Abstract
ST. KITTS AND NEVIS
Title page
ST. KITTS AND NEVIS
STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
August 6, 2018
Prepared By
The Western Hemisphere Department (in collaboration with other departments and institutions)
Contents
FUND RELATIONS
RELATIONS WITH OTHER FINANCIAL INSTITUTIONS
STATISTICAL ISSUES
Fund Relations
(As of June 30, 2018)
Membership Status: Joined August 15, 1984; Article VIII.
| General Resources Account: | SDR Million | Percent of Quota |
| Quota | 12.50 | 100.00 |
| Fund holdings of currency | 11.52 | 92.15 |
| Reserve position in the Fund | 0.98 | 7.86 |
| SDR Department: | SDR Million | Percent of Allocation |
| Net cumulative allocation | 8.50 | 100.00 |
| Holdings | 4.73 | 55.63 |
| Outstanding Purchases and Loans: | None |
| General Resources Account: | SDR Million | Percent of Quota |
| Quota | 12.50 | 100.00 |
| Fund holdings of currency | 11.52 | 92.15 |
| Reserve position in the Fund | 0.98 | 7.86 |
| SDR Department: | SDR Million | Percent of Allocation |
| Net cumulative allocation | 8.50 | 100.00 |
| Holdings | 4.73 | 55.63 |
| Outstanding Purchases and Loans: | None |
| Date of | Expiration | Amount Approved | Amount Drawn | |
| Type | Arrangement | Date | (SDR Million) | (SDR Million) |
| Stand-By | Jul 27, 2011 | Jul 26, 2014 | 52.51 | 47.37 |
| Date of | Expiration | Amount Approved | Amount Drawn | |
| Type | Arrangement | Date | (SDR Million) | (SDR Million) |
| Stand-By | Jul 27, 2011 | Jul 26, 2014 | 52.51 | 47.37 |
Overdue Obligations and Projected Payments to Fund1/:
(SDR Million; based on existing use of resources and present holdings of SDRs):
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
| Forthcoming | |||||
| 2018 | 2019 | 2020 | 2021 | 2021 | |
| Principal | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Charges/Interest | 0.02 | 0.04 | 0.04 | 0.04 | 0.04 |
| Total | 0.02 | 0.04 | 0.04 | 0.04 | 0.04 |
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
| Forthcoming | |||||
| 2018 | 2019 | 2020 | 2021 | 2021 | |
| Principal | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Charges/Interest | 0.02 | 0.04 | 0.04 | 0.04 | 0.04 |
| Total | 0.02 | 0.04 | 0.04 | 0.04 | 0.04 |
When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
Implementation of HIPC Initiative: Not Applicable
Implementation of MDRI Assistance: Not Applicable
Implementation of Catastrophe Containment and Relief (CCR): Not Applicable
Exchange Arrangement
St. Kitts and Nevis is a member of the Eastern Caribbean Central Bank (ECCB), which manages monetary policy and the exchange system for its eight members. The common currency, the Eastern Caribbean dollar, has been pegged to the U.S. dollar at the rate of EC$2.70 per U.S. dollar since July 1976. The exchange rate regime is a currency board. St. Kitts and Nevis accepted the obligations of Article VIII, Sections 2, 3, and 4 in December 1984. The exchange system is free of multiple currency practices and restrictions.
Safeguards Assessment
Under the Fund’s safeguards assessment 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 April 2016 and found that the ECCB has maintained generally strong controls over its key operations. External audit and financial reporting practices remain sound. The ECCB financial statements are compliant with International Financial Reporting Standards and are published on a timely basis. The ECCB has restructured the internal audit function and established an independent risk management unit to align it with leading international practices.
Last Article IV Consultation
The last Article IV staff report (IMF Country Report No. 16/250) was published on July 5, 2017. Board discussion took place on June 16, 2017. Article IV consultations take place on a 12-month cycle.
