BASSETERRE, St. Kitts - On May 21, 2012 ‘the Executive Board of the International Monetary Fund (IMF) completed the second review of St. Kitts and Nevis’ economic performance under a program supported by a 36-month Stand-by Arrangement (SBA). The completion of the review allows the immediate disbursement of an amount equivalent to SDR 3.161 million (about US $4.83 million), bringing total disbursements under the arrangement to SDR 36.781 million (about US $56.21 million)’.
Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement in the recent May 21 Press Release:
“Following three consecutive years of decline, the domestic economic outlook is positive, supported by FDI-related construction and an improvement in tourism activities, although the global environment continues to present downside risks.”
IMF was satisfied that debt exchange programmes were proceeding as planned.
They referred directly to (a) the debt exchange with bondholders and external commercial creditors, the first phase of the comprehensive restructuring of the public debt.
Also listed was the further progress in the resolution of domestic loans, including the conversion of loans secured with land. This no doubt refers to the granting of land to the local National Bank which was used to secure large loans.
In the latter instance, the IMF appeared to justify this move by stating “It will be important to minimize the impact of debt restructuring on banks’ balance sheets to preserve financial sector stability.”
In expressing their agreement to make available more funds, the press release from the IMF stated:
“The success of the program hinges on a proactive policy response to safeguard achievement of the fiscal targets and strict adherence to the planned pace of structural reforms. In this regard, the authorities are proceeding with efforts to enhance tax revenue, maintain tight control over expenditure, and prepare contingency measures. It will be important to continue to make progress on other fiscal reforms to expand space for growth-promoting spending.”
Meanwhile the Press Secretary of the Prime Minister reports that a “landmark debt restructuring deal with the Paris Club” was concluded recently when the Prime Minister, his Financial Secretary and White Oak debt advisors met with its members on May 24th, 2012.
The Press Secretary reports:
“The Government and the Paris Club agreed at the multilateral level to restructure over 20 years the entire stock of debt outstanding to the Paris Club, including the arrears. A grace period on principal repayments of seven years will also apply.
Concessional rates of interest will apply to the rescheduling.”
He further added: “The Government expects that these concessions could involve the outright cancellation of over 60% of the debt treated at the multilateral level on 24 May 2012, as well as other additional concessions.”
As Government continues to wriggle out of its major debt obligations, it remains to be seen what impact these will have on domestic economic conditions.
