IMF says economy right on track

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he International Monetary Fund (IMF) Executive Board Article IV consultation on St. Kitts and Nevis says the Federation has a high vulnerability to natural disasters and shocks to tourism and therefore the federal government has to adopt precautionary measures and engage in contingency planning.

The Washington based IMF did state however that the nation’s economic growth has accelerated in 2006 despite the closure of the sugar industry the previous year. This was evident by improved fiscal imbalances and growing monetary aggregates.

Information coming out of the office of Prime Minister of St. Kitts and Nevis Hon. Denzil Douglas reveal that the IMF has called for further efforts to improve reliability and timeless key data on tourism, debt and public enterprise.

“To develop more sustainable sources of growth, directors recommend strengthening the business and investment climate and improving competitiveness by enhancing the efficiency and reliability of public utilities,” the article said.

The closure of the sugar industry had far deeper reaching implications than over one thousand workers becoming unemployed at one time. The closure had required the government to service the debt of the SSMC which resulted in increased public debt. By the end of 2005, the debt had reached 190 percent of the Gross Domestic Product (GDP).

The report states ‘In 2006, the economy is estimated to have recorded its third consecutive year of strong growth projected at 4.5% in 2006 with good prospects for 2007’. This growth, the report stated, was due to the combination of ongoing construction projects and activities related to the Cricket World Cup.

The report was not all positive as it stated that financing of the current account deficit was mainly by foreign direct investment. It said that in 2005-2006 a temporary spike in inflation was due largely in part to large adjustments in the regulated petroleum and electricity prices in response to the higher global prices for petroleum.

IMF Directors welcomed the authorities’ commitment to tax reform to improve its efficiency but emphasized that for the reform to be successful, it will need to be supported by improvements in administrative capacity.

The article continued to say that greater efforts to prioritise and control government expenditure are needed to sustain the fiscal adjustment and the transparency, accountability, monitoring, and oversight of public enterprises need to be improved, to ensure that the central government’s fiscal consolidation is not undermined by the poor financial performance of public entities.

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