IMF Approves Funds For St. Vincent And The Grenadines

WASHINGTON, DC, CMC – The International Monetary Fund (IMF) has approved US$6.4 million for St. Vincent and the Grenadines to help the country meet an “urgent balance-of-payments need” due to severe flooding and landslides in December last year that killed at least nine people and caused massive damage to infrastructure, housing and agriculture.

The Washington-based financial institution said that the money will be drawn equally from its Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) at US$3.2 million each.

“St. Vincent and the Grenadines suffered massive damages to infrastructure, housing, and agriculture as a result of severe floods in December 2013,” said Min Zhu, IMF deputy managing director.

“Emergency relief and high rehabilitation costs have weakened the fiscal position and created an urgent balance of payments need at a time when the economy is striving to recover from previous natural disasters and the global economic downturn, Zhu said, adding “rehabilitation and reconstruction spending is expected to widen the fiscal deficit this year.

The IMF official said the Ralph Gonsalves-led administration has reiterated its intention to rely mainly on grants and concessional resources to finance the recovery mindful of St. Vincent and the Grenadines “high and growing public debt”.

He said the government will, at the same time, step up efforts to mobilise budgetary resources by increasing revenue collection, containing the wage bill and reducing transfers to state-owned enterprises.

“Looking ahead, the authorities remain committed to securing a sustainable fiscal position. To this end, they intend to generate a primary surplus of at least 2 percent of GDP (Gross Domestic Product) in the medium term to ensure that the debt-to-GDP ratio is put on a declining path,” he added.

The IMF deputy managing director also said that the government is also “stepping up structural reforms” to enhance resilience to natural disasters and climate change, and to ensure strong and lasting growth.

He said the administration is developing programs to improve emergency responses and to strengthening physical infrastructure.

Additionally, Zhu said efforts are ongoing to enhance the business environment, improve access to the country by air, and streamline customs clearance.

“The authorities also intend to carry out civil service and pension reforms, which will boost competitiveness and employment,” he said.

The IMF said the RCF was created under the newly-established Poverty Reduction and Growth Trust (PRGT) and provides rapid financial assistance for low-income countries with an urgent balance-of-payments need.

It also said the RFI provides the same type of financial support for all member-countries.

The IMF said while neither requires any “explicit program-based conditionality or review,” economic policies are expected to address the “underlying balance-of-payments difficulties to support broader policy objectives, including growth”.  In the case of the RCF, this means poverty reduction.