Statement by the IMF Mission to DominicaPress Release No. 11/210
June 1, 2011 An International Monetary Fund (IMF) mission led by Ms. Aliona Cebotari of the IMF’s Western Hemisphere Department visited Dominica during May 17–27, 2011, for the annual Article IV discussions on economic developments and macroeconomic policies. The mission met with the Honorable Prime Minister and Minister of Finance Roosevelt Skerrit, Financial Secretary Rosamund Edwards, other senior government officials, and representatives of the private sector and labor unions. The following statement was issued today by Ms. Cebotari:
“Dominica is emerging from the crisis, building on the timely and strong countercyclical response over the past few years. Growth turned positive last year, but the recovery is expected to slow in 2011 to 0.8 percent, given tepid demand and the needed fiscal consolidation, and to gradually rise to 2 percent over the medium-term. Increasing world commodity prices are expected to put some pressures on inflation and the balance of payments in 2011, but these should be manageable and should subside in line with world fuel and food prices.
“The discussions with the authorities focused on three key policy challenges: (i) ensuring long-term debt sustainability while safeguarding infrastructure investment to support growth; (ii) ensuring the stability and soundness of the financial system; and (iii) boosting the long-term growth prospects.
“Prudent fiscal management over the years brought public debt down and provided room for maneuver during the crisis. Going forward, ensuring debt sustainability will require a gradual withdrawal of the fiscal stimulus and a return to the 2.4 percent primary surplus target that anchored fiscal policies in the recent past and served the country well. To strike an appropriate balance between consolidation and the need to support growth through infrastructure investment, the mission suggested adjustment measures should focus on rationalizing current spending, divesting assets, reinvigorating revenue administration reforms, and addressing the sustainability of the pension system.
“Safeguarding financial stability will require continued monitoring and a proactive management of risks in the financial sector, which may arise from exposure to the failed regional insurance companies and from further deterioration in the credit portfolio.
“Boosting long-term growth will require concerted efforts to create an environment propitious for private sector investment by simplifying the investment approval process, improving land tenancy arrangements, and enacting the revised procurement legislation recently approved by the government, among others.
“The IMF will maintain a close policy dialogue with the authorities as they continue to address these challenges. Upon its return to Washington DC, the mission will prepare a report to the IMF’s Executive Board, which is tentatively scheduled to consider it at end-July 2011. The mission is grateful to the authorities and all its interlocutors for their open discussions, excellent cooperation and warm hospitality.