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IMF Praises St. Vincent's Fiscal Plan

by Phillip Morton, Investors

30 November 2011

The International Monetary Fund (IMF) has commended the fiscal plan of Saint Vincent and the Grenadines, noting that the government's intentions to introduce new property taxes and enhance tax collection will aid the nation in achieving its long-term goal of a budget surplus of 2% of Gross Domestic Product by 2016.

Noting that the fiscal deficit is likely to fall this year, despite an increase in expenditure, the Fund urged the government to push ahead with a "more ambitious fiscal consolidation path" to allow for a faster reduction in debt. The IMF Executive Board did however welcome authorities' plans to introduce market-based property taxes, strengthen revenue administration, contain the public sector wage bill, limit transfers to state-owned enterprises, and rationalize spending on goods and services.

Against the backdrop of lacklustre tax receipts, the Board recommended that the islands introduce reforms to increase the potential for growth, namely by diversifying the economy, improving the business climate and enhancing competitiveness.

With regard to the territory's financial services sector, the IMF noted that non-performing loans (NPLs) at commercial banks decreased somewhat from 8.5% at the end of 2010, to 7.5% in June 2011, but bank profitability has also declined. NPLs remain elevated in the non-banking financial sector, the IMF further reported, although government efforts are ongoing to improve performance in this area.

Concluding, the Executive Board underscored the need for close monitoring of both the banking and non-banking financial sectors. They noted that regional financial sector concerns could affect confidence and ultimately impact economic activity. With this in mind, the Fund welcomed efforts to improve supervision through plans to establish a supervisory body for the non-banking sector, to be known as the Single Regulatory Unit.

TAGS: tax | investment | property tax | banking | financial services | international financial centres (IFC) | offshore | offshore banking | services

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