Caribbean economist praises fiscal consolidation in Dominica
Saturday, July 29, 2006
Chief Economist at Caribbean Money Market Brokers Research Centre, Jwala Rambarran, commented on Dominica’s macroeconomic performance at a post budget seminar organised by CMMB at the Fort Young Hotel last week.
Rambarran delivered a presentation on the 2006/2007 Budget presented by Prime Minister and Minister for Finance and Planning, Roosevelt Skerrit, focussing on the country’s recent macroeconomic performance in the context of the regional and international economic environment.
The Caribbean economist said: “In terms of fiscal performance, Dominica has shown what I consider to be the strongest fiscal consolidation effort in the Eastern Caribbean. As a matter of fact, in the wider Caribbean region, no other country except Jamaica can boast of a stronger consolidation effort, especially in the short space of three years.”
Dominica’s overall macroeconomic performance received good reviews from the leading economist.
“You have managed to raise the Revenue to GDP ratio, from 28% of GDP in the crisis to about 33% of GDP now. Part of that is aided by the fact that you have growth taking place. But there have been improvements in terms of tax administration and collecting revenues.
“In terms of interest payments, that was averaging 5% of GDP a few years aback. And now it is down to just under 3% of GDP. That reflects the fiscal consolidation effort and the success of the debt restructuring exercise.”
The reduction in the public sector wage bill was also noted by the leading economist. Dominica’s wage bill stood at 17% of GDP in 2002, among the highest in the Region at the time. At the end of the 2005/2006 fiscal year, the wage bill stood at 13.7% of GDP. The Government expects to reduce it further to 13.1 % by the end of the 2006/2007 fiscal year, falling to 12.25 % by fiscal year 2008/2009.
Rambarran also commended the Government for a significant improvement in the overall balance:” Moving from an overall deficit at the height of the crisis of just over 8.5% of GDP ... That has now swung to a small overall surplus of 0.3% this year.
“That really speaks to how much effort has gone into fiscal performance. It has been very commendable. And clearly you can see it in terms of the Public Sector Debt to GDP ratio, which has come down from a high of 130% which was clearly unsustainable, and now it is declining. The last number showed it at 86% at the end of the last fiscal year.”
Dominica’s performance under the IMF’s Poverty Reduction and Growth Facility arrangement was also described in favourable language: “When you look at Dominica’s performance under this PRGF programme, you do see a very good track record of macroeconomic performance. I have looked at programmes all over the world, especially PRGF programmes and I could tell you what I have seen here stands out globally in terms of fiscal effort.
“A lot of countries under PRGF programmes do not meet the performance criteria and even if they meet it, they don’t meet it with the kind of margins like Dominica. It has done quite well.”
This public announcement of the dramatic improvement in Dominica’s fiscal situation by Rambarran is considered to be good news for the Government and, more importantly, good news for the people of Dominica.
According to an official press release, Rambarran’s statements confirm that the Government of Dominica, under the leadership of the then Prime Minister, Pierre Charles, was right to embark upon a Programme of Economic Stabilisation and Recovery in June 2002, despite the considerable political risks.
The government says that Dominica’s economy is now on an upward growth trajectory and is also firmly on the path to fiscal and debt sustainability.
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