Abstract
This debt sustainability analysis (DSA) indicates that Antigua and Barbuda’s public and publicly guaranteed (PPG) debt would be unsustainable even in the presence of strong adjustment measures. The comprehensive debt restructuring, currently underway, is therefore necessary to achieve a sustainable fiscal position.
A. Introduction
1. Antigua and Barbuda has one of the highest debt-to-GDP ratios in the Caribbean. As of end 2009, the PPG debt stock is estimated to be around 115 percent of GDP.1 About two thirds of Antigua and Barbuda’s PPG debt is held domestically (72 percent of GDP), mostly by statutory bodies (28 percent of GDP) and commercial banks (22 percent of GDP). The external debt (44 percent of GDP) is mainly comprised of obligations to commercial creditors (15 percent of GDP), non-Paris Club bilateral creditors (14 percent of GDP), and Paris Club members (10 percent of GDP). Antigua’s debt with multilaterals is low (about 4 percent of GDP), and mainly due to the Caribbean Development Bank and the European Investment Bank. In 2009, the country had to borrow also from the Eastern Caribbean Central Bank about 3 percent of GDP to address solvency problems faced by one of the major domestic banks (Figure 1, Panel A).
Antigua and Barbuda: Composition of Public and Publicly Guaranteed Debt, end-2009
(in percent of total public and publicly guaranteed debt)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: Ministry of Finance; Eastern Caribbean Central Bank, and IMF staff calculations.Antigua and Barbuda: Composition of Public and Publicly Guaranteed Debt, end-2009
(in percent of total public and publicly guaranteed debt)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: Ministry of Finance; Eastern Caribbean Central Bank, and IMF staff calculations.Antigua and Barbuda: Composition of Public and Publicly Guaranteed Debt, end-2009
(in percent of total public and publicly guaranteed debt)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: Ministry of Finance; Eastern Caribbean Central Bank, and IMF staff calculations.2. The stock of arrears is estimated to be 45 percent of PPG debt (53 percent of GDP). Most domestic arrears are due to statutory bodies (28 percent of GDP), essentially in the form of unpaid contributions (Figure 1, Panel B).2 Arrears to domestic suppliers amount to 6 percent of GDP, while arrears to domestic banks amount to less than one percent of GDP. At the external level, the bulk of arrears are due to Paris Club members (7 percent of GDP, mostly on past due interest), non-Paris Club official creditors (5 percent of GDP), and commercial creditors (5 percent of GDP). The country has also a small portion of arrears with multilaterals, which will be cleared in the coming months.
3. Domestic credit to the government is concentrated on indigenous banks and statutory bodies. About EC$ 780 million is held by the domestic banking sector, mostly by indigenous banks and the Eastern Caribbean Central Bank. The debt with statutory bodies amounts to near EC$ 860 million, as a result of unpaid contributions to the Social Security Board, the Medical Benefit Scheme, the State Insurance Corporation, and the Board of Education. The entire stock of outstanding debt with statutory bodies is on arrears.
4. The exchange rate risk offered by foreign-denominated debt in Antigua and Barbuda is relatively low. Reflecting the structure of its treasury operations, all domestic debt is denominated in local currency (Eastern Caribbean dollars). Moreover, about 83 percent of its external debt is denominated in U.S. dollars, to which the local currency has been pegged since 1976. Recent disbursements by China have—to a limited extent—contributed to a diversification away from the U.S. dollars and toward the Chinese renminbi (9 percent of the external debt). The remaining portion of external debt is denominated mostly in euros (4 percent) and Kuwaiti dinars (3 percent).
5. The residual maturity of the debt is skewed towards the short-term, as a result of significant accumulation of arrears and short-term commercial loans. In addition to the existing stock of arrears, another 8.7 percent of GDP is due within one year on principal alone. If we add to that the interest on current and past due obligations accrued this year, the total debt service faced by Antigua and Barbuda in 2010 surpasses 17 percent of GDP—and this would only be sufficient for the country to avoid further defaults and increases in arrears. Reflecting these dire conditions, rollover risks had already materialized by mid-2009, with the cessation of most lending operations from domestic banks and external creditors, along with significant under-subscription in the auctions of Antigua and Barbuda’s treasury bills at the Regional Government Securities Market (RGSM).
6. Antigua and Barbuda has initiated debt restructuring renegotiations with some of its main creditors. Discussions are underway with the statutory bodies—especially the Social Security Board and the Medical Benefit Scheme—which are expected to provide a significant relief in terms of stocks and flows. Furthermore, the authorities reported bilateral agreements with some indigenous banks towards the conversion of overdraft balances (with an average annual interest rate of 13 percent and very short maturity) into regular loans (with an average annual interest rate of 8.5 percent and multi-year maturities). In parallel, the authorities have negotiated with multilaterals the clearance of its arrears in the coming months. Finally, the authorities are also seeking relief from bilateral official creditors within the context of the Paris Club.
