practice in seeking to pre-emptively restructure Dominica's debt, and, for the most part, creditors have responded very favorably. The authorities continue to maintain an open dialogue with creditors who have so far chosen to remain outside the restructuring process, and continue to make good-faith efforts to reach collaborative agreements with them. In this context, these creditors are encouraged to work with the authorities towards a timely agreement.
"Despite the substantial progress that has already been achieved, the task of placing Dominica's public finances on a firm footing is not yet complete. The debt restructuring is still ongoing, a medium-term economic growth strategy remains to be finalized, and the economy needs to be shielded from the impact of natural disasters. Accordingly, the authorities plan to undertake a comprehensive review of their medium-term fiscal framework, taking into account potential negative shocks.
"Dominica's remaining structural reform agenda for the medium-term remains large but appropriate for consolidating the gains in macroeconomic stabilization and achieving sustained high growth. Specific measures included in the program at this time are steps to improve the fiscal framework and strengthen the financial sector. Going forward, the government that takes office after the elections will need to continue to push ahead vigorously with the implementation of the reform agenda. For its part, the international donor community will need to continue to provide timely technical and financial assistance in support of the authorities' program objectives, " Mr. Carstens said.
On the issue of the noncomplying disbursement, Mr. Carstens said:
"The Executive Board regretted the Dominican authorities' failure to ensure the accuracy of information relating to the continuous performance criterion on nonaccumulation of external arrears, which gave rise to a noncomplying disbursement under the PRGF arrangement. The Board took note of the authorities' explanation that the missed payments on external debt were due to an oversight, and of the very prompt settlement of the payments upon the discovery of the errors. In view of the minor amount of the arrears and the additional corrective actions taken to strengthen Dominica's monitoring capabilities in this area, the Executive Board decided to grant a waiver for the nonobservance of the performance criterion on external payments arrears."