FSAP Participation, ROSCs, and OFC Assessment
St. Kitts and Nevis participated in the regional ECCU FSAP conducted in September 2004. The Financial System Stability Assessment is available at http://www.imf.org/external/pubs/cat/longres.aspx?sk=17718.
A review of St. Kitts and Nevis AML/CFT Assessment was conducted by a team of assessors representing the Caribbean Financial Action Taskforce (CFATF) in September 2012.
Technical Assistance: (2010–Present)
Since 2010, St. Kitts and Nevis has benefited from technical assistance (TA) in the areas of tax policy, tax administration, economic statistics, financial supervision and macroeconomic management, both from IMF headquarters and the Caribbean Regional Technical Assistance Centre (CARTAC).
CARTAC and the IMF’s Statistics Department (STA) advised the National Statistics Office on rebasing the national accounts, and rebasing the consumer price index (CPI). CARTAC is assisting in developing quarterly GDP estimates; including compiling separate production- based measures of GDP for St. Kitts and Nevis. The milestone of developing the quarterly GDP methodology has been achieved; and good progress is being made in developing the compilation worksheets with around 80 percent completion. Experimental quarterly GDP estimates have been constructed but not been published yet. In addition, assistance is being provided to improve the CPI, and develop data collections and index methodologies for a producer price index and export-import price indices.
CARTAC has assisted the St. Kitts and Nevis Department of Statistics and the Eastern Caribbean Central Bank (ECCB) in strengthening the compilation and dissemination of external sector statistics. The ECCB released preliminary summary estimates of 2014 balance of payments (BOP) and—for the first time—international investment position (IIP) statistics following the latest international standard methodology (BPM6) in January 2016. The ECCB published comprehensive BOP tables for 2014-16 and IIP tables for 2013-16 in the July 2017. The estimates benefited from CARTAC TA to develop and administer new surveys, and train data compilers and survey respondents. In order to solve remaining data gaps, CARTAC continues assisting in strengthening the business and visitor expenditure surveys; improving the coverage of source data used for the compilation of trade in goods, and further developing other data sources used to compile relevant components of the external sector statistics.
CARTAC, the IMF’s Monetary and Capital Markets Department (MCM), and the IMF’s Legal Department (LEG) advised the authorities on strengthening financial sector regulation and supervision, including risk-based supervision. With assistance from the Office of the Superintendent of Financial Institutions in Canada (OSFI), CARTAC provided technical assistance to the Eastern Caribbean Central Bank (ECCB) on drafting the OECS Insurance Act, and also, in conjunction with LEG, provided technical assistance to the ECCB in finalizing the drafting of the OECS Money Services Business Act. CARTAC also assisted in the development of the Single Regulatory Unit and provided training to the Financial Services Regulatory Commission (FSRC) on implementing Risk-Based Supervision, including for nonbank financial institutions in the Federation and the offshore banking sector in Nevis. Since 2014, CARTAC has been assisting the regulatory bodies in St. Kitts with the development of guidelines for supervisory interventions, the implementation of Basel II and risk-based supervisory frameworks. On the Financial Stability front, CARTAC also provided TA in the area of stress-testing and dynamic modelling of the banking system in conjunction with the ECCB and conducted several capacity building workshops on the development of financial soundness indicators, and on risk- weighted capital adequacy.
CARTAC has provided significant TA in tax administration, to both the Inland Revenue Department (IRD) and the Customs and Excise Department (CED);
For the IRD, the assistance included the development of a comprehensive compliance risk management program; strengthening the headquarters function in ’program development’ through the development of an audit plan for the large taxpayer segment, and capacity building in data analytics and cross-matching to improve data quality within the IRD and to support improved planning, performance management and business decisions. The IRD also benefitted from training to improve collections enforcement. For the CED, the assistance involved its reform and modernization program, including Post-Clearance Audit (PCA), Valuation and Risk Management training and developing a Corporate and Strategic Business Plan (2014-17). CARTAC also provided assistance in drafting a new Customs bill and regulations and training for the implementation of the OECS Harmonized System for goods classification.
