Dominica: Staff Report for the 2021 Article IV Consultation—Informational Annex
Author:
International Monetary Fund. Western Hemisphere Dept.
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Publication Date:
14 Feb 2022
eISBN:
9798400202506
ISBN:
9798400202506
Language:
English
Keywords:
ECCU member country; update assessment; common currency; Dominica's data; project implementation rate; External sector statistics; Government finance statistics; Monetary statistics; Financial statistics; Caribbean
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DOMINICA

Abstract

DOMINICA

Title Page

DOMINICA

STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX

January 18, 2022

Prepared By

Western Hemisphere Department

(In consultation with other departments)

Contents

  • FUND RELATIONS

  • RELATIONS WITH OTHER FINANCIAL INSTITUTIONS

  • STATISTICAL ISSUES

Fund Relations

(As of December 31, 2021)

Membership Status Joined 12/12/78; Article VIII

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Latest Financial Arrangements:

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Overdue Obligations and Projected Payments to the Fund (SDR Million; based on existing use of resources and present holdings of SDRs):1

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Exchange Rate Arrangement: The exchange rate arrangement is a currency board. Dominica participates in a currency union with seven other members of the Eastern Caribbean Currency Union (ECCU) and has no separate legal tender. The common currency, the Eastern Caribbean dollar has been pegged to the U.S. dollar atthe rate of EC$2.70 per U.S. dollar since July 1976. Dominica has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions and multiple currency practices.

Safeguards Assessment: Under the Fund’s safeguards policy, the Eastern Caribbean Central Bank (ECCB) is subject to a full safeguards assessment on a four-year cycle. An update assessment was completed in August 2021 and found that the ECCB has maintained strong external audit and financial reporting practices that continue to be aligned with international standards, and further improvements in the capacity of the internal audit function. Legal reforms were recommended to further strengthen operational autonomy of the ECCB and align its Agreement Act with leading practices. The issuance of digital currency (DCash) introduces new risks that require additional controls and oversight, and the assessment made recommendations to enhance the related project-governance framework.

Article IV Consultation: The last Article IV consultation was concluded by the Executive Board on June 18, 2019. Dominica is on a 12-month cycle.

Technical Assistance: Dominica has received significant technical assistance from Caribbean Regional Technical Assistance Center (CARTAC) and the IMF. Technical assistance missions focused on tax reform, revenue administration, expenditure rationalization, financial sector, and Public Financial Management (PFM):

PFM Missions

  • June 2013: Deliver workshop on cash flow forecasting and planning

  • November 2013: Restructure cashflow unit and continue to build capacity and expertise in bank reconciliation

  • January 2014: Investigate and resolve data integrity issues with Smart-Stream

  • January 2014: Wrap up bank reconciliation and ascertain further needs

  • March 2014: Work with M. Smith to review Dominica

  • March 2014: Follow-up on earlier TA on bank account reconciliation

  • March 2014: Introduce new Adviser

  • March 2014: Assist authorities to build capacity for new Procurement staff

  • April 2014: Assist Dominica procurement in continuing to navigate and implement action plan

  • May 2014: Finalize implementation of updated automated bank reconciliation software

  • July-August 2014: Assist in closure of 2013/14 financial year and carryforward unreconciled bank reconciliation discrepancies

  • September 2014: Assist with planning of 2015/16 budget and develop draft budget call circulars

  • October 2014: Examine and provide recommendations to strengthen oversight and monitoring of State-Owned Enterprises

  • February 2015: Undertake a gap analysis of the Internal Audit systems

  • March 2015: Deliver presentations and hold discussions on redraft of PFM Legislation

  • March 2015: Provide TA to Budget Department with the revised budget process and develop Cabinet Decision Table

  • March 2015: Develop Concept Note for undertaking a PEFAQ in October 2015

  • August 2016: Building a PFM Action Plan following the recent PEFA

  • November 2016: PFM Legislation/Regulations Revisions

  • March 2017: Treasury Assessment

  • September 2018: Development of Stronger PFM Laws and Institutions

  • August 2021: Strengthening Internal Audit FY22 (virtual)

