Earlier this year, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV consultation with Antigua and Barbuda, which was released for public viewing on Thursday.
The IMF Directors welcomed Antigua and Barbuda's recent strong economic growth and relatively low inflation, and commended the authorities for their ongoing efforts to improve the country's fiscal position.
Looking forward, Directors supported the authorities' continuing efforts to address structural weaknesses in order to reduce the country's exposure to external shocks and promote durable growth. This should entail, in particular, improving the investment climate, reducing skills mismatches, diversifying exports, and making regulations in telecommunications more efficient.
Directors agreed that it will be important for the government to demonstrate fiscal strengthening in 2008. They commended the implementation of broad-based tax reforms, including VAT, and looked forward to their uniform and transparent implementation.
Additionally, Directors welcomed the authorities' intention to introduce a fuel price adjustment mechanism to achieve greater pass-through of oil price increases. Firm expenditure restraint would allow the surge in spending in 2006 and 2007 to be unwound.
The Directors then went on to welcome the authorities' commitment to strengthen debt management and their ongoing efforts to normalize relations with creditors.
They looked forward to the early clearance of external and internal arrears. Directors stressed that additional fiscal measures will be essential, over the medium term, to placing the debt-to-GDP ratio securely on a downward path.
Expenditure restraint will be critical to this effort, including, in particular, civil service reform to contain the wage bill and enhance efficiency in the public sector.
Directors noted that the real exchange rate appears broadly in line with fundamentals, with the depreciation in recent years having contributed to improved competitiveness.
They emphasized that maintaining competitiveness will depend on the authorities maintaining their commitment to sustained fiscal consolidation and structural reforms, which will also underpin the regional currency arrangement.
Directors cautioned that rapid growth in private sector credit could erode the quality of loan portfolios. They welcomed efforts to further strengthen financial sector supervision, including through unified supervision of non-bank financial institutions.
Finally, Directors saw a need for strengthening economic data in terms of coverage, timeliness, and reliability.
They encouraged the authorities to enhance the resources devoted to this area, and supported the provision of technical assistance as appropriate.
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