The downturn has accentuated strains on the financial system of Anguilla. The 2011 Article IV Consultation highlights that the growth outlook is improving with major tourism projects getting back on course, although a slow recovery is only expected to begin in 2012. Executive Directors have emphasized that a new fiscal framework is needed with an appropriate balance between current and capital expenditure and in line with the resources available. Fiscal policy should be designed to meet the combined objectives of debt sustainability, deficit reduction, and long-term economic growth.

Abstract

The downturn has accentuated strains on the financial system of Anguilla. The 2011 Article IV Consultation highlights that the growth outlook is improving with major tourism projects getting back on course, although a slow recovery is only expected to begin in 2012. Executive Directors have emphasized that a new fiscal framework is needed with an appropriate balance between current and capital expenditure and in line with the resources available. Fiscal policy should be designed to meet the combined objectives of debt sustainability, deficit reduction, and long-term economic growth.

ANNEX I: FUND RELATIONS

  • The consultation discussions with the authorities in Anguilla, which are part of the 2011 Article IV discussions with the United Kingdom, were held in The Valley during July 20-29, 2011. The staff team comprised Messrs. Monroe (head), Mrkaic, and Ms. Viseth (all WHD), Ms. Yang (FIN) and Mr. Akçakoca (external consultant). It met with the Governor of Anguilla, the Chief Minister (who is also the Minister of Finance) and senior officials of the government of Anguilla, members of the Anguillan parliament, and representatives of labor unions, business associations, banks, and pension and health care funds.

  • As a British Overseas Territory, Anguilla falls under UK sovereignty. The UK has accepted the obligations under Article VIII. Anguilla maintains an exchange system free of restrictions.

United Kingdom

I. Membership Status: Joined: December 27, 1945.

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IV. Outstanding Purchases and Loans: None

V. Financial Arrangements: None

VI. Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs):

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Anguilla

VII. Exchange Rate Arrangement:

The Eastern Caribbean Dollar has been pegged to the U.S. dollar at EC$2.7 per US$1 since July 7, 1976.

VIII. Article IV Consultation Discussions:

The 2011 Article IV consultation discussions are the first bilateral Fund discussions with Anguilla.

IX. Financial Sector Supervision, FATF Evaluation, and OFC Assessment:

The evaluation of Anguilla’s compliance with the Financial Action Task Force (FATF) 40+9 Recommendations on AML/CFT was conducted jointly by the FATF and the Caribbean Financial Action Task Force during June 2010.

X. Technical Assistance:

CARTAC is providing technical assistance to Anguilla in the areas of macroeconomic analysis, forecasting and performance monitoring, public finance management, budget preparation, Chart of Accounts reform, and cash management and forecasting.

ANNEX II: ANGUILLA’S RELATIONS WITH THE CARIBBEAN DEVELOPMENT BANK

(As of June 30, 2011)

The Caribbean Development Bank (CDB) has approved loans totalling US$106.5 million, of which US$1.1 million are undisbursed.

Major Projects:

1. Policy-Based Loan—is intended to support the Government of Anguilla’s medium-term reform programme to achieve fiscal and debt sustainability, thereby creating the conditions for overall economic growth and poverty reduction. The PBL assisted the Government to: (a) restructure its public debt to reduce debt service payments by lengthening the maturity structure and reducing the rate of interest on some of its public debt; (b) strengthen the framework for fiscal and economic management for sustained improvements in the fiscal position; and (c) support and maintain social safety nets to cushion the worst effects of the adjustment measures on the most vulnerable in the country.

2. Fifth Consolidated Line of Credit—the provision of a loan of US$5 million to assist the Anguilla Development Bank in continuing its lending programme in the agriculture, industry, tourism, housing, education sectors and small and medium enterprises. The Project is to assist in: (a) financing technically sound and financially viable projects in the productive sectors (agriculture, industry, tourism and services related to those sectors) and (b) improving human resource capacity for Anguilla by upgrading skills at the technical, vocational and professional levels.

3. Fifth Power Project— consists of the purchase and installation of two generators of approximate size 3.5 MW and ancillary switchgear, associated civil works, extension to the power house, the installation of a fuel tank and provision of an instrumentation and control system. The project will provide additional generating capacity to satisfy projected electricity demand and to replace existing engines that are past their useful lives.

4. Natural Disaster Management Project— to contribute to the rehabilitation of economic infrastructure caused by Hurricane Lenny. The project consists of rehabilitating a Bypass road and drainage structures and repairs to other infrastructure and public buildings. The project promotes the reduction of vulnerability to natural disasters through support for the development and adoption of mitigation policies, standards and practices.

I.

CURRENT PORTFOLIO

(In millions of U.S. dollars)

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II.

LOAN DISBURSEMENT

(In millions of U.S. dollars)

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As of June 30.

ANNEX III. STATISTICAL ISSUES

As of November 15, 2011

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Anguilla—Table of Common Indicators Required for Surveillance

(As of November 15, 2011)

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Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

The Eastern Caribbean Dollar is pegged to the US Dollar.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

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

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.