Press Release No. 06/218

Press Release: Statement by IMF Staff Mission to Dominica

October 10, 2006

An International Monetary Fund (IMF) staff mission issued the following statement on October 6 in Roseau:

"An IMF mission headed by Mr. Patrick Njoroge visited Dominica between September 28 and October 6, 2006 to conduct discussions for the seventh review of the program supported by the Poverty Reduction and Growth facility (PRGF) arrangement. The mission received excellent cooperation from the government and benefited from very useful discussions with the Cabinet, the Financial Secretary, other senior government officials, and representatives of the wider community. The discussions focused on recent economic performance, fiscal policy, and implementation of structural reforms.

"Macroeconomic performance has strengthened further in 2006. Data confirm that economic activity is expanding strongly and is more broad-based. Domestic demand has remained buoyant; tax revenues and credit continue to grow robustly. Construction has also picked up strongly, pointing to a rebound of private sector confidence. Favorable indicators were noted for activity in the financial sector, hotels and restaurants, real estate, and transportation. However, weaknesses have remained in non-banana agricultural exports and manufacturing output, but an overall strengthening of the export sectors is now apparent; banana production and visitor arrivals have rebounded, and tourist receipts are substantially higher as hotel visitors and student enrollment at the offshore schools have increased. On this basis, real GDP growth is expected to rise from 3½ percent in 2005 to 4 percent in 2006.

"Policy implementation has remained commendably strong. All quantitative targets for June 2006 under the program were met. Fiscal performance has been very good throughout FY 2005/06. Revenue performance has been exceptionally strong due in part to transitory factors and the buoyant economy. Noninterest current expenditures have been kept at about target, despite higher outlays for utilities and gratuities for retirees. Capital spending has been in line with the target, despite slow project execution earlier in the year. The stance of the FY 2006/07 budget is welcome, which is consistent with the medium-term sustainability of public finances and debt, and, as has been the case thus far, the mission expects continued strong implementation. The mission also notes the government's efforts to complete its debt restructuring effort, and its intention to continue to engage the remaining creditors in good-faith negotiations.

"Structural reforms have been advanced. Key reforms include restoring social security sustainability, amending the Electricity Supply Act and the related legislation, implementing the Value Added Tax, improving public expenditure management, streamlining of the public sector, and strengthening the financial sector. These reforms are expected to play an important role in safeguarding the realized gains and bolstering the prospects for sustainable private sector-led growth and poverty reduction. The mission encourages the government to complete the implementation of these reforms, as well as to put in place those measures that have been delayed.

"The mission notes the government's commitment to implementing its medium-term strategy for growth and poverty reduction, as articulated in the Growth and Social Protection Strategy. It recommends close cooperation with donors, to facilitate their timely support for these efforts.

"Completion of the review by the Board in the next few months will make available the last disbursement to Dominica under the program of about SDR 1.2 million or US$ 1.7 million.

"The IMF mission wishes the government and the people of Dominica every success in their endeavors."