IMF Says Eastern Caribbean Is Doing Well, by Amanda Banks, Tax-News.com, London 26 July 2006
David O. Robinson, head of an International Monetary Fund staff mission to the Eastern Caribbean Currency Union (ECCU) countries, said recently that most Eastern Caribbean countries are benefiting from good economic conditions in the United States and the United Kingdom.
Said Mr Robinson:
"Recent economic outcomes have been strong — growth for the ECCU region accelerated in 2005 to about 4½ percent, largely due to a recovery in tourism, and increased construction activity ahead of the 2007 Cricket World Cup. While inflationary pressures have emerged due to the strong economic activity and higher world oil prices, inflation has remained in the low single digits, anchored by the regional monetary arrangement at the ECCB. Fiscal positions also improved, with the central government primary balance (the overall balance of the government minus interest payments) recording a small surplus for the first time in nearly a decade.
"Buoyed by continued growth in the region's main tourism markets — the United States and the UK — as well as the ongoing high level of construction activity, near-term growth prospects remain strong in most countries. This supportive environment provides a window to enhance the flexibility of the region's economies that will be important to enable the region to take advantage of the new opportunities provided by the CSME (Caribbean Single Market and Economy) and the increasing globalization of the world economy, as well as to adjust to the further decline of trade preferences for bananas and sugar. Sustaining growth once the impetus dissipates from the construction boom ahead of the Cricket World Cup will be key to maintaining and further improving living standards in the region.
"Despite the improvement in fiscal outcomes seen in 2005 and restructuring agreements reached with creditors in three countries — Antigua and Barbuda, Dominica, and Grenada — debt burdens remain high throughout the region. Interest outlays by countries in the region restrict the fiscal space available to pursue social agendas and address emerging concerns such as HIV/AIDS. Important reforms to place the fiscal balances on a firmer footing are underway in many countries—including through the introduction of value added taxes—and it is essential that improved fiscal positions are sustained. In this context, care will be needed to ensure that public sector investments are yielding adequate social rates of return and that tax incentives are not unduly eroding tax bases."
The IMF mission is visiting the Eastern Caribbean Currency Union countries during July and August to conduct the Fund's 2006 ECCU regional discussions. It will visit the six IMF member countries of the ECCU — Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines — and key regional institutions, including the Caribbean Development Bank, the Eastern Caribbean Central Bank (ECCB), and the Organization of Eastern Caribbean States (OECS).
The IMF mission visited Antigua and Barbuda during July 17-19, 2006. The IMF team thanked the authorities of Antigua and Barbuda for 'insightful and open' discussions. Said Mr Robinson: "The authorities are implementing a bold reform agenda designed to strengthen prospects for private investment and to restore normalcy in fiscal and debt relations. The recent surge in private investment and strengthening of the fiscal accounts are early signs that these efforts are bearing fruit. We wish them every success in their continued efforts."
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