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IMF says St. Kitts public debt too high

In a statement issued yesterday, the IMF pointed to strong growth and promising medium-term prospects for the twin-island federation, noting that growth was rebounding and fiscal balances were improving markedly.

The international lending agency pointed out that tightened external borrowing conditions made it more difficult for the Denzil Douglas administration to borrow on the international market and the government had therefore turned mainly to domestic sources meet its financing needs.

This, the IMF said had led to contributed to high public debt - about 185 percent of the gross domestic product (GDP).

It warned that he situation left "little room for manoeuvre in the event of an adverse shock".

"Sustained fiscal consolidation, backed up with the development of a contingency plan to respond to economic shocks, would help mitigate the risks associated with the high debt stock," the release stated.

The bank's officials also encouraged the authorities "to continue their efforts to achieve their medium-term fiscal goals and put debt on a solid downward trajectory". "Expenditure restraint, including comprehensive civil service reform, will be key. Plans to broaden the tax base, improve the oversight and transparency of public enterprises and strengthen debt management capacity will also support these goals," the IMF recommended.

But it also cautioned that the public debt would remain elevated throughout the medium term, and encouraged the authorities to explore options for a more rapid debt reduction, including by accelerating the pace of asset sales, which could also promote private sector-led growth.

The IMF also encouraged the authorities to accelerate the implementation of planned structural reforms aimed at improving the business climate and strengthening the economy's flexibility and resilience.

It also noted that financial sector risks need to be carefully monitored and called for "further progress in mitigating risks, including through enhancing supervision of vulnerable banks and reducing the large government exposure".

The IMF also welcomed the authorities' plan to establish a single regulatory unit for the non-bank financial sector.

admin wrote on April 03, 2008 10:00 PM from Saint Kitts and Nevis

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