Macroeconomic Assumptions
7. The debt sustainability analysis is based on the following assumptions, in line with the macroeconomic framework presented in the staff report:
The adjustment measures included in the 2010 budget are expected to yield an average primary surplus of 3.6 percent of GDP over the medium term. In addition, public sector reforms, and in particular civil service reform, could further raise the primary surplus up to 4.2 percent of GDP by 2013-14.
Growth is expected to recover starting 2011, while inflation will continue subdued. Due to the global financial crisis and the collapse of the Stanford and the CL Financial groups, the three most important sectors of the Antiguan economy (tourism, construction, and banking services) are expected to continue underperforming this year, with initial signs of recovery to become noticeable by 2011. Real GDP growth would decline by 2 percent in 2010, and then begin to recover slowly, reaching 4 percent over the medium term, reflecting inter alia the recovery in tourism and the benefits of structural reforms.
Exports of goods as a percentage of GDP are expected to remain flat, but tourism receipts are projected to pick up with a modest increase in tourism-related FDI inflows. Given the low liquidity in the domestic banking system, financing gaps would need to be filled mostly externally. For this reason, and based on the regional experience, it is assumed a mix of domestic and external financing—both in the form of six-year bonds, at an initial interest rate of 7½ percent, with increments of 50 basis points each year over the medium term.
Privatization. While this is not incorporated into the scenarios below due to high uncertainty and political sensitivity, the authorities plan to privatize a small number of public enterprises, which could contribute to debt reduction over the medium term.
Fund program. We consider public debt developments in the context of a three-year SBA with access of SDR 81 million (600 percent of quota). The disbursements are programmed to become available on a quarterly basis following the Board’s approval after each review, and to respect the normal access limits (200 percent of quota disbursed each year, up to a maximum of 600 percent of quota cumulative).
Antigua and Barbuda: SBA Access and Phasing
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Antigua and Barbuda: SBA Access and Phasing
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Antigua and Barbuda: SBA Access and Phasing
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Debt dynamics under the central scenario
8. This analysis is based on the assumption that arrears would be cleared in 2010. The authorities are seeking a resolution from Parliament authorizing the swap of the arrears with statutory bodies for long-term bonds (30-year maturity, 5-year grace period, and step-up coupon that starts at zero and increases by 100 basis points every five years, up to 6 percent).3 For the remaining domestic arrears—mainly unpaid vouchers and matured securities—the assumption is commercial terms (12-year bonds, 5-year grace period, and a fixed coupon of 7.5 percent). For the external arrears, in light of the unknown outcome of the discussions with the Paris Club, we assumed similar commercial terms to clear the arrears with commercial and official creditors, but to the latter group the Commercial Interest Reference Rate (CIRR) would apply.
9. A comprehensive debt restructuring is needed to put Antigua’s total PPG on a sustainable path. Even with the substantial fiscal measures contemplated, PPG debt would not decline significantly as a share of GDP in the absence of a comprehensive debt restructuring. Under the baseline scenario, which includes debt restructuring already underway, debt declines slowly, from 115 percent of GDP at end-2009 to 105 percent of GDP at the completion of the IMF program in 2013 (Table 1). The bound tests using the baseline scenario indicate vulnerability to a range of shocks (including growth rates, primary balance, interest rates, and contingent liabilities) (Figure 2). The ratio of PPG debt to GDP is projected to fall at a more robust pace with full implementation of the programmed restructuring.
Antigua and Barbuda: Public Sector Debt Sustainability Framework, 2005-2015
(In percent of GDP, unless otherwise indicated)
Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.
Derived as [(r - π(1+g) - g + αε(1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate; α = share of foreign-currency denominated debt; and ε = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).
The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g.
The exchange rate contribution is derived from the numerator in footnote 2/ as αε(1+r).
For projections, this line includes exchange rate changes.
Defined as public sector deficit, plus amortization of medium and long-term public sector debt, plus short-term debt at end of previous period.
The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.
Derived as nominal interest expenditure divided by previous period debt stock.
Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.
