Between September 25th and October 5th 2007, the Government of Antigua and Barbuda welcomed the International Monetary Fund (IMF) officials for the annual Article IV Consultation. We were pleased to once again have the opportunity to engage the Fund staff on the fiscal and other economic challenges facing Antigua and Barbuda and to exchange ideas on how best to meet these challenges. Over the two week period of the Article IV Consultation, the Fund staff met with a wide range of public sector officials along with representatives from the private sector and civil society. Through these various meetings the Fund was able to undertake a comprehensive assessment of macroeconomic developments in Antigua and Barbuda. At the conclusion of the mission, the Fund and the Government held a joint press conference where the IMF presented its findings and engaged the media in discussions on the various issues facing the Antigua and Barbuda economy.
While the Government agrees that the fiscal balances are not yet at sustainable levels, it must be emphasised that there has been significant adjustment in fiscal performance over recent years. Indeed, the primary balance has declined from 5.8 percent of GDP in 2003 to 2.8 percent of GDP for 2007. This was made possible through aggressive reforms on the revenue side which have contributed to revenue increases of over 20 percent. The strong revenue performance was boosted by robust economic growth and ongoing efforts to strengthen the key institutions that are responsible for revenue collection. We concur that adjustments on the expenditure side have been less aggressive than the interventions on the revenue side. However, the Government has been and remains adamant that measures to reduce expenditure must be undertaken with caution and should not precipitate economic and social hardship on the population. Such an approach is even more critical given the persistent increases in international prices for oil and non-oil commodities and the implications of these external price shocks for the economy as a whole. Despite these challenges, we remain committed to transforming the macroeconomic landscape of Antigua and Barbuda and will continue to pursue policies and strategies that will bring about fiscal sustainability and at the same time encourage investment and promote economic growth.
We are pleased with the Fund’s assessment of economic growth prospects for Antigua and Barbuda and concur that the Antigua and Barbuda would grow at a rate of just over 6 percent in 2007 compared to growth of over 12 percent in 2006. For 2008 and into the medium term, the Government anticipates that economic growth would average between 5 and 6 percent – a medium term projection that is not significantly dissimilar to the 5 percent estimated by the Fund. We expect that economic growth will be driven by a number of private sector and public sector development projects. It is also expected that the tourism sector will continue to grow as the Government intensifies marketing programmes in traditional and non-tradition markets and as efforts to capitalise on the increased room capacity developed during preparations for Cricket World Cup 2007 begin to bear fruit.
With respect to the fiscal accounts, we agree that achieving a primary surplus in 2008 is critical to moving the Government closer to attaining its fiscal objectives. Following the one-off resource outlays in 2006 and 2007, particularly for CWC 2007 related expenses and for the implementation of the Voluntary Separation and Early Retirement Programme (VSEP), which slowed progress in reducing the fiscal balances, the Government will focus on greater expenditure controls and further enhancing revenue performance in 2008. The Government’s commitment to moving ahead with its home-grown adjustment programme is reflected in Budget 2008, which estimates current account and primary surpluses of about 1 percent of GDP.
We expect to achieve these outcomes through the continued implementation of key expenditure management programmes – particularly the FreeBalance system and the Human Capital Accountability Programme (HCAP). In addition, we intend to enact the regulations for the Finance Administration Act and will seek to finalise the new Procurement Act. These measures along with ongoing efforts to reorganise the Treasury Department will all help to curtail expenditure and firmly establish new and modern procedures for more effective financial management. On the revenue side, the Government will continue to undertake various measures aimed at enhancing tax administration thereby further boosting revenue performance. In particular, it is expected that the Customs Renewal Programme, which faced some challenges over the past several months, will move apace in 2008. This has been made possible through the kind assistance of the Government of Jamaica, the Organisation of American States and the United States Agency for International Development (USAID) through its Country Open Trade Support (COTS) programme. Further, the Government has established an oversight committee to assist the Inland Revenue Department to better achieve its mandate and to more effectively meet its revenue targets.
Another critical component of the Government’s programme to transform the macroeconomic environment in Antigua and Barbuda is its debt management strategy. This strategy was developed with the financial assistance of the Canadian International Development Agency (CIDA) and with the technical assistance of the international debt advisory firm, Houlihan Lokey Howard and Zukin (Europe) Ltd. Our debt management strategy has focused on normalising relations with creditors, assessing the Government’s payment capacity, reducing the overall level of debt, and establishing more prudent borrowing procedures. We commenced implementation of this strategy in 2007 and have already begun to realise positive results which are reflected in a further decline in the debt to GDP ratio to 97 percent. This is a significant achievement given that in 2002 and 2003, the debt to GDP ratio exceeded 140 percent. While the public debt remains high, we are encouraged that as the implementation of this debt management strategy continues in 2008, we will realise further reductions in the debt stock that would ensure the achievement of debt sustainability.
At the same time that this Government is seeking to correct the large fiscal imbalances that characterised the Antigua and Barbuda economy for many years, we are also dedicated to implementing policies and strategies that will encourage investment and promote the growth and development of the private sector. This is indeed a difficult undertaking but we have managed to generate some successes on the fiscal side while at the same time realising economic growth, which averaged over 7 percent between 2004 and 2007. The Government is very cognisant of the need for various structural reforms to ensure sustainable growth. An important part of the Government’s plans to encourage private sector development is the Antigua Barbuda Investment Authority (ABIA). This institution has the responsibility for facilitating and promoting investment in Antigua and Barbuda. It serves as a one-stop-shop for all investors – whether local or foreign and represents a more transparent and predictable mechanism for granting concessions and tax incentives.
Along with the ABIA, the Government enacted legislation to support the development of micro and small businesses. We are very cognisant of the role of small businesses in generating employment, reducing poverty and promoting economic growth. In this regard, the Small Business Development Act was passed in 2007 and provides fiscal incentives and concessions for small businesses and offers technical assistance for small business owners in areas such as budgeting, accounting, product development, marketing, development of business plans and general management procedures. Also, a Loan Guarantee Scheme will be established in 2008 and is intended to provide micro and small businesses with greater access to financing. We believe that these interventions along with the fiscal reform initiatives are critical for the transformation of the economy of Antigua and Barbuda.
One of the major constraints to the policy making process in Antigua and Barbuda has been limited availability of reliable and timely data. The Government has recognised the need to strengthen the Statistics Division in order to ensure that critical economic and social data can be readily obtained. This process is expected to commence in 2008 with financial and technical assistance provided through the Caribbean Development Bank (CDB). The programme will focus on enhancing human resources, reorganising the Statistics Division, and providing appropriate tools and equipment for data collection, analysis and dissemination.
In conclusion, the Government remains grateful for the support and assistance provided by the Fund. We welcome the opportunity to engage the Fund staff on the wide range of fiscal and other economic issues that are important to Antigua and Barbuda. While these discussions with the Fund have proven instructive, the Government has and will continue to pursue its own policies and strategies. These policies and strategies have been based on the overarching principle of balancing macroeconomic transformation with the need to safeguard the economic and social welfare of the people of Antigua and Barbuda. The Government will continue to utilise the technical expertise of the Fund and other international and regional institutions in its ongoing effort to promote fiscal and economic sustainability in Antigua and Barbuda.