…time to diversify the local economies
WASHINGTON, DC - THE International Monetary Fund (IMF) has called for territories across the Organization of Eastern Caribbean States (OECS) and the wider Caribbean to cut spending and save their buffers, as a drop-off in tourism numbers is expected in the coming months.
That call comes against the backdrop of the Fund cutting its outlook for tourism dependent states due to the ripple effects of the rising inflation.
The IMF is painting a grim picture for Latin America and the Caribbean for 2023, as the world continues to seek ways to rebound from the economic shock brought by the rapid increase in inflation numbers being seen in all corners of the globe.
Those shocks were as a result of the continued war in Ukraine, global supply chain issues and the continuing flux in gas prices.
St. Kitts and Nevis, like the rest of the region, is grappling with the staggering inflation rate and the Dr. Terrance Drew administration is combating the problem by using a number of measures to bring relief to citizens and residents.
But while doing so, the Government is said to be spending and, in some cases, losing revenue due to relief measures.
In addition, since taking office, the Government has begun instituting a number of relief measures to benefit citizens, while a number of programmes are being funded, most likely, through the Citizenship by Investment Programme.
While that is beneficial, the IMF believes that such spending might not be needed at this time, as the source markets being Caribbean tourism would likely face difficulties in the near future.
The United States is likely to hit recession stage in the near future, and the uncertainty surrounding the position being adopted by the European Union, putting the CBI programme in jeopardy, and the inflation rate is likely to impact consumer spending.
Those challenges are prompting the IMF to say ‘save for a rainy day’.
The Director of the International Monetary Fund's Western Hemisphere Department, Ilan Goldfan, reminded that if those monies are being used now when there is no rainy day, it would create a problem later down the road since countries would have to rebuild during a difficult period.
“We are still navigating these more tougher and tougher times,” he said.
Since the start of the pandemic, a number of initiatives were implemented to prop the fledgling economy, and former Prime Minister Dr. Timothy Harris had indicated that in 2020 the country recorded a surplus from which he was able to pay a double salary.
Now, in 2022, the Dr. Drew administration is bearing the cost of some of the measures that were still in place.
The Federation currently has more than 28 social programmes that benefit citizens and residents, and the new administration is seeking to reform and, in some cases, increase a number of those programmes started under Dr. Timothy Harris’ leadership.
Pressed by SKNVibes at the 2022 Annual Meeting in DC on the IMF’s position on OECS economies being dependent on CBI proceeds, Goldfan urged those Caribbean member states to diversify their economies as they seek to rebound from the pandemic.
A position must be taken to diversify the economies in light of the challenges facing small island states and the wider Caribbean region.
For several years, various governments spoke to the topic, but no move has been made in that direction.
“The more diversified the revenue for the countries the better, and this is more medium term objective. I always say that we are always going from one crisis to the other and we are thinking of how to sustain or react to the crisis. It could be the pandemic, and then we had the Russian invasion of Ukraine which, for the Caribbean, mean food [price] increases, and energy more expensive. And now, we will have tnking of national issues which means slowing down of the resources,” explained Goldfan.
The former administration had positioned itself to thrust entertainment into the spotlight and blue economy or the ocean resources.
During the election campaign, Prime Minister Drew had suggested that he would seek to roll out the marijuana industry while bringing more investors to diversify the business sector.