Antigua and Barbuda: Public Sector Debt Sustainability Framework, 2005-2015
(In percent of GDP, unless otherwise indicated)
| Actual | Projections | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Debt-stabilizing | ||||
| primary | |||||||||||||||
| balance 9/ | |||||||||||||||
| Baseline: Public sector debt 1/ | 111.5 | 105.8 | 93.3 | 92.8 | 115.3 | 117.3 | 115.4 | 111.0 | 104.9 | 98.4 | 93.0 | -2.4 | |||
| o/w foreign-currency denominated | 41.4 | 40.4 | 39.5 | 35.1 | 43.7 | 47.4 | 48.6 | 48.6 | 46.9 | 44.9 | 43.8 | ||||
| Change in public sector debt | -23.5 | -5.7 | -12.5 | -0.5 | 22.5 | 2.0 | -1.9 | -4.4 | -6.2 | -6.5 | -5.4 | ||||
| Identified debt-creating flows (4+7+12) | -2.8 | -7.2 | -4.0 | 2.4 | 25.9 | 1.5 | -2.3 | -4.9 | -6.6 | -6.9 | -5.7 | ||||
| Primary deficit | 1.5 | 4.3 | 2.9 | 3.0 | 11.5 | -3.0 | -3.4 | -3.8 | -4.2 | -4.2 | -3.2 | ||||
| Revenue and grants | 22.8 | 25.0 | 24.3 | 23.9 | 19.7 | 26.5 | 25.7 | 25.7 | 25.7 | 25.7 | 25.7 | ||||
| Primary (noninterest) expenditure | 24.3 | 29.3 | 27.1 | 26.9 | 31.2 | 23.4 | 22.3 | 21.9 | 21.5 | 21.5 | 22.5 | ||||
| Automatic debt dynamics 2/ | -4.3 | -11.5 | -6.8 | -0.6 | 11.6 | 4.5 | 1.0 | -1.1 | -2.4 | -2.7 | -2.5 | ||||
| Contribution from interest rate/growth differential 3/ | -4.3 | -11.5 | -6.8 | -0.6 | 11.6 | 4.5 | 1.0 | -1.1 | -2.4 | -2.7 | -2.5 | ||||
| Of which contribution from real interest rate | 2.1 | 0.8 | -0.6 | 1.0 | 4.8 | 2.2 | 2.0 | 1.7 | 1.5 | 1.5 | 1.6 | ||||
| Of which contribution from real GDP growth | -6.3 | -12.3 | -6.2 | -1.6 | 6.8 | 2.3 | -0.9 | -2.8 | -4.0 | -4.1 | -4.1 | ||||
| Contribution from exchange rate depreciation 4/ | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | … | … | … | ||||
| Other identified debt-creating flows | 0.0 | 0.0 | 0.0 | 0.0 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Privatization receipts (negative) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Recognition of implicit or contingent liabilities | 0.0 | 0.0 | 0.0 | 0.0 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Other (specify, e.g. bank recapitalization) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Residual, including asset changes (2-3) 5/ | -20.7 | 1.5 | -8.5 | -2.9 | -3.5 | 0.5 | 0.5 | 0.5 | 0.4 | 0.4 | 0.3 | ||||
| Public sector debt-to-revenue ratio 1/ | 489.8 | 422.9 | 384.8 | 387.9 | 586.1 | 443.4 | 449.7 | 432.5 | 408.5 | 383.1 | 362.1 | ||||
| Gross financing need 6/ | 7.0 | 10.6 | 6.1 | 8.5 | 23.4 | 5.9 | 2.5 | 3.6 | 1.7 | 2.0 | 7.2 | ||||
| in billions of U.S. dollars | 0.1 | 0.1 | 0.1 | 0.1 | 0.3 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | ||||
| Scenario with key variables at their historical averages 7/ | 117.3 | 121.2 | 125.1 | 129.0 | 132.7 | 136.4 | -0.6 | ||||||||
| Scenario with no policy change (constant primary balance) in 2010-2015 | 117.3 | 115.8 | 112.2 | 107.1 | 101.7 | 96.5 | -2.4 | ||||||||
| Key Macroeconomic and Fiscal Assumptions Underlying Baseline | |||||||||||||||
| Real GDP growth (in percent) | 5.0 | 12.9 | 6.5 | 1.8 | -7.0 | -2.0 | 0.8 | 2.5 | 3.8 | 4.2 | 4.4 | ||||
| Average nominal interest rate on public debt (in percent) 8/ | 3.2 | 4.4 | 3.8 | 3.5 | 7.8 | 4.7 | 4.5 | 4.2 | 4.1 | 4.0 | 4.2 | ||||
| Average real interest rate (nominal rate minus change in GDP deflator, in percent) | 1.7 | 1.3 | -0.4 | 1.2 | 4.8 | 1.9 | 1.8 | 1.6 | 1.6 | 1.6 | 1.8 | ||||
| Nominal appreciation (increase in US dollar value of local currency, in percent) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | … | … | … | ||||
| Inflation rate (GDP deflator, in percent) | 1.5 | 3.2 | 4.2 | 2.4 | 3.0 | 2.8 | 2.7 | 2.6 | 2.5 | 2.4 | 2.3 | ||||
| Growth of real primary spending (deflated by GDP deflator, in percent) | 11.8 | 36.5 | 1.3 | 0.9 | 7.4 | -26.8 | -4.5 | 0.5 | 1.5 | 3.6 | 8.9 | ||||
| Primary deficit | 1.5 | 4.3 | 2.9 | 3.0 | 11.5 | -3.0 | -3.4 | -3.8 | -4.2 | -4.2 | -3.2 | ||||
Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.
