Press Release No. 14/117

Press Release: IMF Executive Board Completes Seventh and Eighth Reviews Under Stand-By Arrangement for St. Kitts and Nevis and Approves US$3.43 Million Disbursement

March 19, 2014

On March 19, the Executive Board of the International Monetary Fund (IMF) completed the seventh and eighth reviews of St. Kitts and Nevis’ economic performance under a program supported by a 36-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 2.21 million (about US$ 3.43 million). The authorities have decided to treat the arrangement as precautionary. On the same day, the Board also concluded the 2014 Article IV consultation with St. Kitts and Nevis (see Press Release No. 14/138).

In completing the reviews, the Executive Board approved the waiver of applicability for the end-December 2013 performance criteria, for which data are not yet available and there is no evidence that they were not observed. The Executive Board also approved the waiver of non-observance of the continuous performance criterion on the ceiling of external arrears accumulated on debt contracted or guaranteed by the central government as the non-observance was minor and temporary. In addition, the Executive Board approved the re-phasing of the undisbursed amounts over the remainder of the arrangement. The SBA was originally approved on July 27, 2011 (see Press Release No.11/295), for an amount equivalent to SDR 52.51 million (about US$81.55 million), or 590 percent of St. Kitts and Nevis’ IMF quota.

Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:

“The St. Kitts and Nevis authorities have continued to make commendable progress under their home-grown Fund-supported program. Economic activity is picking up after a four-year slump, inflation remains low, the financial sector is stable, and the fiscal and external positions are improving. Significant progress has also been made to strengthen public financial management.

“The 2014 budget aims to protect the gains under the program, continue the downward debt-to-GDP trajectory, and advance the reform agenda. Achieving these objectives will require sustained strict control of government spending and increased efforts to improve revenue collection. The bulk of revenues from the Citizenship by Investment program should be saved to build buffers, facilitate a faster decline in debt, and finance productive capital projects. Containing public sector wage outlays and hiring will also be necessary.

“Debt has fallen considerably due to completion of a large part of the debt-land swap, but remains high. Completing the agreement on the remaining debt-land swap should be a top priority. New measures should ensure that external arrears do not recur.

“While there have been significant advances in structural reforms, greater effort will be needed to implement the remaining planned reforms to generate further efficiencies in the public sector and foster private sector growth. Priority should be given to measures to enhance revenues by strengthening tax administration and limiting tax exemptions, and to streamline public expenditure, including through civil service reform.

“The banking sector remains resilient. Together with the ECCB, the government should continue its close monitoring of banks and their progress in reducing nonperforming loans. The sale of lands involved in the debt-land swap should commence expeditiously to bolster banks’ profitability. The authorities have taken welcome steps to strengthen the non-bank financial institutions supervisory framework. Continued efforts in this area are needed to support the stability of the financial system.”