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St Kitts And Nevis PM Recalls Fiscal Consolidation Journey

by Jason Gorringe, Tax-News.com, London

04 April 2014

The Prime Minister of St Kitts and Nevis has recalled the process that the territory has gone through, under an International Monetary Fund assisted program, to turn the territory's mammoth deficit into a surplus.

Speaking as part of the 'Ask the Prime Minister' radio program, Denzil Douglas said "that the IMF often proposes – and sometimes demands – that various countries follow specific policy paths."

"The path that the Government of St Kitts and Nevis has followed in recent years, during a crisis that floored many a nation, was a path conceived by the Government of St. Kitts and Nevis; double, triple, quadruple-checked by the Government of St. Kitts and Nevis; and implemented by the Government of St. Kitts and Nevis," he said.

"The IMF reported that our country was continuing to make 'commendable progress' ... under our own home-grown programme. And we must note that second cluster of words also – 'under St. Kitts and Nevis's own home-grown programme'," said Douglas.

Last month, the IMF reported that there were firm signs of a recovery in 2013 with gross domestic product (GDP) estimated to have grown by 1.7 percent as a result of an upturn in tourism and construction. Employment has risen by 10.2 percent, and wages are up 5.1 percent in the first half of 2013.

Douglas pointed out that the financial system has remained stable; the current account deficit narrowed from over 20 percent prior to 2011 to about 11-12 percent in 2012 and 2013; and the improved current account, together with strong capital inflows, has significantly strengthened the external position.

The fiscal position has substantially improved, Douglas highlighted, from a deficit of 7.8 percent of GDP in 2010, to a projected surplus of 8.6 percent in 2013. The improved fiscal situation allowed for the 13th month wage payment in September 2013 after a nominal wage freeze since 2010.

The IMF has predicted that growth in 2014 will accelerate to between 2.5 and 3 percent of GDP, with the continued recovery in tourism. Over the medium-term, the economy is expected to continue to recover and reach its potential growth rate of about 3-3.5 percent.

TAGS: tax | gross domestic product (GDP) | employees | international financial centres (IFC) | offshore | Saint Kitts and Nevis | tax reform | construction

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