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Dominica: Staff Report for the 2018 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Western Hemisphere Dept.
Published Date:
September 2018
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Fund Relations

(As of April 30, 2018) Membership Status Joined December 12, 1978; Article VIII.

General Resources AccountSDR MillionPercent of Quota
Quota11.50100.00
Fund holdings of currency11.4999.93
Reserve Tranche Position0.010.08
SDR DepartmentSDR MillionPercent of Allocation
Net cumulative allocation7.84100.00
Holdings0.405.12
Outstanding Purchases and Loans:SDR MillionPercent of Quota
RCF Loans7.7967.74
ESF RAC Loan0.988.5

Latest Financial Arrangements:

TypeApproval DateExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
ECF12/29/0312/28/067.697.69
Stand-By08/28/0201/02/043.282.97
SAF11/26/8611/25/892.802.80

Projected Payments to the Fund (SDR Million):1/

Forthcoming
20182019202020212022
2022Principal0.531.071.411.641.44
Charges/Interest0.050.060.060.060.06
Total0.581.130.471.701.50

Exchange Rate Arrangement: Dominica is a member of the Eastern Caribbean Currency Union, which has a common central bank, the Eastern Caribbean Central Bank, and currency, the Eastern Caribbean dollar. Since July 1976, the Eastern Caribbean dollar has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar. Dominica has accepted the obligations of Article VIII, Sections 2, 3, and 4. Dominica maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions.

Safeguards Assessment: Under the Fund’s safeguards policy, the Eastern Caribbean Central Bank (ECCB) is subject to a full safeguards assessment on a four-year cycle. An update assessment was completed in April 2016 and found that the ECCB has maintained generally strong controls over its key operations. External audit and financial reporting practices remain sound. The ECCB financial statements are compliant with International Financial Reporting Standards and are published on a timely basis. The internal audit function needs to be reformed to align it with leading international practices and oversight could be further strengthened by enhancing the financial expertise of the audit committee.

Article IV Consultation: The last Article IV consultation was concluded by the Executive Board on May 12, 2017. Dominica is on a 12-month cycle.

Technical Assistance: Dominica has received significant technical assistance from Caribbean Regional Technical Assistance Center (CARTAC) and the IMF. Technical assistance missions focused on tax reform, revenue administration, expenditure rationalization, financial sector, and Public Financial Management (PFM):

PFM Missions

  • June 2013: Deliver workshop on cash flow forecasting and planning

  • November 2013: Restructure cash flow unit and continue to build capacity and expertise in bank reconciliation

  • January 2014: Investigate and resolve data integrity issues with Smart-Stream

  • January 2014: Wrap up bank reconciliation and ascertain further needs

  • March 2014: Work with M. Smith to review Dominica

  • March 2014: Follow-up on earlier TA on bank account reconciliation

  • March 2014: Introduce new Adviser

  • March 2014: Assist authorities to build capacity for new Procurement staff

  • April 2014: Assist Dominica procurement in continuing to navigate and implement action plan

  • May 2014: Finalize implementation of updated automated bank reconciliation software

  • July-August 2014: Assist in closure of 2013/14 financial year and carry forward un-reconciled bank reconciliation discrepancies

  • September 2014: Assist with planning of 2015/16 budget and develop draft budget call circulars

  • October 2014: Examine and provide recommendations to strengthen oversight and monitoring of State Owned Enterprises

  • February 2015: Undertake a gap analysis of the Internal Audit systems

  • March 2015: Deliver presentations and hold discussions on redraft of PFM Legislation

  • March 2015: Provide TA to Budget Department with the revised budget process and develop Cabinet Decision Table

  • March 2015: Develop Concept Note for undertaking a PEFAQ in October 2015

  • August 2016: Building a PFM Action Plan following the recent PEFA

  • November 2016: PFM Legislation/Regulations Revisions

  • March 2017: Treasury Assessment

Revenue Administration Missions

  • June 2013: Tax and Customs Administration

  • June 2013: Tax and Customs Administration

  • June 2013: To work on outline for Regional Audit Manual with STX Brian Dawe

  • August 2013: Assist Dominica Inland Revenue and Customs Department with their Risk Management program (Support to SEMCAR)

