Reprinted from Caribbean Net News
caribbeannetnews.com

IMF commends Dominica for achieving macroeconomic stability
08-03-2006

ROSEAU, Dominica: The Executive Board of the International Monetary Fund has praised the efforts of the Government of Dominica in achieving macroeconomic stabilisation.

A press release was issued on Wednesday, July 26, 2006 following the Board’s completion of the sixth review of Dominica’s PRGF arrangement.

Augustin Carstens, Deputy Managing Director and Acting Chair stated:

“The Dominican authorities are to be commended for their efforts in achieving macroeconomic stability through sustained fiscal consolidation and a collaborative debt restructuring effort. Dominica’s strong macroeconomic performance during 2005-06 which was supported by a solid fiscal performance, has set the stage for the moving forward with the implementation of robust structural reforms that will establish the foundations for sustained, strong growth and poverty reduction. The recently completed Growth and Social Protection Strategy (GSPS), which sets out the authorities’ approach to poverty reduction, is a further welcome step in this direction.

“The strong stance of the recently approved budget for FY2006/07, which incorporates a primary surplus target of 3 percent of GDP, has been in line with the attainment of medium-term sustainability for public finances and debt. The budget also includes fiscal reforms aimed at reducing the government’s wage bill and strengthening budget execution and financial management.”

The statement by Carstens commends the Dominica government for the introduction of a value added tax and an excise tax in March, 2006, but had one reservation: “Regrettably, subsequent amendments that provided incentives to selected sectors weakened a regime that was designed with few exemptions and a limited set of zero-rated supplies.”

Carstens however applauded the Government for its commitment to ensure that the VAT regime remains non-distortionary.

Carstens also stated that the Government’s planned comprehensive review of the VAT regime “will contribute to setting the scope for future revenue reforms”. Also receiving praise from the Fund is the Government’s emphasis on establishing an administrative regime that sustains a high level of compliance, supported by a good audit system and the implementation of a system that allows timely refunds.

While acknowledging progress in a number of structural areas, Carstens believes that work in that area should be accelerated.

“While progress has been made in a number of structural areas, the pace of reform should be accelerated in line with priorities set out in the GSPS, including amending the Electricity Supply Act and related legislation; eliminating the unfunded liability of the Dominica Social Security (DSS); and addressing the fragility of the AID Bank. These structural reforms will play an important role in enhancing the economy’s growth potential and alleviating existing vulnerabilities.”

The success of the Government’s debt restructuring programme has also been commended by the IMF.

“The authorities’ good faith efforts to reach collaborative settlements with the remaining creditors in the debt restructuring process are commendable.”

Completion of the sixth review of Dominica’s PRGF arrangement enables the release of an amount equivalent to SDR $1.16 million (about US$1.7 million), which will bring total disbursements to SDR6.5 million (about US$9.6 million).

The present PRGF arrangement will end in December, 2006.