Derived as [(r - π(1+g) - g + αε(1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate; α = share of foreign-currency denominated debt; and ε = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).
The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g.
The exchange rate contribution is derived from the numerator in footnote 2/ as αε(1+r).
For projections, this line includes exchange rate changes.
Defined as public sector deficit, plus amortization of medium and long-term public sector debt, plus short-term debt at end of previous period.
The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.
Derived as nominal interest expenditure divided by previous period debt stock.
Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.
Antigua and Barbuda: Public Sector Debt Sustainability Framework, 2005-2015
(In percent of GDP, unless otherwise indicated)
| Actual | Projections | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Debt-stabilizing | ||||
| primary | |||||||||||||||
| balance 9/ | |||||||||||||||
| Baseline: Public sector debt 1/ | 111.5 | 105.8 | 93.3 | 92.8 | 115.3 | 117.3 | 115.4 | 111.0 | 104.9 | 98.4 | 93.0 | -2.4 | |||
| o/w foreign-currency denominated | 41.4 | 40.4 | 39.5 | 35.1 | 43.7 | 47.4 | 48.6 | 48.6 | 46.9 | 44.9 | 43.8 | ||||
| Change in public sector debt | -23.5 | -5.7 | -12.5 | -0.5 | 22.5 | 2.0 | -1.9 | -4.4 | -6.2 | -6.5 | -5.4 | ||||
| Identified debt-creating flows (4+7+12) | -2.8 | -7.2 | -4.0 | 2.4 | 25.9 | 1.5 | -2.3 | -4.9 | -6.6 | -6.9 | -5.7 | ||||
| Primary deficit | 1.5 | 4.3 | 2.9 | 3.0 | 11.5 | -3.0 | -3.4 | -3.8 | -4.2 | -4.2 | -3.2 | ||||
| Revenue and grants | 22.8 | 25.0 | 24.3 | 23.9 | 19.7 | 26.5 | 25.7 | 25.7 | 25.7 | 25.7 | 25.7 | ||||
| Primary (noninterest) expenditure | 24.3 | 29.3 | 27.1 | 26.9 | 31.2 | 23.4 | 22.3 | 21.9 | 21.5 | 21.5 | 22.5 | ||||
| Automatic debt dynamics 2/ | -4.3 | -11.5 | -6.8 | -0.6 | 11.6 | 4.5 | 1.0 | -1.1 | -2.4 | -2.7 | -2.5 | ||||
| Contribution from interest rate/growth differential 3/ | -4.3 | -11.5 | -6.8 | -0.6 | 11.6 | 4.5 | 1.0 | -1.1 | -2.4 | -2.7 | -2.5 | ||||
| Of which contribution from real interest rate | 2.1 | 0.8 | -0.6 | 1.0 | 4.8 | 2.2 | 2.0 | 1.7 | 1.5 | 1.5 | 1.6 | ||||
| Of which contribution from real GDP growth | -6.3 | -12.3 | -6.2 | -1.6 | 6.8 | 2.3 | -0.9 | -2.8 | -4.0 | -4.1 | -4.1 | ||||
| Contribution from exchange rate depreciation 4/ | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | … | … | … | ||||
| Other identified debt-creating flows | 0.0 | 0.0 | 0.0 | 0.0 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Privatization receipts (negative) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Recognition of implicit or contingent liabilities | 0.0 | 0.0 | 0.0 | 0.0 | 2.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Other (specify, e.g. bank recapitalization) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Residual, including asset changes (2-3) 5/ | -20.7 | 1.5 | -8.5 | -2.9 | -3.5 | 0.5 | 0.5 | 0.5 | 0.4 | 0.4 | 0.3 | ||||
| Public sector debt-to-revenue ratio 1/ | 489.8 | 422.9 | 384.8 | 387.9 | 586.1 | 443.4 | 449.7 | 432.5 | 408.5 | 383.1 | 362.1 | ||||
| Gross financing need 6/ | 7.0 | 10.6 | 6.1 | 8.5 | 23.4 | 5.9 | 2.5 | 3.6 | 1.7 | 2.0 | 7.2 | ||||
| in billions of U.S. dollars | 0.1 | 0.1 | 0.1 | 0.1 | 0.3 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | ||||
| Scenario with key variables at their historical averages 7/ | 117.3 | 121.2 | 125.1 | 129.0 | 132.7 | 136.4 | -0.6 | ||||||||
| Scenario with no policy change (constant primary balance) in 2010-2015 | 117.3 | 115.8 | 112.2 | 107.1 | 101.7 | 96.5 | -2.4 | ||||||||
| Key Macroeconomic and Fiscal Assumptions Underlying Baseline | |||||||||||||||
| Real GDP growth (in percent) | 5.0 | 12.9 | 6.5 | 1.8 | -7.0 | -2.0 | 0.8 | 2.5 | 3.8 | 4.2 | 4.4 | ||||
| Average nominal interest rate on public debt (in percent) 8/ | 3.2 | 4.4 | 3.8 | 3.5 | 7.8 | 4.7 | 4.5 | 4.2 | 4.1 | 4.0 | 4.2 | ||||
| Average real interest rate (nominal rate minus change in GDP deflator, in percent) | 1.7 | 1.3 | -0.4 | 1.2 | 4.8 | 1.9 | 1.8 | 1.6 | 1.6 | 1.6 | 1.8 | ||||
| Nominal appreciation (increase in US dollar value of local currency, in percent) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | … | … | … | ||||
| Inflation rate (GDP deflator, in percent) | 1.5 | 3.2 | 4.2 | 2.4 | 3.0 | 2.8 | 2.7 | 2.6 | 2.5 | 2.4 | 2.3 | ||||