  • September 2013: Continue to assist with IRD reorganization and capacity building in audit

  • September 2013: Introductory Meetings with Senior IRD Officials; liaise with STX Dawe on IRD reorganization

  • September 2013: to introduce new LTX Advisor to Senior IRD officials; liaise with STX Dawe on IRD reorganization

  • October 2013: Liaise with STX Macleod on PAYE Administration support

  • October 2013: Deliver PAYE audit training; assist with development of Audit program and procedures circulars

  • November 2013: Work at home: Development of Audit Manual

  • November 2013: Co-facilitate regional seminar on Tax Arrears Collections and Enforcement

  • November 2013: Co-facilitate the Regional Collections Enforcement Seminar for Supervisors

  • November 2013: To continue to assist with IRD reorganization and capacity building in audit

  • November 2013: To assist in the development and upgrade of collections enforcement procedures

  • November 2013: Supporting the development of Valuation procedures and policy for the Customs Administration

  • January 2014: Help design the IRD Corporate Strategic Plan

  • March 2014: Post Clearance Audit Training and Support to the Customs Administration

  • April 2014: Extension of Tax Administration Adviser

  • April 2014: Project Management Support and Building Audit Capacity – IRD reorganization project

  • September 2014: To conduct Tax review

  • September/October 2014: Review of Dominica Income Tax

  • January 2015: Building Capacity and Supporting the Establishment of the HQ Design Monitoring and Large and Medium Taxpayer Sections (LMTS)

  • January 2015: DMS and Large and Medium Taxpayers compliance measurement

  • March 2016: Small Business Reform – Revenue Modelling for VAT and Presumptive tax

  • August 2016 : To Provide Training and Guidance to Strengthen the Post-Clearance Audit Function in Customs

  • September 2016: Meeting with the Comptroller of Customs to Discuss Technical Assistance Needs

  • October 2016: Building Capacity in Data Analytics and Computer-Assisted Audit Techniques

  • October 2016: Compliance management framework

  • November 2016: Develop Taxpayer Service Strategy

  • February 2017: Tax Administration-Assist IRD to finalize its taxpayer services strategy

Financial Sector Missions

  • December 2013: Insurance Supervision and Credit Union Supervision

  • January 2014: Follow-up mission—onsite review of offshore banks and continued training of Supervisors

  • April 2014: Consolidated Supervision – Training

  • November 2014: Risk Based Supervision and Consolidated Supervision

  • April 2016: Risk Based Supervision

  • August 2016: Supervisory Interventions Banks and Non-Banks

  • November 2016: Risk-Based Supervision Training

  • January 2017: Development of a Stress-Testing Framework and Methodology for Credit Union Sector

  • February 2018: Crisis Management Plan for the Non-Bank Sector Economic and Financial Statistics

  • May 2013: National Accounts – Quarterly

  • April 2014: Joint CARTAC/STA IIP Mission

  • February 2015: Training for Survey Respondents (ECCU Countries)

  • June 2016: Balance of Payments Statistics and IIP

  • June 2017: External Sector Statistics

  • January 2018: National Accounts

Macroeconomics and Programming Analysis

  • November 2013 – Needs assessment of Macroeconomic Policy Unit; create a forward technical assistance work plan

  • January 2014: To assist authorities with their medium-term macroeconomic framework

  • November 2014 – Produce framework to update macroeconomic projections on a quarterly basis

  • February 2015: Technical assistance to train staff in macroeconomic and fiscal forecasting as well as to prepare for IMF Article IV visit

  • February 2016: Assist Macro Policy unit with update of their macroeconomic projections for upcoming Budget

