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International Monetary Fund. Western Hemisphere Dept.
This paper highlights St. Vincent and The Grenadines’ Request for Disbursement Under the Rapid Credit Facility (RCF). The coronavirus disease 2019 (COVID-19) pandemic poses a major challenge to St. Vincent and the Grenadines. The tourism sector, a key driver of economic growth in the country, has come to a complete halt with ripple effects across the economy. The authorities have responded to the pandemic by swiftly implementing containment measures and a fiscal package, which includes an increase in funding for the health sector, various public construction projects to generate jobs, financial support to agriculture and fishery sector, and programs to support displaced workers and the most vulnerable. The authorities are committed to meeting the regional debt target of 60 percent of gross domestic product by 2030. Once the crisis has abated, they plan to reprioritize capital spending, contain the growth of the wage bill, enhance taxpayer compliance, and rationalize exemptions from import duties and value added tax on imports. IMF emergency support under the RCF will help fill St. Vincent and the Grenadines’ balance of payments needs. The IMF financing will also help catalyze additional donor support. The authorities are committed to ensuring transparency and good governance in the use of COVID-19-related spending.
International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation explains that St. Lucia’s near-term growth prospects are favorable, supported by large infrastructure investment and robust tourist inflows. However, longer-term growth continues to be impeded by high public debt, lingering vulnerabilities in the financial system, and structural impediments to private investment. Diminishing policy buffers further weaken the country’s resilience to external shocks against the backdrop of aprecarious global outlook. Completion of long pending legislative initiatives, alongside stronger regional and domestic financial oversight, should provide banks with incentives to strengthen their balance sheets and increase the efficiency of financial intermediation. There is also a need to draw on supervisory and regulatory tools to respond to emerging risks from rising overseas investments of the banks and the rapid expansion of lending by credit unions. The authorities are recommended to should step up efforts to address the institutional, financing and capacity gaps in its climate and disaster response strategy. Supply-side reforms are needed to unlock potential growth by improving the business environment, reducing energy costs, enhancing labor productivity, and further diversifying the economy.
International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation with Federated States of Micronesia (FSM) highlights that the economy has performed well in recent years, with relatively high growth and low inflation. Fiscal and current account balances have recorded large surpluses since 2017, owing to the authorities’ decision to save revenue windfalls. Nonetheless, the FSM faces significant medium-term uncertainty as various economic supports under the Compact Agreement with the United States are set to expire in 2023. Unless they are renewed, the FSM is expected to lose access to Compact grants, giving rise to a fiscal cliff in 2023; banking sector oversight by the Federal Deposit Insurance Corporation; and post-disaster rehabilitation assistance. The country is highly vulnerable to climate change, while private sector activity remains anaemic. It is recommended to improve resilience to climate change by strengthening capacity to implement adaptation projects. Over the medium term, disaster risks should be mitigated by using disaster insurance and disaster-contingent foreign financing.
International Monetary Fund. African Dept.
This paper discusses Union of Comoros’ Request for Disbursement Under the Rapid Credit Facility (RCF) and Purchase Under the Rapid Financing Instrument (RFI). Reflecting the large budgetary and external financing gaps arising from emergency assistance and reconstruction needs, the authorities are seeking financial assistance under the RCF and RFI exogenous shock windows. Comoros’ qualification is based on urgent balance of payments needs following a severe natural disaster. The authorities shared staff’s main policy recommendations. Efforts to address the cyclone’s impact will need to focus on mobilizing external financing, creating fiscal space by containing the wage bill, and spending mobilized resources in a well-targeted and timely manner. The authorities plan to address financial sector weaknesses, including by finding a solution for the critical situation of the postal bank, closely monitoring nonperforming loans, and addressing obstacles in the judicial system to facilitate the use of collateral and promote lending.
International Monetary Fund. African Dept.