  • September 2021: Post-Hurricane Maria PFM Review Follow Up FY22 (virtual)

  • November 2021: Developing Performance Targets and KPI (virtual)

Revenue Administration Missions

  • June 2013: Tax and Customs Administration

  • June 2013: Tax and Customs Administration

  • June 2013: To work on outline for Regional Audit Manual with STX Brian Dawe

  • August 2013: Assist Dominica Inland Revenue and Customs Department with their Risk Management program (Support to SEMCAR)

  • September 2013: Continue to assist with IRD reorganization and capacity building in audit

  • September 2013: Introductory Meetings with Senior IRD Officials; liaise with STX Dawe on IRD reorganization

  • September 2013: to introduce new LTX Advisor to Senior IRD officials; liaise with STX Dawe on IRD reorganization

  • October 2013: Liaise with STX Macleod on PAYE Administration support

  • October 2013: Deliver PAYE audit training; assist with development of Audit program and procedures circulars

  • November 2013: Work at home: Development of Audit Manual

  • November 2013: Co-facilitate regional seminar on Tax Arrears Collections and Enforcement

  • November 2013: Co-facilitate the Regional Collections Enforcement Seminar for Supervisors

  • November 2013: To continue to assist with IRD reorganization and capacity building in audit

  • November 2013: To assist in the development and upgrade of collections enforcement procedures

  • November 2013: Supporting the development of Valuation procedures and policyfor the Customs Administration

  • January 2014: Help design the IRD Corporate Strategic Plan

  • March 2014: Post Clearance Audit Training and Support to the Customs Administration

  • April 2014: Extension of Tax Administration Adviser

  • April 2014: Project Management Support and Building Audit Capacity-IRD reorganization project

  • September 2014: To conduct Tax review

  • September-October 2014: Review of Dominica Income Tax

  • January 2015: Building Capacity and Supporting the Establishment of the HQ Design Monitoring and Large and Medium Taxpayer Sections (LMTS)

  • January 2015: DMS and Large and Medium Taxpayers compliance measurement

  • March 2016: Small Business Reform- Revenue Modelling for VAT and Presumptive tax

  • August 2016: To Provide Training and Guidance to Strengthen the Post-Clearance Audit Function in Customs

  • September 2016: Meeting with the Comptroller of Customs to Discuss Technical Assistance Needs

  • October 2016: Building Capacity in Data Analytics and Computer-Assisted Audit Techniques

  • October 2016: Compliance management framework

  • November 2016: Develop Taxpayer Service Strategy

  • February 2017: Tax Administration-Assist IRD to finalize its taxpayer services strategy

  • March 2020: COVID-19 Tax Policy Mission on Income Taxation and International Tax (virtual)

  • October 2020: TADAT assessment (virtual mission)

  • October 2021: Strengthening Treasury Operations FY22

  • October 2021: Strengthening Core Business Functions- Arrears Management

Financial Sector Missions

  • December 2013: Insurance Supervision and Credit Union Supervision

  • January 2014: Follow-up mission—onsite review of offshore banks and continued training of Supervisors

  • April 2014: Consolidated Supervision—Training

  • November 2014: Risk Based Supervision and Consolidated Supervision

  • April 2016: Risk Based Supervision

  • August 2016: Supervisory Interventions Banks and Non-Banks

  • November 2016: Risk-Based Supervision Training

  • January 2017: Development of a Stress-Testing Framework and Methodology for Credit Union Sector

  • February 2018: Crisis Management Plan for the Non-Bank Sector

  • May 2018: Financial Health and Stability Indicators for the Credit Union Sector

  • November 2018: Framework to Develop Macroprudential Regulation of SIFIs

  • January 2019: Framework to Develop Macroprudential Regulation of SIFIs

Economic and Financial Statistics

  • May 2013: National Accounts—Quarterly

  • April 2014: Joint CARTAC/STA IIP Mission

  • February 2015: Training for Survey Respondents (ECCU Countries)