  • November 2016: Coordinate Macro Program with Macro Advisor

FSAP: A joint IMF/World Bank team performed an assessment of the financial sector of the member states of the ECCU, in two missions—September 1–19 and October 20–31, 2003. The principal objective of the missions was to assist the authorities in assessing the development needs and opportunities for the financial sector and identifying potential vulnerabilities of financial institutions and markets to macroeconomic shocks, as well as the risks to macroeconomic stability from weaknesses and shortcomings in the financial sector. The Financial System Stability Assessment (FSSA) was discussed by the Executive Board on May 5, 2004, and subsequently published on the IMF’s external website, including the Report on the Observance of Standards and Codes (ROSC) on Banking Supervision.

AML/CFT: The most recent assessment of Dominica’s AML/CFT regime was conducted by the Caribbean Financial Action Task Force in 2009. Since this assessment, Dominica has taken steps to strengthen its AML/CFT framework. Dominica has not yet been assessed against the prevailing 2012 FATF standard which includes an emphasis on the effectiveness of the framework in place.

Relations with Other International Financial Institutions

Statistical Issues

(As of April 30, 2018)

Dominica — STATISTICAL ISSUES APPENDIX
I. Assessment of Data Adequacy for Surveillance
General: Data provision has shortcomings due to capacity constraints in the statistical agency, and collection at the regional level. Dominica participates in the General Data Dissemination System. However, the metadata were last updated in January 2006 for the national accounts and external sector statistics and December 2002 for the government finance statistics. including weaknesses in coverage, accuracy, frequency, and timeliness of data. Although it is broadly adequate for surveillance, these limitations constrain economic analysis and policy formulation. Particularly, staff’s analysis would benefit from more timely and improved data pertaining to the fiscal accounts, labor, agriculture, and the balance of payments. Efforts to prepare national accounts at a quarterly frequency would also be welcome. The authorities could pursue such improvements in a more cost-effective manner by exploring proposals to centralize statistics.
National accounts: Staff turnover and limited source data have hampered the improvement on real sector statistics. The Central Statistics Office (CSO) currently produces and disseminates annual estimates of GDP by production approach at current and constant 2006 prices; as well as annual current price estimates for GDP by expenditure approach, with private final consumption expenditure derived as a residual. The CSO has been trying to develop quarterly GDP by production approach since 2012, but progress has been minimal due to limited staff capacity and source data. A census was conducted in 2011.
Price Statistics: CPI data are compiled monthly. The weights are based on the 2008/09 Household Income and Expenditure Survey (HIES) with a base period of June 2010. There is a program to develop export and import price indexes (XMPIs), but a shortage of staff working on price statistics limits developments in CPI methodology and the likelihood that XMPIs will be developed expediently. Data on employment are sparse and there are no official data on producer prices.
Government Finance Statistics: Statistical capacity problems affect the timely production of quality government finance statistics. Monthly data can be obtained, but they show some important shortcomings. Fiscal data should be reconciled between the Inland Revenue Department, Customs, and the Treasury monthly. Efforts should also be directed towards reducing omissions and misclassifications in the data, which would help reduce the need for frequent revisions. Capital expenditure data would benefit from efforts to improve reporting and budgeting data for the public-sector investment program (e.g., project implementation rates, current expended resources, projected resource usage, estimated completion dates, etc.), which are fragmented and subject to continuous revisions. Attention should also be directed towards improving statistics on the financial position of public institutions outside the central government. An automation technology, mandatory for all ministries and suppliers of goods and services was installed in all line ministries in 2005 and is the basis for the reporting. Although progress has been made in improving the measurement of government debt, data show shortcomings and are not tracked continuously. Very limited financing data are available. The authorities do not provide consolidated nonfinancial public-sector data. Data for the rest of the public sector––Dominica Social Security and the public enterprises––are obtained directly from each entity with frequent delays and omissions. No government finance data are reported to STA for publication in the International Financial Statistics (IFS) or the Government Finance Statistics (GFS) Yearbook.
