Front Matter Page
IMF Country Report No. 14/49
ST. KITTS AND NEVIS
FIFTH AND SIXTH REVIEWS UNDER THE STAND-BY ARRANGEMENT, REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND REQUEST FOR WAIVER OF APPLICABILITY; STAFF REPORT; PRESS RELEASE
February 2014
In the context of the combined fifth and sixth reviews under the Stand-by Arrangement, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 24, 2013, following discussions that ended on May 15, 2013, with the officials of St. Kitts and Nevis on economic developments and policies underpinning the IMF arrangement under the Stand-By Arrangement. Based on information available at the time of these discussions, the staff report was completed on July 8, 2013.
A Press Release including a statement by the Chair of the Executive Board.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of St. Kitts and Nevis*
Memorandum of Economic and Financial Policies by the authorities of St. Kitts and Nevis*
Technical Memorandum of Understanding by the authorities of St. Kitts and Nevis*
*Also included in Staff Report
The publication policy for staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
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© 2014 International Monetary Fund
Front Matter Page
ST. KITTS AND NEVIS
FIFTH AND SIXTH REVIEWS UNDER THE STAND-BY ARRANGEMENT, REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND REQUEST FOR WAIVER OF APPLICABILITY
July 8, 2013
Executive Summary
Stand-By Arrangement (SBA). On July 27, 2011, the Executive Board approved a 36-month SBA for St. Kitts and Nevis for SDR 52.51 million (590 percent of quota) to support the authorities’ program (Country Report No. 11/270). The first review was completed on January 25, 2012, the second review was completed on May 21, 2012, the third review was completed on August 3, 2012 and the fourth review was completed on November 30, 2012. A tranche of SDR 4.266 million will be made available upon completion of the fifth and sixth reviews.
Context. A pick-up in tourism and construction activity presages a recovery in 2013, with growth projected at 2 percent, up from a four-year contraction through 2012. In addition to an expected pickup in FDI and construction, supportive policies include programs subsidizing employment and loans to home buyers and entrepreneurs. Risks include the pace of the economic recovery in the United States and policy indecisiveness stemming from political developments in St. Kitts and Nevis, which may impact investment and slow down the adoption of reforms.
Program performance. All fiscal program targets were met through end-March 2013, partly due to strong receipts from the Citizenship by Investment program. However, the continuous performance criterion on the non accumulation of government and guaranteed external arrears was missed by a minor amount due to temporary delays in payments. Three structural benchmarks were met at end-December 2012 and end-March 2013 while two benchmarks were met with delay. The structural benchmark on drafting a proposal for a comprehensive pension reform, scheduled for end-June 2013, has been delayed to allow for further deliberations.
Review. The authorities continue to demonstrate their sustained commitment to their home-grown program, including with their 2013 budget and ongoing progress in the restructuring of their public debt. Staff supports the authorities’ request for the completion of the fifth and sixth reviews under the SBA and the waiver of applicability based on the absence of data available to assess whether the end-June 2013 PC—the governing PC under the SBA—were met, and the lack of evidence that end-June PC will not be met.
Approved By
Adrienne Cheasty and Elliott Harris
The staff team comprising Mr. G. Tsibouris (head), Mr. K. Greenidge, Ms. D. Simard (all WHD), and Mr. K. Moriyama (SPR) visited Basseterre and Charlestown during April 29 to May 15, 2013. Mr. Dalrymple (OED) participated in the final discussions. The mission met with Prime Minister and Minister of Finance Douglas, Premier Amory, and other senior officials and representatives of the private sector.
Contents
PERFORMANCE UNDER THE PROGRAM
A. Recent Developments
B. Program Performance
OUTLOOK
POLICIES IN 2013 AND OVER THE MEDIUM TERM
A. Fiscal Policy
B. Debt Restructuring
C. Financial Sector
D. Labor Market Initiatives
E. Program Design
STAFF APPRAISAL
BOXES
1. Tourism in St. Kitts and Nevis
2. The Citizenship by Investment (CBI) Program
3. Key Measures to Boost Growth and Tax Revenue in 2013
FIGURES
1. Real Sector Developments and Near-Term Outlook
2. Monetary Developments
3. Fiscal Developments
4. External Debt Sustainability: Bound Tests
5. Public Debt Sustainability: Bound Tests
TABLES
1. Basic Data
2. Central Government Fiscal Operations, 2009–15 (in millions of EC$)
3. Central Government Fiscal Operations, 2009–15 (in percent of GDP)
4. Balance of Payments, 2009–18
5. Monetary Survey, 2008–13
6. Indicators of External and Financial Vulnerability, 2007–12
7. External Financing Requirements and Sources, 2011–18
8. Indicators of Capacity to Repay the Fund, 2013–21
9. External Debt Sustainability Framework, 2008–18
10. Public Sector Debt Sustainability Framework, 2008–18
APPENDIX
Letter of Intent
Attachment I: Memorandum of Economic and Financial Policies
Attachment II: Technical Memorandum of Understanding
Front Matter Page
Press Release No. 13/278
FOR IMMEDIATE RELEASE
July 25, 2013
International Monetary Fund
Washington, D.C. 20431 USA
