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Paul Cashin, head of an International Monetary Fund (IMF) staff mission to the Eastern Caribbean Currency Union (ECCU) countries, issued a statement on April 6 following the conclusion of the mission.
Describing the mission, Mr Cashin said:
“An IMF mission is visiting the members of the Eastern Caribbean Currency Union during January – March to conduct the Fund's 2009 discussions on ECCU policies. The mission team will visit 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). For the first time the mission also visited Anguilla and Montserrat, two UK overseas territories and non-IMF members of the ECCU. In this context, the IMF mission visited Grenada on March 23-24, 2009."
Cashin then went on to explain the outcome of the mission, stating:
“Facing a volatile and weakening external environment in 2008, the region has come off a period of strong growth during 2004-07. Real growth is estimated to have decelerated to about 2% in 2008, reflecting sluggish activity in tourism and construction."
"Inflation accelerated during the first three quarters of 2008, but eased toward end-2008 with the retreat of world commodity prices and slowing economic activity. Limited fiscal consolidation achieved in 2007 - reflecting higher tax revenues and lower capital expenditure - is estimated to have stalled in 2008 as both revenues and expenditures as a share of GDP remained fairly stable, with public debt standing at about 94% of regional GDP at year end," he added, going on:
"The ECCU’s high vulnerability to shocks, exacerbated by its elevated public debt level, highlights the importance of further enhancing crisis preparedness. Additional and sustained efforts to push through structural reforms, such as tax reform, improving the business climate, and deepening regional integration, are key to enhance competitiveness and underpin the currency union."
“With very high public debt levels, there is little, if any, room for counter-cyclical fiscal policy in the ECCU. Minimizing fiscal slippages would require following through on revenue reforms (including the introduction and successful implementation of value-added taxes), containing expenditures and enhancing efficiency (particularly public investment and civil service wage bills), and strengthening debt management."
Mr Cashin continued:
"The global slowdown and financial turmoil are slowing economic activity in Grenada, chiefly through a weakening of tourism receipts, FDI, and remittances. The authorities have had some success in reducing the primary fiscal deficit, although the level of public debt, which was 109% of GDP at end-2008, remains high."
"Looking ahead, the authorities intend to focus on addressing the impact of the global slowdown, placing debt on a sustainable trajectory, undertaking reforms to improve the business environment, and strengthening capacity for economic and fiscal management. While the authorities affirmed the need for fiscal discipline, they also called upon the IMF and other international financial institutions to consider innovative approaches to the management of debt burdens in highly-indebted small states," he concluded.
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