A follow-up mission from FAD visited the Federation in February 2016 to review progress with previous FAD recommendations and provide advice on remaining challenges for modernizing tax and customs administration.
CARTAC and MCM provided technical assistance on public debt management under the Fund- supported program.
IMF’s Fiscal Affairs Department (FAD) is currently providing assistance for the comprehensive review of the tax incentives regime. An FAD scoping mission took place in March 2016 to review the main laws granting tax concessions and identify the next steps for developing an incentive regime that would be appropriate for the circumstances of St. Kitts and Nevis. In June 2018, a follow-up mission reviewed and made recommendations on both tax policy and procedures for tax incentives, including legislative changes in income tax, VAT, and tax administration and procedures to implement the recommendations.
CARTAC, FAD and LEG provided assistance to improve cash management and tax administration—including collection enforcement. CARTAC also provided assistance in Property Tax reform to move the property tax base from rental value to market value, and in improving central government fiscal and debt data. A capacity building exercise was conducted to train new officers in the preparation of fiscal and debt projections.
Under the Fiscal Management in the Caribbean Project (FMCP) the IMF is providing technical assistance in broad areas of Public Financial Management (PFM), including program and performance budgeting, cash planning in the Nevis Island Administration, the PFM reform action plan, and the finalization of Chart of Account codes.
As part of the Stabilization and Adjustment Technical Assistance Program (SATAP), St. Kitts and Nevis have benefited from capacity building in macroeconomic analysis.
Relations with Other Financial Institutions
World Bank: http://projects.worldbank.org/search?lang=en&searchTerm=&countrycode_exact=KN
Caribbean Development Bank: http://www.caribank.org/about-cdb/member-countries/regional-members/st-kitts-and-nevis
Statistical Issues
| I. Assessment of Data Adequacy for Surveillance |
| General: Data provision has some shortcomings but is broadly adequate for surveillance. |
| National Accounts: Methodological deficiencies are present in the real sector statistics. GDP figures rely on the production approach, both in constant and current prices. Limited survey data hinder the assessments of value-added for each sector with some sectors suffering from significant weaknesses in estimation methodology. On the expenditure of GDP, which is available only at current prices, the aggregate final private consumption expenditure is derived as a residual. This residual includes households and NPISH final consumption expenditures, and changes in inventories. Weaknesses are observed in the methods to estimate gross capital formation. GDP figures are derived from the production approach in constant and current prices. There are significant delays in completing data collection and processing of the annual NA. Staffing constraints in the compiling agency may compromise the development of new statistics, the quality improvement of the existing ones, and the intended improvements of timeliness. Quarterly GDP estimates are not published. Monthly data on tourism is disseminated by the ECCB with a significant lag. |
| Price Statistics: Monthly CPI data are posted on the ECCB website with a long lag, and a break in the series in November 2010 suggests a methodological problem in the linking process with the previous base. The ECCB disseminate monthly data on tourism also with a long lag, and the estimates on tourism expenditure are based on an old survey of spending by types of tourists and are only updated by changes in CPI. Except for data from the social security board and occasional labor force surveys, limited data are available on labor market developments. |
| Government Finance Statistics: Government Finance Statistics: STA has derived both quarterly and annual government finance statistics (GFS) for St. Kitts and Nevis up to 2016Q2 and annual GFS up to 2014 on main aggregates and their components for revenue, expense, and financing of the budgetary central government. |
| 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 (SRF 2SR), 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, which accept deposits—are excluded. Also, accrued interest is not incorporated in the value of the interest-bearing assets and liabilities, and valuation adjustments are liabilities. In addition, source data for the commercial banks do not provide the disaggregation recommended by the Monetary and Financial Statistics Manual and Compilation Guide. 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 is currently working on implementing a new reporting system for commercial banks that is envisaged to address the recommendations made by the April 2007 data ROSC mission. It is expected that the new reporting system would be implemented in 2016-17. Financial Sector Surveillance: The ECCB compiles financial soundness indicators (FSIs) for its member countries, including St. Kitts and Nevis. Financial Soundness Indicators (FSI): The ECCB compiles financial soundness indicators (FSIs) for its member countries, including St. Kitts and Nevis. However, due to confidentiality reason, dissemination of FSIs for the ECCB member countries has so far not been approved. |
