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IMF Concludes Article IV Consultation With St Vincent And The Grenadines

by Amanda Banks,, London

15 November 2007

The International Monetary Fund has this week released details of its Article IV Consultation with St Vincent and the Grenadines, concluded earlier this year.

According to the IMF review, economic activity has rebounded in the jurisdiction, with real GDP growing by over 4% in 2006, and further acceleration expected in 2007.

The improved performance in 2006 was largely driven by a pick up in construction and tourism-related services, as well as a rebound in weather-affected agricultural production.

While prudential indicators of the financial sector and disaster preparedness have both improved in recent years, vulnerabilities remain, the IMF observed.

The IMF Executive Board announced this week that:

"Directors welcomed signs that growth has accelerated, but stressed that the challenge remains to develop new sources of growth without compromising fiscal and debt sustainability. The country's fiscal position is of concern, and a front-loaded fiscal adjustment is needed to place the debt ratio on a more sustainable path, increase the scope to address social needs, and enable the economy to respond to adverse shocks. Directors stressed the importance of undertaking major infrastructure investments, including in the air transport sector, only if they are judged viable, and financing them with grants or highly concessional loans."

"Directors welcomed the improvements in tax policy and administration, including the...adoption of the VAT. They called for steps to curb tax concessions and to introduce a flexible retail fuel pricing mechanism to help maintain revenue buoyancy and ensure that the tax system promotes new investment. Directors emphasized that, despite the boost in revenues, stricter spending discipline is needed, through better prioritization of capital spending, limits on civil service employment, and reform of the social security scheme."

It continued:

"Directors welcomed that the financial sector's vulnerability to adverse shocks has been reduced. They supported the ongoing efforts to improve the balance sheet of the state-owned National Commercial Bank and strengthen financial sector supervision."

"Directors supported the efforts made to bolster national disaster mitigation and preparedness. They called for further efforts, including in the context of regional pooling of catastrophe risk insurance."

"Directors considered that the erosion of trade preferences for bananas is placing considerable pressure on rural households, which increases the importance of developing a reform program-including well-targeted and temporary safety nets-to ease the transition away from bananas and elicit donor support. In this vein, Directors urged donors to accelerate disbursements to the country of promised aid and grants."

And concluded:

"Directors agreed that data with respect to areas central to surveillance are adequate. At the same time, they encouraged the authorities to continue their efforts to improve the coverage, timeliness, and dissemination of statistics, including with technical assistance support from donors and CARTAC."

The full text of the Article IV Consultation on St Vincent and the Grenadines can be found in the Tax News Resources section.

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