KINGSTOWN, St Vincent -- An International Monetary Fund (IMF) mission headed by Nita Thacker visited St Vincent and the Grenadines from October 23 to November 1 for the annual Article IV discussions on economic developments and macroeconomic policies.
The mission met with the prime minister and minister of finance, Dr Ralph Gonsalves, the director general of the ministry of finance, Maurice Edwards, other senior government officials, as well as members of the political opposition, including Arnhim Eustace. The mission also met with representatives of the private sector and labour unions.
At the end of the mission, Thacker issued the following statement:
“Economic activity indicators suggest that a slow recovery may be underway, with some improvements in tourism and manufacturing. Real Gross Domestic Product (GDP) increased by 0.4 percent last year and is expected to grow at a rate below one percent this year. Growth is expected to reach its potential level of about 3 percent over the medium term. Risks to the growth outlook are on the downside, especially if the recovery in advanced economies stalls. On a positive note, the decline in commodity prices, particularly fuel, has reduced pressure on inflation and on the balance of payments.
“The government’s fiscal position is expected to improve in 2012. Fiscal data for the first nine months shows that revenues were lower than projected, due to the slow recovery but also to an apparent decline in tax compliance. However, significant cuts to central government capital spending are projected to more than offset the lower revenues, leading to a reduction in the central government fiscal deficit. Looking forward, the authorities agreed with the mission on the need to reduce current spending, strengthen tax compliance and administration, and improve the operational efficiency of the central government and state-owned enterprises. The resulting budgetary savings can be applied toward growth- and employment-generating capital projects and better targeted social safety nets to help the poor.
“Structural reforms should continue to aim to create a growth-friendly environment and stimulate private sector activity to ensure sustained medium-term growth and generate employment, especially for the youth. Achieving these goals will require vigorously implementing reforms, including easing access to credit and reducing its cost, enhancing labor skills, reducing energy costs, and improving infrastructure.
“With respect to the financial sector, continued close monitoring and decisive action to ensure that all financial institutions meet prudential requirements will be critical to safeguarding the stability of this sector. In this context, the mission welcomed the establishment of the Financial Services Authority which is expected to strengthen non-bank financial sector supervision.
“Upon its return to Washington, the mission will prepare a report, to be discussed by the IMF's Executive Board in early 2013. The mission thanks the authorities for their warm hospitality and close cooperation.”