The 2008 Article IV Consultation with Dominica discusses external competitiveness and key policy issues. The real effective exchange rate is broadly in line with macroeconomic fundamentals. Fiscal policy is appropriately focused on reducing high public debt. Plans for developing the tourist sector, including improving air access and roads to tourist attractions, are well advanced and should be financed with a view maintaining the sustainability of public debt. The authorities rightly emphasize improving the business climate, strengthening regulation and supervision of the financial sector, and improving disaster preparedness.
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
This paper discusses the Poverty Reduction Strategy Paper—Preparation Status Report for Dominica. The paper discusses that the government of the Commonwealth of Dominica has advanced its sectoral strategy to enhance growth in several dimensions. With technical assistance from the World Bank, the government has been reviewing its Electricity Supply Act to modify it and allow the exploitation of geothermal energy, which potentially can be exported to neighboring islands. The government has also made progress in the area of social protection.
Dominica has made significant progress over the past decade in strengthening its macroeconomic policy management. The 2011 Article IV Consultation report concludes that Dominica is emerging from the crisis. Growth turned positive in 2010, but tepid demand and the needed fiscal consolidation will weigh on the near-term prospects. Executive Directors endorse that fiscal policies need to be returned to a sounder footing to correct the weakening fiscal position. Given weakening revenues, IMF staff believes that achieving the authorities’ target will necessitate additional fiscal measures beyond those envisaged in the budget.
This paper examines the staff report for Dominica’s Request for Disbursement under the Rapid Credit Facility. Dominica has been hit by a number of natural disasters during July–September 2011. Although the impact on growth may be limited owing to the localized nature of the damage, the disasters will have large fiscal and balance of payment costs as the government undertakes the necessary rehabilitation work, including relocation of people from the affected areas. Medium-term prospects remain subdued owing to lack of clear growth drivers, with potential growth estimated at about 2 percent.
International Monetary Fund. Western Hemisphere Dept.
Dominica has faced two major challenges during the past two decades: weak competitiveness and low potential growth. In addition to these economic challenges, the country has been facing frequent natural disasters. Growth is expected to pick up gradually. The financial system is highly liquid but monetary conditions have not eased. The external position is improving on strong service receipts. Fiscal policy is reaching its limit in terms of its ability to support economic activity. The balance of risks to the fiscal outlook is broadly balanced.
This 2007 Article IV Consultation highlights that Dominica has fully recovered from the 2001–02 economic and financial crisis. Output growth has rebounded, reaching 4 percent in 2006, and it is expected to remain above trend in 2007. The rebound is driven by a pickup in tourism, recovery in banana production, and buoyant construction and offshore school activity. Inflation has remained subdued, reflecting stabilizing oil prices, and is projected to remain low. The external current account deficit narrowed sharply in 2006, and is likely to remain large at about 20 percent of GDP in 2007.
The economy is predominantly agricultural, although some degree of diversification has taken place in recent years toward tourism, communications, and financial services. The performance of the main agricultural activity, banana production and exports, has steadily deteriorated since the early 1990s and has adversely affected developments in other sectors. In the external sector, the current account of the balance of payments has shown a marked deterioration in recent years. The saving-investment balance showed a marked deterioration during 1999–2000.
Poverty in Dominica exhibits the following: poor households tend to be larger than nonpoor households; poor households contain proportionately fewer persons of working age, and there is no significant difference in the gender distribution of poverty in the country. The challenges of this poverty-reduction strategy will be to foster growth and private sector employment, and to achieve fiscal and broader economic stability and a dynamic, accountable, and effective public service to provide a strong basis for the sustainable and integrated political, social, and economic development of Dominica.