  • June 2016: Balance of Payments Statistics and IIP

  • June 2017: External Sector Statistics

  • January 2018: National Accounts

  • July 2018: External Sector Statistics

  • May2021: BOP CARTAC Mission

  • August 2021: Joint BOP CARTAC/STA Mission (virtual)

Macroeconomics and Programming Analysis

  • November 2013: Needs assessment of Macroeconomic Policy Unit; create a forward technical assistance work plan

  • January 2014: To assist authorities with their medium-term macroeconomic framework

  • November 2014: Produce framework to update macroeconomic projections on a quarterly basis

  • February 2015: Technical assistance to train staff in macroeconomic and fiscal forecasting as well as to prepare for IM F Article IV visit

  • February 2016: Assist Macro Policy unit with update of their macroeconomic projections for upcoming Budget

  • November 2016: Coordinate Macro Program with Macro Advisor

  • May 2021: Coordination of Macro Program with Resident Advisor

FSAP: A joint IMF/World Bank team performed an assessment of the financial sector of the member states of the ECCU, in two missions—September 1–19 and October 20–31, 2003. The principal objective of the missions was to assist the authorities in assessing the development needs and opportunities for the financial sector and identifying potential vulnerabilities of financial institutions and markets to macroeconomic shocks, as well as the risks to macroeconomic stability from weaknesses and shortcomings in the financial sector. The Financial System Stability Assessment (FSSA) was discussed by the Executive Board on May 5, 2004, and subsequently published on the IMF’s external website, including the Report on the Observance of Standards and Codes (ROSC) on Banking Supervision.

AML/CFT: The most recent assessment of Dominica’s AML/CFT regime was conducted by the Caribbean Financial Action Task Force in 2009. Since this assessment, Dominica has taken steps to strengthen its AML/CFT framework. Dominica has not yet been assessed against the prevailing 2012 FATF standard which includes an emphasis on the effectiveness of the framework in place.

Relations with Other Financial Institutions

(As of November 29, 2021)

Statistical Issues

I. Assessment of Data Adequacy for Surveillance

General: Data provision has shortcomings due to capacity constraints in the statistical agency, and collection at the regional level. Although it is broadly adequate for surveillance, these limitations constrain economic analysis and policy formulation. Particularly, staffs analysis would benefit from more timely and improved data pertaining to the fiscal accounts, labor, agriculture, and the balance of payments. Efforts to prepare national accounts at a quarterly frequency would also be welcome. The authorities could pursue such improvements in a more cost-effective manner by exploring proposals to centralize statistics.

National accounts: Staff turnover and limited source data have hampered the improvement on real sector statistics. The Central Statistics Office (CSO) currently produces and disseminates annual estimates of GDP by production approach at current and constant 2006 prices; as well as annual current price estimates for GDP by expenditure approach, with private final consumption expenditure derived as a residual. The CSO has been trying to develop quarterly GDP by production approach since 2012, but progress has been minimal due to limited staff capacity and source data. A census was conducted in 2011.

Price Statistics: CPI data are compiled monthly. The weights are based on the 2008/09 Household Income and Expenditure Survey (HIES) with a base period of June 2010. There is a program to develop export and import price indexes (XMPIs), but a shortage of staff working on price statistics limits developments in CPI methodology and the likelihood that XMPIs will be developed expediently. Data on employment are sparse and there are no official data on producer prices.

Government Finance Statistics: Statistical capacity problems affect the timely production of quality government finance statistics. Monthly data can be obtained, but they show some important shortcomings. Fiscal data should be reconciled between the Inland Revenue Department, Customs, and the Treasury monthly. Efforts should also be directed towards reducing omissions and mis classifications in the data, which would help reduce the need for frequent revisions. Capital expenditure data would benefit from efforts to improve reporting and budgeting data for the public-sector investment program (e.g., project implementation rates, current expended resources, projected resource usage, estimated completion dates, etc.), which are fragmented and subject to continuous revisions. Attention should also be directed towards improving statistics on the financial position of public institutions outside the central government. An automation technology, mandatory for all ministries and suppliers of goods and services was installed in all line ministries in 2005 and is the basis for the reporting. Although progress has been made in improving the measurement of government debt, data show shortcomings and are not tracked continuously. Very limited financing data are available. The authorities do not provide consolidated nonfinancial public-sector data. Data for the rest of the public sector—Dominica Social Security and the public enterprises—are obtained directly from each entity with frequent delays and omissions. No government finance data are reported to STAfor publication in the International Financial Statistics (IFS) or the Government Finance Statistics (GFS) Yearbook.