| External sector statistics: Balance of payments data are compiled and disseminated by the ECCB on an annual basis. In January 2016, the ECCB released preliminary summary estimates of 2014 balance of payments and—for the first time—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. In 2017, the ECCB disseminated comprehensive balance of payments data for 2014-16 based on BPM6, pending estimation of historical data prior to 2014 under this methodology. Further work is required to improve the coverage of the data, particularly, the recording of trade in goods sourced from customs records and direct investment transactions due to low survey response rates. Travel credit services are now based on the results of the recent visitor expenditure survey, which are a better data source. |
| II. Data Standards and Quality |
| St. Kitts and Nevis has been participating in the General Data Dissemination System (GDDS) since October 2000, and currently participates in its successor initiative, the e-GDDS. The 2007 regional data ROSC provides an assessment on the ECCB’s monetary statistics. No data ROSC is available for other sectors. Monetary Statistics Component of the Regional Data Module Report on Observance of Standards and Codes (ROSC) for the Eastern Caribbean Central Bank (ECCB) was published in 2007. Data ROSC was published on August 2007. |
| I. Assessment of Data Adequacy for Surveillance |
| General: Data provision has some shortcomings but is broadly adequate for surveillance. |
| National Accounts: Methodological deficiencies are present in the real sector statistics. GDP figures rely on the production approach, both in constant and current prices. Limited survey data hinder the assessments of value-added for each sector with some sectors suffering from significant weaknesses in estimation methodology. On the expenditure of GDP, which is available only at current prices, the aggregate final private consumption expenditure is derived as a residual. This residual includes households and NPISH final consumption expenditures, and changes in inventories. Weaknesses are observed in the methods to estimate gross capital formation. GDP figures are derived from the production approach in constant and current prices. There are significant delays in completing data collection and processing of the annual NA. Staffing constraints in the compiling agency may compromise the development of new statistics, the quality improvement of the existing ones, and the intended improvements of timeliness. Quarterly GDP estimates are not published. Monthly data on tourism is disseminated by the ECCB with a significant lag. |
| Price Statistics: Monthly CPI data are posted on the ECCB website with a long lag, and a break in the series in November 2010 suggests a methodological problem in the linking process with the previous base. The ECCB disseminate monthly data on tourism also with a long lag, and the estimates on tourism expenditure are based on an old survey of spending by types of tourists and are only updated by changes in CPI. Except for data from the social security board and occasional labor force surveys, limited data are available on labor market developments. |
| Government Finance Statistics: Government Finance Statistics: STA has derived both quarterly and annual government finance statistics (GFS) for St. Kitts and Nevis up to 2016Q2 and annual GFS up to 2014 on main aggregates and their components for revenue, expense, and financing of the budgetary central government. |
| 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 (SRF 2SR), 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, which accept deposits—are excluded. Also, accrued interest is not incorporated in the value of the interest-bearing assets and liabilities, and valuation adjustments are liabilities. In addition, source data for the commercial banks do not provide the disaggregation recommended by the Monetary and Financial Statistics Manual and Compilation Guide. 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 is currently working on implementing a new reporting system for commercial banks that is envisaged to address the recommendations made by the April 2007 data ROSC mission. It is expected that the new reporting system would be implemented in 2016-17. Financial Sector Surveillance: The ECCB compiles financial soundness indicators (FSIs) for its member countries, including St. Kitts and Nevis. Financial Soundness Indicators (FSI): The ECCB compiles financial soundness indicators (FSIs) for its member countries, including St. Kitts and Nevis. However, due to confidentiality reason, dissemination of FSIs for the ECCB member countries has so far not been approved. |
| External sector statistics: Balance of payments data are compiled and disseminated by the ECCB on an annual basis. In January 2016, the ECCB released preliminary summary estimates of 2014 balance of payments and—for the first time—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. In 2017, the ECCB disseminated comprehensive balance of payments data for 2014-16 based on BPM6, pending estimation of historical data prior to 2014 under this methodology. Further work is required to improve the coverage of the data, particularly, the recording of trade in goods sourced from customs records and direct investment transactions due to low survey response rates. Travel credit services are now based on the results of the recent visitor expenditure survey, which are a better data source. |
| II. Data Standards and Quality |
| St. Kitts and Nevis has been participating in the General Data Dissemination System (GDDS) since October 2000, and currently participates in its successor initiative, the e-GDDS. The 2007 regional data ROSC provides an assessment on the ECCB’s monetary statistics. No data ROSC is available for other sectors. Monetary Statistics Component of the Regional Data Module Report on Observance of Standards and Codes (ROSC) for the Eastern Caribbean Central Bank (ECCB) was published in 2007. Data ROSC was published on August 2007. |
Table of Common Indicators Required for Surveillance
(As of March 2017)
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 bank, and domestic nonbank financing.
