BASSETERRE, St. Kitts, Friday July 29, 2011 – The International Monetary Fund (IMF) has approved a three-year Stand-By Arrangement (SBA) for US$84.5 million with St. Kitts and Nevis to support its economic programme, coupled with a comprehensive debt restructuring, to restore debt and external sustainability and set the stage for sustained growth.
An amount of US$35.6 million has become available is available for immediate disbursement.
The assistance comes as IMF Deputy Managing Director and Acting Chair Nemat Shafik reports that the St. Kitts and Nevis economy is gradually recovering from a prolonged recession, but fiscal imbalances and structural fragilities pose significant risks to the economic outlook.
“The authorities have started to implement an economic programme to address these challenges over the medium term. The main objectives of this programme are achieving higher growth and a sustainable fiscal position. The authorities’ plans include front-loaded fiscal consolidation, a comprehensive debt restructuring, and further steps to strengthen the financial sector,” she pointed out.
“The authorities have already taken important revenue and expenditure measures. These include an introduction of a value added tax, implementation of an excise tax and electricity tariff reform, and a freeze of the public wage bill. Given the magnitude of the targeted adjustment, sustained consolidation is critical.”
In addition to fiscal adjustment, the IMF official said, a comprehensive and timely debt restructuring is needed to achieve a sustainable fiscal position.
“Further strengthening of the financial system is also a critical element of the authorities’ economic programme. In this respect, the forthcoming Banking Sector Reserve Fund would be able to provide temporary liquidity support to solvent financial institutions, if needed,” Shafik added.
She said that over the medium term, the structural reforms envisaged by the authorities will complement fiscal adjustment. Those reforms aim at strengthening public financial management, improving the business climate, enhancing the social safety nets, removing obstacles to growth, and restoring competitiveness.