| Growth of real primary spending (deflated by GDP deflator, in percent) | 11.8 | 36.5 | 1.3 | 0.9 | 7.4 | -26.8 | -4.5 | 0.5 | 1.5 | 3.6 | 8.9 | ||||
| Primary deficit | 1.5 | 4.3 | 2.9 | 3.0 | 11.5 | -3.0 | -3.4 | -3.8 | -4.2 | -4.2 | -3.2 | ||||
Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.
Derived as [(r - π(1+g) - g + αε(1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate; α = share of foreign-currency denominated debt; and ε = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).
The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g.
The exchange rate contribution is derived from the numerator in footnote 2/ as αε(1+r).
For projections, this line includes exchange rate changes.
Defined as public sector deficit, plus amortization of medium and long-term public sector debt, plus short-term debt at end of previous period.
The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.
Derived as nominal interest expenditure divided by previous period debt stock.
Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.
Antigua and Barbuda: Public Debt Sustainability: Bound Tests 1/
(Public debt in percent of GDP)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: International Monetary Fund, country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average forthe variable is also shown.2/ Permanent ¼ standard deviation shocks applied to real interest rate, growth rate, and primary balance.3/ One-time real depreciation of 30 percent and 10 percent of GDP shock to contingent liabilities occur in 2010, with real depreciation defined as nominal depreciation (measured by percentage fall in dollar value of local currency)minus domestic inflation (based on GDP deflator).Antigua and Barbuda: Public Debt Sustainability: Bound Tests 1/
(Public debt in percent of GDP)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: International Monetary Fund, country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average forthe variable is also shown.2/ Permanent ¼ standard deviation shocks applied to real interest rate, growth rate, and primary balance.3/ One-time real depreciation of 30 percent and 10 percent of GDP shock to contingent liabilities occur in 2010, with real depreciation defined as nominal depreciation (measured by percentage fall in dollar value of local currency)minus domestic inflation (based on GDP deflator).Antigua and Barbuda: Public Debt Sustainability: Bound Tests 1/
(Public debt in percent of GDP)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: International Monetary Fund, country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average forthe variable is also shown.2/ Permanent ¼ standard deviation shocks applied to real interest rate, growth rate, and primary balance.3/ One-time real depreciation of 30 percent and 10 percent of GDP shock to contingent liabilities occur in 2010, with real depreciation defined as nominal depreciation (measured by percentage fall in dollar value of local currency)minus domestic inflation (based on GDP deflator).10. A comprehensive public debt rescheduling is also necessary to reduce external vulnerabilities. Due to the high debt-stabilizing non-interest current account, Antigua’s external debt would remain at 44 percent of GDP even after a severe compression in its deficit in the balance of goods and services (Table 2)4. Likewise, positive gains from higher economic growth would be offset by the heavy interest burden. Moreover, gross financing needs would average 20 percent of GDP in the medium term, and the vulnerability to current account shocks (including deteriorated terms of trade and lower demand for tourism) could push the external debt up to two-thirds of GDP (Figure 3).
Antigua and Barbuda: External Debt Sustainability Framework, 2005-2015
(In percent of GDP, unless otherwise indicated)
Derived as [r - g - ρ(1+g) + εα(1+r)]/(1+g+ρ+gρ) times previous period debt stock, with r = nominal effective interest rate on external debt; ρ = change in domestic GDP deflator in US dollar terms, g = real GDP growth rate, ε = nominal appreciation (increase in dollar value of domestic currency), and α = share of domestic-currency denominated debt in total external debt.
The contribution from price and exchange rate changes is defined as [-ρ(1+g) + εα(1+r)]/(1+g+ρ+gρ) times previous period debt stock. ρ increases with an appreciating domestic currency (ε > 0) and rising inflation (based on GDP deflator).
