Press Release No. 11/293

Press Release: IMF Executive Board Approves US$ 2 Million Disbursement Under Rapid Credit Facility for St. Vincent and the Grenadines

July 26, 2011

The Executive Board of the International Monetary Fund (IMF) on July 25, 2011 approved a disbursement of an amount equivalent to SDR 1.245 million (about US$2.0 million) under the Rapid Credit Facility (RCF) for St. Vincent and the Grenadines to help the country meet the urgent balance of payments need caused by torrential rains, flooding and landslides in April that caused extensive damage to infrastructure (roads and bridges), agriculture and housing.

This was the second natural disaster to hit the island in less than six months; in October last year Hurricane Tomas had a similar impact. Preliminary estimates of the destruction from the flooding and landslides put the damage at about 3.6 percent of Gross Domestic Product. On February 28, 2011, the Executive Board approved (see Press Release No. 11/58) a first disbursement under the RCF to help the country cope with the damages caused by Hurricane Thomas, in an amount equivalent to SDR 2.075 million (about US$3.26 million).

The RCF, which provides rapid financial assistance for low-income countries with an urgent balance of payments need, does not require any program-based conditionality or review. However, economic policies are expected to address the underlying balance of payments difficulties and support policy objectives including macroeconomic stability and poverty reduction. Financing under the RCF carries zero interest (until end 2011), has a grace period of 5.5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.

Following the Executive Board’s discussion of St. Vincent and the Grenadines, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, issued the following statement:

“St. Vincent and the Grenadines suffered significant damage to infrastructure, housing, and agriculture as a result of the flooding and landslides that hit the country in April 2011. High reconstruction and rehabilitation costs have weakened the fiscal position and created an urgent balance of payments need.

“In light of the high public debt, the authorities have reiterated their intention to rely mainly on grants and concessional resources to finance budgetary needs, while enhancing their efforts to increase revenue collections, including through the recently established Large Taxpayer Unit. They have also committed to contain wages and limit other current expenditures.

“The authorities remain focused on their objective to secure debt sustainability over the medium term. To this end, they are strongly committed to generate the needed primary surpluses to ensure that the debt to GDP ratio remains on a firmly declining path.

“The authorities are undertaking further structural reforms to improve the business climate and raise the growth potential. In this context, they are strengthening the governance of state-owned enterprises and reforming the civil service and the pension system. Legislation to establish the Single Regulatory Unit will be submitted to Parliament in the months ahead, paving the way for enhancing the supervision of the nonbank financial sector,” Ms. Shafik said.