Central government only.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).
Table of Common Indicators Required for Surveillance
(As of March 2017)
| Date of Latest Observation | Date Received | Frequency of Data6 | Frequency of Reporting6 | Frequency of Publication6 | |
|---|---|---|---|---|---|
| Exchange Rates | Fixed Rate | NA | NA | NA | NA. |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | 3/18 | 5/22/2018 | M | M | M |
| Reserve/Base Money | 3/18 | 5/22/2018 | M | M | M |
| Broad Money | 3/18 | 5/22/2018 | M | M | M |
| Central Bank Balance Sheet | 3/18 | 5/22/2018 | M | M | M |
| Consolidated Balance Sheet of the Banking System | 3/18 | 5/22/2018 | M | M | M |
| Interest Rates2 | 3/18 | 5/22/2018 | M | M | M |
| Consumer Price Index | 3/18 | 6/26/2018 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3—General Government4 | 12/17 | 4/27/2018 | Q | Q | A |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 12/17 | 4/27/2018 | Q | Q | A |
| External Current Account Balance | 2016 | 7/23/2017 | A | A | A |
| Exports and Imports of Goods and Services | 2016 | 7/23/2017 | A | A | A |
| GDP/GNP | 2017 | 6/26/2018 | A | A | A |
| Gross External Debt | 12/17 | 4/27/18 | Q | Q | A |
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 bank, and domestic nonbank financing.
Central government only.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).
Table of Common Indicators Required for Surveillance
(As of March 2017)
| Date of Latest Observation | Date Received | Frequency of Data6 | Frequency of Reporting6 | Frequency of Publication6 | |
|---|---|---|---|---|---|
| Exchange Rates | Fixed Rate | NA | NA | NA | NA. |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | 3/18 | 5/22/2018 | M | M | M |
| Reserve/Base Money | 3/18 | 5/22/2018 | M | M | M |
| Broad Money | 3/18 | 5/22/2018 | M | M | M |
| Central Bank Balance Sheet | 3/18 | 5/22/2018 | M | M | M |
| Consolidated Balance Sheet of the Banking System | 3/18 | 5/22/2018 | M | M | M |
| Interest Rates2 | 3/18 | 5/22/2018 | M | M | M |
| Consumer Price Index | 3/18 | 6/26/2018 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3—General Government4 | 12/17 | 4/27/2018 | Q | Q | A |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 12/17 | 4/27/2018 | Q | Q | A |
| External Current Account Balance | 2016 | 7/23/2017 | A | A | A |
| Exports and Imports of Goods and Services | 2016 | 7/23/2017 | A | A | A |
| GDP/GNP | 2017 | 6/26/2018 | A | A | A |
| Gross External Debt | 12/17 | 4/27/18 | Q | Q | A |
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 bank, and domestic nonbank financing.
Central government only.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).