For projection, line includes the impact of price and exchange rate changes.
Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.
The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.
Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP) remain at their levels of the last projection year.
Antigua and Barbuda: External Debt Sustainability Framework, 2005-2015
(In percent of GDP, unless otherwise indicated)
| Actual | Projections | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Debt-stabilizing | ||||
| non-interest | |||||||||||||||
| current account 6/ | |||||||||||||||
| Baseline: External debt | 41.4 | 40.4 | 39.5 | 35.1 | 43.7 | 47.4 | 48.6 | 48.6 | 46.9 | 44.9 | 43.8 | -12.7 | |||
| Change in external debt | -24.3 | -1.0 | -1.0 | -4.4 | 8.6 | 3.7 | 1.2 | 0.0 | -1.7 | -2.0 | -1.1 | ||||
| Identified external debt-creating flows (4+8+9) | 1.8 | -10.7 | -1.5 | 13.5 | 15.2 | 7.0 | 5.2 | 4.0 | 2.9 | 2.6 | 2.5 | ||||
| Current account deficit, excluding interest payments | 16.6 | 28.2 | 30.3 | 28.7 | 22.5 | 14.5 | 14.2 | 14.2 | 14.1 | 14.2 | 14.3 | ||||
| Deficit in balance of goods and services | 13.1 | 26.4 | 28.7 | 25.0 | 23.0 | 13.7 | 13.5 | 13.4 | 13.3 | 13.3 | 13.4 | ||||
| Exports | 65.7 | 54.6 | 52.1 | 53.3 | 49.9 | 51.0 | 52.8 | 53.9 | 53.9 | 54.1 | 54.0 | ||||
| Imports | 78.8 | 81.0 | 80.7 | 78.3 | 73.0 | 64.7 | 66.3 | 67.3 | 67.2 | 67.4 | 67.3 | ||||
| Net non-debt creating capital inflows (negative) | -13.4 | -35.5 | -29.3 | -14.4 | -11.3 | -10.6 | -11.1 | -11.4 | -11.7 | -11.9 | -12.1 | ||||
| Automatic debt dynamics 1/ | -1.4 | -3.4 | -2.4 | -0.9 | 3.9 | 3.2 | 2.1 | 1.2 | 0.5 | 0.3 | 0.2 | ||||
| Contribution from nominal interest rate | 2.3 | 2.5 | 2.6 | 0.7 | 2.2 | 2.3 | 2.4 | 2.3 | 2.2 | 2.1 | 2.1 | ||||
| Contribution from real GDP growth | -3.1 | -4.6 | -2.3 | -0.7 | 2.6 | 0.9 | -0.4 | -1.2 | -1.7 | -1.9 | -1.9 | ||||
| Contribution from price and exchange rate changes 2/ | -0.6 | -1.3 | -2.8 | -0.9 | -0.9 | … | … | … | … | … | … | ||||
| Residual, incl. change in gross foreign assets (2-3) 3/ | -26.1 | 9.7 | 0.5 | -17.8 | -6.6 | -3.3 | -4.0 | -4.0 | -4.7 | -4.6 | -3.5 | ||||
| External debt-to-exports ratio (in percent) | 63.0 | 74.1 | 75.8 | 65.8 | 87.5 | 92.9 | 92.0 | 90.2 | 87.0 | 83.0 | 81.3 | ||||
| Gross external financing need (in billions of US dollars) 4/ | 0.3 | 0.3 | 0.4 | 0.4 | 0.3 | 0.2 | 0.2 | 0.2 | 0.3 | 0.3 | 0.3 | ||||
| in percent of GDP | 37.2 | 32.4 | 34.4 | 33.3 | 26.2 | 19.3 | 18.3 | 18.4 | 19.7 | 19.9 | 22.8 | ||||
| Scenario with key variables at their historical averages 5/ | 47.4 | 44.4 | 41.5 | 38.0 | 34.5 | 32.0 | -17.0 | ||||||||
| Key Macroeconomic Assumptions Underlying Baseline | |||||||||||||||
| Real GDP growth (in percent) | 5.0 | 12.9 | 6.5 | 1.8 | -7.0 | -2.0 | 0.8 | 2.5 | 3.8 | 4.2 | 4.4 | ||||
| GDP deflator in US dollars (change in percent) | 0.8 | 3.3 | 7.3 | 2.4 | 2.5 | 2.3 | 2.3 | 2.2 | 2.1 | 2.0 | 2.0 | ||||
| Nominal external interest rate (in percent) | 3.7 | 7.0 | 7.4 | 1.9 | 6.0 | 5.4 | 5.3 | 5.1 | 4.8 | 4.8 | 5.0 | ||||
| Growth of exports (US dollar terms, in percent) | 6.6 | -3.2 | 9.1 | 6.7 | -10.8 | 2.5 | 6.7 | 6.9 | 6.0 | 6.8 | 6.2 | ||||
| Growth of imports (US dollar terms, in percent) | 15.3 | 19.9 | 14.0 | 1.1 | -11.2 | -11.0 | 5.6 | 6.4 | 5.8 | 6.7 | 6.4 | ||||
| Current account balance, excluding interest payments | -16.6 | -28.2 | -30.3 | -28.7 | -22.5 | -14.5 | -14.2 | -14.2 | -14.1 | -14.2 | -14.3 | ||||
| Net non-debt creating capital inflows | 13.4 | 35.5 | 29.3 | 14.4 | 11.3 | 10.6 | 11.1 | 11.4 | 11.7 | 11.9 | 12.1 | ||||
Derived as [r - g - ρ(1+g) + εα(1+r)]/(1+g+ρ+gρ) times previous period debt stock, with r = nominal effective interest rate on external debt; ρ = change in domestic GDP deflator in US dollar terms, g = real GDP growth rate, ε = nominal appreciation (increase in dollar value of domestic currency), and α = share of domestic-currency denominated debt in total external debt.