Mozambique’s economic situation had been improving until Tropical Cyclone Idai and Kenneth hit the country in March and April, respectively. Economic growth was recovering gradually and becoming broader based, and inflation reached low single digits. Economic activity is expected to decelerate sharply in 2019 due to the supply shock to productive capacity, but it should rebound to pre-cyclone levels by 2020. In April, the IMF Executive Board approved US$118 million in emergency assistance under the Rapid Credit Facility (RCF). The authorities are committed to macroeconomic stability while fostering inclusive growth and addressing governance challenges.
International Monetary Fund. Western Hemisphere Dept.
This Article IV Consultation highlights that following the opening of a modern international airport, signs of an economic recovery have emerged, with increased direct flights from major cities in the United States and Canada and renewed interests from foreign investors in tourism projects. The overall fiscal balance has improved over the past few years, and the debt to GDP ratio fell in 2017 for the first time since 2007. However, despite these positive developments, St. Vincent and the Grenadines faces challenges in sustaining the growth momentum over the longer-term. Like other Caribbean economies, its high exposure to natural disasters, limited land, narrow production and exports base, weak business competitiveness, and limited physical and human capital constrain potential growth. The financial system remains broadly stable but has vulnerable spots in the non-bank financial sector. It is important to implement structural reforms to foster private sector activity, by improving the investment environment and strengthening physical and human capital.
International Monetary Fund. Western Hemisphere Dept.
This 2018 Article IV Consultation highlights that The Bahamas’ real GDP is estimated to have expanded by 1.3 percent in 2017. Economic activity has been supported by the completion of Baha Mar, new foreign direct investment-financed projects, and post-hurricane reconstruction activity. However, air tourist arrivals declined 4 percent in 2017, reflecting the impact of Hurricane Matthew on hotel infrastructure in the Grand Bahama Island. Real GDP growth is projected at 2.5 percent in 2018 and 2.25 percent in 2019 on the back of stronger growth in the United States; the phased opening of Baha Mar; and a pickup in foreign direct investment. Medium-term growth is projected to remain at 1.5 percent, reflecting significant structural impediments.
International Monetary Fund. Western Hemisphere Dept.
This 2017 Article IV Consultation highlights that growth in St. Vincent and the Grenadines in 2017 is expected to remain relatively flat. The current account deficit is expected to narrow reflecting additional profit repatriation by telecommunication companies. The domestic banking system remains stable, but credit to the private sector has been flat. The fiscal situation is projected to worsen substantially in 2017 owing to a projected decline in tax revenue after exceptional receipts in 2016 and higher outlays for transfers, subsidies and public investment. Growth is expected to pick up to 2.1 percent in 2018 and reach its potential over the medium-term.
International Monetary Fund. Western Hemisphere Dept.
This 2017 Article IV Consultation highlights that Dominica’s recovery from Tropical Storm Erika (August 2015) has been slower than anticipated, with output growth of 1 percent in 2016, dragged down by a storm-related decline in manufacturing. Moreover, capacity constraints and unfavorable weather slowed public investment more than anticipated. Despite ample liquidity, bank credit to the private sector remains weak, although this is in part relieved by growing lending by credit unions. Growth is projected to accelerate to above 3 percent in 2017–18 on the back of a pickup in public investment and several large-scale private projects with citizenship-by-investment and grant financing.
Mrs. Kerstin Gerling
Weather-related natural disasters and climate change pose interrelated macro-fiscal challenges. Using panel-VARX studies for a sample of 19 countries in Developing Asia during 1970 to 2015, this paper contributes new empirical evidence on the dynamic adjustment path of growth and key fiscal variables after severe weather-related disasters. It does not only show that output loss can be permanent, but even twice as large for cases of severe casualties or material damages than people affected. Meanwhile, key fiscal aggregates remain surprisingly stable. Event and case studies suggest that this can reflect both a deliberate policy choice or binding constraints. The latter can make governments respond through mitigating fiscal policy efforts such as ad hoc fiscal rebalancing and reprioritization. The findings help better customize disaster preparedness and mitigation efforts to countries’ risk exposure along a particular loss dimension.