The IMF team, which visited the twin island federation for its annual Article IV evaluation from October 29 to November 1, noted that "macroeconomic outcomes...have strengthened significantly in recent years", with growth reaching 4% in 2006.

However, the team - headed by Paul Cashin - cautioned that, while two years of consecutive primary fiscal surpluses since 2005 have helped contain indebtedness, public debt remains high, at over 180% of GDP at end-2006.

Nonetheless, the IMF observed that the authorities are continuing their efforts to introduce reforms and to place public debt firmly on a downward path, while maintaining macroeconomic stability and strengthening growth. In addition, the team found that important reforms have been undertaken, including closing the traditional sugar industry and strengthening revenue mobilization, and efforts are ongoing to reform the tax system, contain expenditures, and move forward with asset/land sales.

The St Kitts and Nevis Article IV evaluation coincided with an IMF mission to the Eastern Caribbean Currency Union countries during October and November to conduct the Fund's 2007 discussions on ECCU policies. This mission augments the work of the individual country Article IV consultation discussions, and covers the issues that cut across the region. The mission team visited the six IMF-member countries of the ECCU — Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines — and key regional institutions, including the Caribbean Development Bank, the Eastern Caribbean Central Bank (ECCB), and the Organization of Eastern Caribbean States (OECS).

The IMF mission found that economic activity in the ECCU region was "buoyant" in 2006, with real GDP growth reaching over 6%, the highest in more than 15 years.

"Activity was driven by construction spending for the 2007 Cricket World Cup (CWC), and a significant expansion in tourism capacity," the IMF stated. While inflationary pressures have emerged due to the strong economic activity and higher world oil prices, inflation has remained low, anchored by the regional monetary arrangement at the ECCB. Despite higher revenues, fiscal positions deteriorated in 2006 largely due to CWC-related capital spending, and the regional debt ratio remained above 105% of GDP, the mission statement added.

"The forecast is for a soft landing of the ECCU economy in 2007, but risks are tilted to the downside," the Fund predicted.