The contribution from price and exchange rate changes is defined as [-ρ(1+g) + εα(1+r)]/(1+g+ρ+gρ) times previous period debt stock. ρ increases with an appreciating domestic currency (ε > 0) and rising inflation (based on GDP deflator).
For projection, line includes the impact of price and exchange rate changes.
Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.
The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.
Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP) remain at their levels of the last projection year.
Antigua and Barbuda: External Debt Sustainability Framework, 2005-2015
(In percent of GDP, unless otherwise indicated)
| Actual | Projections | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Debt-stabilizing | ||||
| non-interest | |||||||||||||||
| current account 6/ | |||||||||||||||
| Baseline: External debt | 41.4 | 40.4 | 39.5 | 35.1 | 43.7 | 47.4 | 48.6 | 48.6 | 46.9 | 44.9 | 43.8 | -12.7 | |||
| Change in external debt | -24.3 | -1.0 | -1.0 | -4.4 | 8.6 | 3.7 | 1.2 | 0.0 | -1.7 | -2.0 | -1.1 | ||||
| Identified external debt-creating flows (4+8+9) | 1.8 | -10.7 | -1.5 | 13.5 | 15.2 | 7.0 | 5.2 | 4.0 | 2.9 | 2.6 | 2.5 | ||||
| Current account deficit, excluding interest payments | 16.6 | 28.2 | 30.3 | 28.7 | 22.5 | 14.5 | 14.2 | 14.2 | 14.1 | 14.2 | 14.3 | ||||
| Deficit in balance of goods and services | 13.1 | 26.4 | 28.7 | 25.0 | 23.0 | 13.7 | 13.5 | 13.4 | 13.3 | 13.3 | 13.4 | ||||
| Exports | 65.7 | 54.6 | 52.1 | 53.3 | 49.9 | 51.0 | 52.8 | 53.9 | 53.9 | 54.1 | 54.0 | ||||
| Imports | 78.8 | 81.0 | 80.7 | 78.3 | 73.0 | 64.7 | 66.3 | 67.3 | 67.2 | 67.4 | 67.3 | ||||
| Net non-debt creating capital inflows (negative) | -13.4 | -35.5 | -29.3 | -14.4 | -11.3 | -10.6 | -11.1 | -11.4 | -11.7 | -11.9 | -12.1 | ||||
| Automatic debt dynamics 1/ | -1.4 | -3.4 | -2.4 | -0.9 | 3.9 | 3.2 | 2.1 | 1.2 | 0.5 | 0.3 | 0.2 | ||||
| Contribution from nominal interest rate | 2.3 | 2.5 | 2.6 | 0.7 | 2.2 | 2.3 | 2.4 | 2.3 | 2.2 | 2.1 | 2.1 | ||||
| Contribution from real GDP growth | -3.1 | -4.6 | -2.3 | -0.7 | 2.6 | 0.9 | -0.4 | -1.2 | -1.7 | -1.9 | -1.9 | ||||
| Contribution from price and exchange rate changes 2/ | -0.6 | -1.3 | -2.8 | -0.9 | -0.9 | … | … | … | … | … | … | ||||
| Residual, incl. change in gross foreign assets (2-3) 3/ | -26.1 | 9.7 | 0.5 | -17.8 | -6.6 | -3.3 | -4.0 | -4.0 | -4.7 | -4.6 | -3.5 | ||||
| External debt-to-exports ratio (in percent) | 63.0 | 74.1 | 75.8 | 65.8 | 87.5 | 92.9 | 92.0 | 90.2 | 87.0 | 83.0 | 81.3 | ||||
| Gross external financing need (in billions of US dollars) 4/ | 0.3 | 0.3 | 0.4 | 0.4 | 0.3 | 0.2 | 0.2 | 0.2 | 0.3 | 0.3 | 0.3 | ||||
| in percent of GDP | 37.2 | 32.4 | 34.4 | 33.3 | 26.2 | 19.3 | 18.3 | 18.4 | 19.7 | 19.9 | 22.8 | ||||
| Scenario with key variables at their historical averages 5/ | 47.4 | 44.4 | 41.5 | 38.0 | 34.5 | 32.0 | -17.0 | ||||||||
| Key Macroeconomic Assumptions Underlying Baseline | |||||||||||||||
| Real GDP growth (in percent) | 5.0 | 12.9 | 6.5 | 1.8 | -7.0 | -2.0 | 0.8 | 2.5 | 3.8 | 4.2 | 4.4 | ||||
| GDP deflator in US dollars (change in percent) | 0.8 | 3.3 | 7.3 | 2.4 | 2.5 | 2.3 | 2.3 | 2.2 | 2.1 | 2.0 | 2.0 | ||||
| Nominal external interest rate (in percent) | 3.7 | 7.0 | 7.4 | 1.9 | 6.0 | 5.4 | 5.3 | 5.1 | 4.8 | 4.8 | 5.0 | ||||
| Growth of exports (US dollar terms, in percent) | 6.6 | -3.2 | 9.1 | 6.7 | -10.8 | 2.5 | 6.7 | 6.9 | 6.0 | 6.8 | 6.2 | ||||
| Growth of imports (US dollar terms, in percent) | 15.3 | 19.9 | 14.0 | 1.1 | -11.2 | -11.0 | 5.6 | 6.4 | 5.8 | 6.7 | 6.4 | ||||
| Current account balance, excluding interest payments | -16.6 | -28.2 | -30.3 | -28.7 | -22.5 | -14.5 | -14.2 | -14.2 | -14.1 | -14.2 | -14.3 | ||||
