St Kitts And Nevis Budget Consolidation On Track

by Amanda Banks, Tax-News.com, London

Monday, January 30, 2012

Saint Kitts and Nevis has made marked process on debt reduction under a program supported by the International Monetary Fund (IMF).

The IMF found, undertaking the first review of St Kitts and Nevis's economic performance under a 36-month Stand-by Arrangement program, that despite the territory's stagnant economy it had met all criteria necessary for the disbursement of a second tranche of funds. The completion of the review of the jurisidction's fiscal policy actions allows the immediate disbursement of around USD17.6m, bringing total disbursements under the arrangements to around USD51.6m.

Following the Executive Board’s discussion, Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“All end-September 2011 quantitative targets have been met, despite slower-than-expected economic growth. The fiscal target was met by a comfortable margin, and the authorities were successful in reducing budget expenditure arrears to below the levels at the end of December 2010. No external arrears were accumulated except for debt service payments, which are part of the debt restructuring. Also, the authorities approved the 2012 budget consistent with the program objectives.” Shinohara said.

“The authorities have made progress on structural reforms, including by updating the registry and undertaking the valuation of 600 acres of land, as well as updating existing stress tests of financial institutions. To ensure fiscal sustainability, further reforms will focus on public financial management, the civil service, the social security system, and the strengthening of the social safety net.”

“The authorities are making progress on negotiations with their creditors for the comprehensive restructuring of the public debt. Early implementation of the debt restructuring will be critical for the success of the program. Continued commitment to ensuring the stability and health of the financial sector will be important to reduce vulnerabilities.”

In 2009, St Kitts and Nevis had the most significant public debt among its Caribbean peers, at 185% of gross domestic product, and the third largest in the world. Following the introduction of a value-added tax and excise tax reforms introduced in November 2010, and the streamlining of import duty exemptions and the introduction of an environmental levy, the government has managed to make inroads into the debt problem.