Front Matter Page
IMF Country Report No. 17/76
ST. LUCIA
2017 ARTICLE IV CONSULTATION—PRESS RELEASE AND STAFF REPORT
March 2017
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2017 Article IV consultation with St. Lucia, the following documents have been released and are included in this package:
A Press Release.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on a lapse of time basis, following discussions that ended on January 27, 2017, with the officials of St. Lucia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on March 9, 2017.
An Informational Annex prepared by the IMF staff.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2017 International Monetary Fund
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ST. LUCIA
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION
March 9, 2017
Key Issues
Context. Despite some limited improvement in labor market conditions, unemployment remains high and growth modest as low competitiveness and structural bottlenecks continue to weigh on economic performance. Slow progress in addressing financial sector problems has left banks loaded with impaired assets and unable to support the economy. The new government is developing a program of pro-growth reforms, but policies have not yet been defined.
Fiscal policy. A recent fiscal package has weakened the fiscal position and corrective measures are needed promptly to stabilize debt dynamics and ensure the attainment of the ECCU debt target of 60 percent of GDP by 2030. Fiscal adjustment should focus on reducing the numerous tax exemptions, controlling key expenditure items, and reducing the cost of debt. A medium-term fiscal framework and a supporting fiscal rule should underpin the consolidation effort.
Financial sector policies. Continued progress in implementing the regional strategy to strengthen the financial sector in the Eastern Caribbean Currency Union is necessary to help banks resume lending. Slow implementation, including in the establishment of a regional asset management company, has delayed the resolution of problem loans. Changes to the domestic legislation on insolvency and foreclosures are also critical.
Structural policies. Addressing skills mismatches and reinforcing the link between wages and productivity are necessary to reduce high structural unemployment. Reducing high costs of doing business, including energy costs and costs of trade, should help enhance competitiveness and lift potential growth.
Approved By
Trevor Alleyne (WHD) and Bob Traa (SPR)
Discussions for the 2016 consultation took place in Castries on January 16-27, 2017. The team comprised Messrs. Bonato (head), Impavido, Salinas (all WHD), and Ms. Sola (SEC). Mr. Williams (OED) accompanied the mission and Mr. McGrath (OED) joined the final policy discussion. The mission met with the Honorable Prime Minister Allen M. Chastanet, the Honorable Minister in the Ministry of Finance Ubaldus Raymond, Director of Finance Cointha Thomas and other senior government officials, the Leader of the Opposition, the Honorable Phillip J. Pierre, and representatives of the private sector and labor unions. Mmes. Hess and Tibung assisted in the preparation of the staff report.
Contents
RECENT DEVELOPMENTS AND OUTLOOK
A. Context
B. Current Trends
C. Outlook
ENSURING FISCAL SUSTAINABILITY AND FOSTERING GROWTH
A. Fiscal Policies
B. Financial Sector Policies
C. Structural Reforms
D. The Authorities’ Position
STAFF APPRAISAL
BOXES
1. Estimating the Cost of Natural Disasters
2. The PFM Bill
3. Changes in the Citizenship by Investment Program
FIGURES
1. Mixed Macroeconomic Outcomes Despite Favorable Global Conditions
2. Strengthening the Financial Sector
3. Main Social Spending Items Relative to Comparator Groups
4. Baseline, Passive, and Adjustment Scenarios
5. Structural Reform Priorities to Drive Growth
6. Unemployment in St. Lucia
TABLES
1. Selected Social and Economic Indicators, 2013–2022
2a. The Statement of Operations of the Central Government (In millions of EC dollars)
2b. The Statement of Operations of the Central Government (In percent of GDP)
3. Balance of Payments Summary, 2013–2022
4. Monetary Survey, 2013–2017
5. Banking System Summary Data, 2010–2016
6. Selected Labor Market Indicators, 2010–2015
ANNEXES
I. Risk Assessment Matrix
II. Implementation of Previous Staff Advice
III. Debt Sustainability Analysis
IV. External Sector Assessment
V. Government Wage Bill in the Caribbean
VI. Unemployment in St. Lucia and ECCU
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ST. LUCIA
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
March 9, 2017
Prepared By
Western Hemisphere Department (in consultation with other departments and the Caribbean Regional Technical Assistance Center, CARTAC)
Contents
FUND RELATIONS
RELATIONS WITH THE WORLD BANK GROUP
RELATIONS WITH THE CARIBBEAN DEVELOPMENT BANK (CDB)
STATISTICAL APPENDIX
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Press Release No. 17/106
FOR IMMEDIATE RELEASE
March 31, 2017
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