Monetary and Financial Statistics: Monthly monetary statistics are compiled and reported to the Fund by the ECCB, based on standardized report forms (SRF) for the central bank (SRF 1SR) and for other depository corporations (SRF2SR), since July 2006. In April 2007, a data ROSC mission assessed the monetary statistics with reference to the GDDS and the Data Quality Assessment Framework (DQAF, July 2003). It indicated that the institutional coverage of other depository corporations is incomplete, as data for mortgage companies, finance companies, building societies, and credit unions—all of which accept deposits—are excluded. Also, valuation adjustments are included in other liabilities. Accrued interest was not incorporated in the value of the interest-bearing assets and liabilities, and source data for the commercial banks did not provide the disaggregation recommended by the Monetary and Financial Statistics Manual and Compilation Guide, but in 2020 the ECCB implemented a new chart of accounts for commercial banks that has addressed these issues. Close coordination between the ECCB and the single regulatory unit (which supervises financial corporations other than those licensed under the Banking Act) is crucial. The ECCB submits Dominica’s data on some basic indicators and series to the Financial Access Survey (FAS) including the two indicators (commercial bank branches per 100,000 adults and ATMs per 100,000 adults) adopted by the UN to monitor Target 8.10 of the Sustainable Development Goals (SDGs).

External sector statistics: The ECCB has been releasing annual balance of payments and international investment position statistics based on the sixth edition of the Balance of Payments and International Investment Position Statistics Manual (BPM6), for the eight ECCU member economies, including Dominica, since 2017. Travel estimates (credits) are sourced from visitor expenditure surveys. Further work is required to reassess the ratios used to estimate insurance and freight charges for goods imported. Actions need to be undertaken in collaboration with the ECCB, which coordinates the compilation of external sector statistics of the ECCU economies.

The debt unit of the Ministry of Finance maintains a database on public and publicly guaranteed external loans, debt securities, and other debt instruments that provides detailed information on disbursements, debt service, and debt stocks (the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS) is used). Public and publicly guaranteed external debt data are reported to the World Bank’s Quarterly External Debt Statistics (QEDS) database. Data on private sector external debt stocks are not available, other than from the monetary survey, in the case of the commercial banks.

II. Data Standards and Quality

Dominica is a participant in the enhanced General Data Dissemination System (e-GDDS since September 2000. Dominica has not fully implemented the e-GDDS as it does not have a National Summary Data Page (NSDP).

A Data ROSC for the monetary sector was conducted in 2007, covering the ECCB and ECCU member countries, including Dominica.

Dominica: Table of Common Indicators Required for Surveillance

(As of November 29, 2021)

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Dominica is a member of the Eastern Caribbean Currency Union, in which the common currency of all member states (E.C. dollar) is pegged to the U.S. dollar at US$1 = EC$2.70.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

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

Foreign, domestic banks, and domestic nonbank financing.

The general government consists of the central government and state and local governments.

Currency and maturity composition are provided annually.

Data is not available from the authorities.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA); Not Applicable (n.a.).

1

Based on existing use of resources and present holdings of SDRs.

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Cover IMF Staff Country Reports
Dominica: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Dominica
Author:
International Monetary Fund. Western Hemisphere Dept.
Volume/Issue:
Volume 2022: Issue 040
Publisher:
International Monetary Fund
ISBN:
9798400202506
ISSN:
1934-7685
Pages:
79
DOI:
https://doi.org/10.5089/9798400202506.002