Press Release No. 11/104

Press Release: IMF Executive Board Approves Completion of Second and Third Reviews Under Stand-by Arrangement with Antigua and Barbuda

March 30, 2011

The Executive Board of the International Monetary Fund (IMF) has completed the second and third reviews of Antigua and Barbuda’s economic performance under a program supported by a 36-month Stand-by Arrangement (SBA). The completion of the reviews allows the immediate disbursement of an amount equivalent to SDR 6.75 million (about US$10.7 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 27 million (about US$42.7 million).

The SBA was approved on June 7, 2010 (see Press Release No. 10/232), for an amount equivalent to SDR 81 million (about US$128.0 million), or 600 percent of Antigua and Barbuda’s IMF quota. The first review of the program was completed on October 29, 2010 (see Press Release No. 10/406).

Following the Executive Board’s discussion, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, made the following statement:

“The Antiguan economy is beginning to recover. Recent indicators point to moderate positive growth in 2011 based on some improvement in the tourism sector. However, private and foreign direct investment, remittance flows, and construction spending are still below pre-crisis level. All end-December quantitative targets under the Fund-supported program were met, despite the continued weak economic performance in 2010 and revenue shortfalls relative to initial program projections. The overall fiscal balance improved significantly as result of expenditure restraint, interest savings from debt restructuring and, to some extent, enhanced revenue efforts. Continued vigilance is necessary as risks remain high, including those related to increasing global food and fuel prices and the domestic banking sector.

“The authorities’ commitment to fiscal discipline, in particular, to strengthening revenue-enhancing measures and exercising continued restraint to current spending, will be critical to meet the budget and program targets. To this end, further efforts should be made to raise tax revenues towards initially programmed levels. Maintaining debt sustainability, under severe financing constraints, will also require a sustained effort.

“The restructuring of public external debt exceeded initial expectations. The authorities have secured refinancing of external public debt with Paris Club creditors on non-concessional terms, and have concluded bilateral negotiations with most of these creditors. There has also been comprehensive restructuring of domestic debt to statutory bodies and suppliers, with substantial haircuts on the face value of the debts. The authorities are actively pursuing negotiations to resolve remaining arrears and complete the debt restructuring.

“Significant progress has been made in structural reforms. The proposal to establish new structural benchmarks and a new ceiling for arrears is an important step toward achieving the fiscal targets and strengthening economic growth. Since increasing revenue remains a major focus, improving public financial management, initiation of public sector audits, and undertaking civil service reform will be critical. Advancing privatization of state-owned enterprises, including improving oversight and better assessment of their budget impact, will further strengthen the fiscal situation.

“In the financial sector, the authorities remain committed to preserving financial stability and to ensuring that banks are able to maintain sufficient capital margins. The authorities are also putting in place a more effective regulatory framework to govern offshore financial services and nonbank financial institutions.”