The arrangement will support the authorities’ economic program, coupled with a comprehensive debt restructuring, to restore debt and external sustainability and set the stage for sustained growth.
As a result of the board’s decision, an amount equivalent to SDR 22.15 million (about US$35.6 million) is available for immediate disbursement. The three-year SBA arrangement represents 590 percent of St Kitts and Nevis’s (SDR 8.9 million) IMF quota. St Kitts and Nevis joined the Fund in August 1984.
Following the executive board’s discussion of St Kitts and Nevis on Wednesday, Nemat Shafik, deputy managing director and acting chair, made the following statement:
“The St Kitts and Nevis economy is gradually recovering from a prolonged recession. However, fiscal imbalances and structural fragilities pose significant risks to the economic outlook.
“The authorities have started to implement an economic program to address these challenges over the medium term. The main objectives of this program are achieving higher growth and a sustainable fiscal position. The authorities’ plans include front-loaded fiscal consolidation, a comprehensive debt restructuring, and further steps to strengthen the financial sector.
“The authorities have already taken important revenue and expenditure measures. These include an introduction of a value added tax, implementation of an excise tax and electricity tariff reform, and a freeze of the public wage bill. Given the magnitude of the targeted adjustment, sustained consolidation is critical.
“In addition to fiscal adjustment, a comprehensive and timely debt restructuring is needed to achieve a sustainable fiscal position. The authorities have publicly announced their intention to restructure the public debt and have initiated discussions with creditors to this end.
“Further strengthening of the financial system is also a critical element of the authorities’ economic program. In this respect, the forthcoming Banking Sector Reserve Fund would be able to provide temporary liquidity support to solvent financial institutions, if needed.
“Over the medium term, the structural reforms envisaged by the authorities will complement fiscal adjustment. These reforms aim at strengthening public financial management, improving the business climate, enhancing the social safety nets, removing obstacles to growth, and restoring competitiveness.”