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IMF Country Report No. 20/54
ST. LUCIA
2019 ARTICLE IV CONSULTATION—PRESS RELEASE; AND STAFF REPORT
February 2020
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 2019 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 November 8, 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 January 21.
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.
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ST. LUCIA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION
January 21, 2020
Key Issues
Context. St. Lucia’s near-term growth prospects are favorable, supported by large infrastructure investment and robust tourist inflows. However, longer-term growth continues to be impeded by high public debt, lingering vulnerabilities in the financial system, and structural impediments to private investment. Diminishing policy buffers further weaken the country’s resilience to external shocks against the backdrop of a precarious global outlook.
Rebuilding policy space. Fiscal consolidation is needed to bring debt onto a downward path, rebuild policy space, and provide St. Lucia with flexibility to respond to negative shocks. Policies should focus on measures that increase revenues and finance much-needed investments to make the economy more resilient to natural disasters and climate change. A fiscal rule, supported by a clear medium-term institutional framework for fiscal policy, should be adopted to guide the pace and composition of the needed fiscal consolidation.
Strengthening bank balance sheets and financial intermediation. Completion of long-pending legislative initiatives, alongside stronger regional and domestic financial oversight, should provide banks with incentives to strengthen their balance sheets and increase the efficiency of financial intermediation. There is also a need to draw on supervisory and regulatory tools to respond to emerging risks from rising overseas investments of the banks and the rapid expansion of lending by credit unions.
Supporting resilient, sustainable growth. The authorities should step up efforts to address the institutional, financing and capacity gaps in its climate and disaster response strategy. Supply-side reforms are needed to unlock potential growth by improving the business environment, reducing energy costs, enhancing labor productivity, and further diversifying the economy.
Approved By
Nigel Chalk (WHD) and Mary Goodman (SPR)
Discussions for the 2019 consultation took place in Castries on October 29– November 8, 2019. The team comprised Messrs. Ding (head), Hukka, Moeller, and Vargas (all WHD). Ms. Levonian and Mr. Williams (OED) joined the concluding meetings. The mission met with the Honorable Prime Minister Chastanet, Permanent Secretary Thomas and other senior government officials, representatives of the opposition, the private sector, and labor unions. Ms. Aghababyan and Ms. Kalla assisted in the preparation of the staff report.
Contents
RECENT DEVELOPMENTS AND OUTLOOK
A. Context
B. Current Trends
C. Outlook and Risks
POLICY DISCUSSIONS
A. Rebuilding Policy Space
B. Strengthening Financial Sector Balance Sheets and Financial Intermediation
C. Supporting Resilient, Sustainable Growth
STAFF APPRAISAL
BOXES
1. Fiscal: Major Tax Measures
2. Fiscal: Baseline and Adjustment Scenarios
FIGURES
1. Recent Developments
2. External Sector Developments
3. Fiscal Sector Developments
4. Banking System Developments
5. Credit Union Sector Developments
6. External Competitiveness and Structural Weaknesses
TABLES
1. Selected Social and Economic Indicators, 2015–24
2a. Central Government Operations, 2015–24 (In millions of EC Dollars)
2b. Central Government Operations, 2015–24 (In percent of GDP)
3. Balance of Payments Summary, 2015–24
4. Monetary Survey, 2015–19
5. Banking System Summary Data, 2013–18
ANNEXES
I. Implementation of Previous Staff Advice
II. External Sector Assessment
III. Risk Assessment Matrix
IV. Debt Sustainability Analysis
V. The Potential Impact of a Hotel Accommodation Fee
VI. Carbon taxation in St. Lucia: An Update
VII. Emerging Risks from Credit Unions
VIII. Implementation of the 2018 CCPA Recommendations
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ST. LUCIA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
January 21, 2020
Prepared By
Western Hemisphere Department (in consultation with other departments and the Caribbean Regional Technical Assistance Center, CARTAC)
Contents
FUND RELATIONS
RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS
STATISTICAL APPENDIX
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Press Release No. 20/63
FOR IMMEDIATE RELEASE
February 24, 2020
International Monetary Fund
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