Monetary and Financial Statistics: Monetary statistics are compiled and reported to the Fund by the ECCB monthly based on a standardized report adopted in 2006. The institutional coverage of monetary statistics needs to be improved by including the accounts of mortgage companies, building societies, credit unions, and insurance companies. The lack of published data on credit unions is a serious shortcoming as the sector is large in Dominica. In this respect, coordination between the ECCB and Dominica’s Financial Services Unit (which supervises financial corporations other than those licensed under the Banking Act) could help to resolve this issue.
External sector statistics: In July 2017, the ECCB released annual estimates of 2014–2016 balance of payments and—for the first time—international investment position statistics. Estimates were based on the sixth edition of the Balance of Payments and International Investment Position Statistics Manual (BPM6) for the eight ECCU member economies, including Dominica. Travel estimates (credits) are sourced from visitor expenditure surveys and now include education-related travel services. Further work is required to release consistent historical data series and improve the timeliness and the coverage of the data, particularly, direct investment transactions due to the low response rates to the surveys. Actions need to be undertaken in collaboration with the ECCB, which coordinates the compilation of external sector statistics of the ECCU economies.
Debt statistics: The debt unit of the Ministry of Finance maintains a database on external debt statistics. These include, public and publicly-guaranteed external loans, debt securities, and other debt instruments that provides detailed information on disbursements, debt service, and debt stocks (the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS) is used). Public and publicly guaranteed external debt data are reported to the World Bank’s Quarterly External Debt Statistics (QEDS). Data on private sector external debt stocks are not available, other than from the monetary survey, in the case of the commercial banks.
II. Data Standards and Quality
Dominica is a participant in the enhanced General Data Dissemination System (e-GDDS since September 2000. Its metadata published on the Fund’s Dissemination Standards Bulletin Board (http://dsbb.imf.org) was last updated in September 2004.A Data ROSC for the monetary sector was conducted in 2007, covering the ECCB and ECCU member countries, including Dominica.
Dominica: Table of Common Indicators Required for Surveillance(As of April 23, 2018)
Date of Latest ObservationDate Received8Frequency of Data8Frequency of Reporting8Frequency of Publication8
Exchange Rates1Fixed RateNANANANA
International Reserve Assets and Reserve liabilities of the Monetary Authorities 1,201/201803/27/2018MMM
Reserve/Base Money01/201804/08/2018MMM
Reserve/Base Money1/31/20173/21/2017MMM
Broad Money01/201804/08/2018MMM
Central Bank Balance Sheet01/201804/08/2018MMM
Consolidated Balance Sheet of the Banking System1/31/20173/21/2017MMM
Interest Rates301/201804/08/2018MMM
Consumer Price Index12/201704/10/2018MMM
Revenue, Expenditure, Balance, and Composition of Financing4 – General Government5NANANANANA
Revenue, Expenditure, Balance, and Composition of Financing4 – Central Government01/31/20173/16/2017MMQ
Stocks of Central Government and Central Government- Guaranteed Debt62015/20163/08/2017AAA
External Current Account Balance201610/05/2017AAA
Exports and Imports of Goods and Services09/201702/23/2018MAA
GDP/GNP201612/05/2017AAA
Gross External Debt20152/20/2016MMA
International Investment Position7201610/10/2017NANANA

Dominica is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (E.C. dollar) is pegged to the U.S. dollar at US$1 = EC$2.70.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic banks, and domestic nonbank financing.

The general government consists of the central government and state and local governments.

Currency and maturity composition are provided annually.

Data is not available from the authorities.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA); Not Applicable (n.a.).

Dominica is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (E.C. dollar) is pegged to the U.S. dollar at US$1 = EC$2.70.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic banks, and domestic nonbank financing.

The general government consists of the central government and state and local governments.

Currency and maturity composition are provided annually.

Data is not available from the authorities.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA); Not Applicable (n.a.).

Based on existing use of resources and present holdings of SDRs.

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