IMF, Antigua and Barbuda reach initial deal

The opposition Antigua Labour Party (ALP) has warned of tough times ahead for citizens of Antigua and Barbuda under the plan unveiled by the government.(file photo)

ST JOHN’S, Antigua, October 19, 2009 – The Antigua and Barbuda government is close to a final deal with the International Monetary Fund (IMF) that will demand reduction in government spending, including a 20 per cent cut in the amount paid on wages and salaries by 2012. And Finance Minister Harold Lovell has cautioned residents to prepare to make sacrifices.

But the amount of money which Antigua and Barbuda will get from the IMF has not been finalised.

“We will go back to the headquarters in Washington where the agreement would be reviewed and we expect to return in the coming weeks to finalise and conclude the agreement,” reported IMF Mission Chief Wendell Samuel at a press conference held with Lovell. “There are some areas in which some fine-tuning still needs to be done but we do not see any big surprises after this point.”

What is a surety after last week’s discussions in St John’s with IMF officials, who were also completing the Article IV Consultation for the country, was that spending cutbacks, improvement in tax collection and outsourcing government services would be part of the deal.

“Over the next two to three years, we will have to make some sacrifices and I don’t want to gloss over that,” Lovell said. “We make sacrifices to do things that are worthwhile so it is not the sacrifice that is so important, it is the end result after the sacrifice has been made and I’m satisfied that the end result based on all that we’ve been doing is certainly worth our while,” Lovell said.

Even though the need to slash the amount of money paid out to public sector workers has triggered fears of job losses, Lovell said sending home government worker would be a last resort.

He said the focus would instead be on reducing overtime payments.

“Last year we were looking at overtime expenditure of just under EC$20 million (US$7.56 million). We intend to rearrange and restructure in such a way and we should spend no more than EC$5 million (US$1.89 million) in 2010. That will allow us to achieve some savings,” Lovell said.

“We are doing everything possible to avoid having to engage in any form of layoffs and so we are looking at how we can squeeze all the various areas of waste out of the system and ensure that we have a more efficient operating government,” he added, although saying that “nothing is ruled in, nothing is ruled out.”

In addition to decreasing the money paid out, the government will also be looking to increase the money it earns, through reducing the amount of zero-rated items under the Antigua and Barbuda Sales Tax (ABST); taking measures to increase overall tax compliance; and reducing operating expenses by outsourcing security, garbage collection and janitorial services.

Some taxes will be increased, including the non-citizen land holding licence and departure tax, while new ones will be introduced, such as an excise tax on alcohol, tobacco and ammunition.

The opposition Antigua Labour Party (ALP) has warned of tough times ahead for citizens of Antigua and Barbuda under the plan unveiled by the government.

“Our country’s economy and our people will now face the worst hardship that they have experienced in modern times.  No sector of the economy will be spared; unemployment will soar and so will crime,” ALP leader Lester Bird predicted in his weekly address.

“Unemployment will rise, the economy will contract, and the business sector will also suffer as there will be more unemployed people with less money to spend…this means that dismissals of public servants will continue over the next seven years and there will be no additional jobs created in the public sector.”

He criticised specific aspects of the deal, including the increase in the number of goods which will be subject to the ABST.

“Every person in this country will be taxed with ABST on more of the goods and services they buy and their cost of living will continue to rise,” Bird said.

He also poured scorn on the planned hike in departure tax at the VC Bird International Airport. He said it was the wrong move to make when the country’s tourism was in trouble.

“At a time when the people of this country are already over-taxed, the UPP is increasing the cost of travel which will affect business people. What is more, despite the evident fact that tourism needs a boost, the UPP regime is killing it further by making it more expensive for tourists to come here,” Bird said.

The ALP leader has also predicted that state owned assets would be sold off.