| Net non-debt creating capital inflows | 13.4 | 35.5 | 29.3 | 14.4 | 11.3 | 10.6 | 11.1 | 11.4 | 11.7 | 11.9 | 12.1 | ||||
Derived as [r - g - ρ(1+g) + εα(1+r)]/(1+g+ρ+gρ) times previous period debt stock, with r = nominal effective interest rate on external debt; ρ = change in domestic GDP deflator in US dollar terms, g = real GDP growth rate, ε = nominal appreciation (increase in dollar value of domestic currency), and α = share of domestic-currency denominated debt in total external debt.
The contribution from price and exchange rate changes is defined as [-ρ(1+g) + εα(1+r)]/(1+g+ρ+gρ) times previous period debt stock. ρ increases with an appreciating domestic currency (ε > 0) and rising inflation (based on GDP deflator).
For projection, line includes the impact of price and exchange rate changes.
Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.
The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.
Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP) remain at their levels of the last projection year.
Antigua and Barbuda: External Debt Sustainability: Bound Tests 1/
(External debt in percent of GDP)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: International Monetary Fund, Country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also shown.2/Permanent ¼ standard deviation shocks applied to real interest rate, growth rate, and current account balance.3/One-time real depreciation of 30 percent occurs in 2011.Antigua and Barbuda: External Debt Sustainability: Bound Tests 1/
(External debt in percent of GDP)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: International Monetary Fund, Country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also shown.2/Permanent ¼ standard deviation shocks applied to real interest rate, growth rate, and current account balance.3/One-time real depreciation of 30 percent occurs in 2011.Antigua and Barbuda: External Debt Sustainability: Bound Tests 1/
(External debt in percent of GDP)
Citation: IMF Staff Country Reports 2010, 279; 10.5089/9781455207763.002.A002
Sources: International Monetary Fund, Country desk data, and staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also shown.2/Permanent ¼ standard deviation shocks applied to real interest rate, growth rate, and current account balance.3/One-time real depreciation of 30 percent occurs in 2011.Conclusion
11. This DSA indicates that Antigua and Barbuda’s risks of debt distress would remain elevated even in the presence of strong fiscal and external adjustments. In spite of significant fiscal restraint and trade deficit compression, the PPG debt would linger at pre-IMF program levels in the medium term. Under such scenario, the country would be highly vulnerability to an array of shocks, and the risks of future defaults would be amplified. A comprehensive debt restructuring, therefore, is a keystone for the consolidation of fiscal and external sustainability.
PPG debt includes central government debt and government guaranteed debt contracted by non-financial parastatals. The stock data and service projections are provisional and subject to revisions upon reconciliation with creditors.
In late 2007 the arrears with the statutory bodies decreased by EC$104 million (US$38 million) due to a bilateral agreement between the central government and the Board of Education.
The legislation is expected to be approved by Parliament in the coming months.
This analysis incorporates debt restructuring currently underway, in particular the restructuring of one external commercial loan. External arrears are assumed to be cleared on commercial terms.
