After two days of high level discussions between the International Monetary Fund (IMF) and participants from the region, officials say the outlook for the Caribbean is positive if the ideas and policies discussed at the just concluded IMF conference are implemented. The forum, which was organized by the Caribbean Development Bank (CDB) and the IMF on September 4th and 5th, provided a unique platform to further the ongoing dialogue with the region’s policymakers, listen to their views on the challenges they face and share experiences. At the conclusion of the forum, the IMF together with the CDB stated that the Caribbean region has important strengths on which it can build a firm foundation. The two bodies further noted that political stability, strong investor protections and observance of the rule of law have made it an attractive destination for investment. According to the IMF, the authorities are working to strengthen their economies as the region is gradually recovering after a deep recession. While acknowledging the fact that commodity-exporters are benefiting from still-favourable conditions globally, the IMF says it recognizes that tourism and services-dependent economies remain adversely affected by the tepid recovery in advance economies. The Fund also recognized the fact that low potential growth remains a key challenge for the region. In order to correct this, the Fund recommended that Governments take decisive reforms to boost competitiveness and private sector investment which, according to them, will help boost growth in the region. They further recommended Governments to continue focusing on lowering relative (domestic vs foreign) costs of goods and services to foster exports and reduce external current account deficits. Protecting the poor and vulnerable groups was another key area mentioned during the forum. The Fund advised Governments to build on social cohesion that prevails in the Caribbean. Fiscal consolidation and structural reforms, they say, can also help to improve social safety nets by making them more efficient and equitable to better protect the poor and vulnerable groups. While recognizing the challenge to achieve sustainable growth in the region, the IMF called for a broad-based collective and collaborative approach to address the problem. They called on multilateral financial institutions as well as donor partners to work closely and coordinate their assistance to maximize the benefits to the region. In the closing press conference, the Associate Director of the Western Hemisphere Department, Saul Lizondo expressed his satisfaction and contentment with the results of the forum describing it as “very helpful, (and) very fruitful.” “We had very important exchange of views, some new ideas about the special circumstances of the countries in the Caribbean. These ideas we think are very fruitful for us in providing the authorities with support and strengthen the economies. “We caught up on a number of issues that are affecting these countries, in particular the issue about competitiveness and the need to improve competitiveness which will in turn increase growth in the medium term. Also was the question of fiscal space and the need to deal with the high levels of debt,” said Lizondo. The Fund, Lizondo says has had a very good rapport with Government in the region by not only providing finance but also technical assistance and this forum, he adds, allowed the Fund to change their approach in providing even more assistance in the region which will aid in stimulating growth. CDB President, Warren Smith joined Lizondo in expressing his satisfaction with the results of the forum. He says at the end of the rap session to conclude the forum, he felt that the challenges, as daunting as they are, are soluble. He believes it can be addressed in a timely fashion but would require institutions and countries working closely to achieve that goal. “It also requires, as a number of participants in the meeting indicated, that we have to have the humility—and I am speaking here as the institutions, we have to have the humility to listen to the client and hear what the client is saying. We are taking that on board very, very seriously. “Mention was made at the meeting that small states of most Caribbean countries, who would be considered members, have peculiar characteristics and those characteristics have implications for how they grow, how they deal with debt and also how they deal with regulation of their financial systems,” said Smith. In an exclusive interview with the STAR, Deputy Managing Director of the IMF, Min Zhu says the region needs a boost to increase growth and reduce high levels of debt. He adds that Governments, including St Lucia’s would have to consider making some cuts in spending while looking for ways to generate more income to sustain the economy. “When you have high debt level, you have to cut because your debt is not sustainable. Your interest payments are way high which really would erode your fiscal situation. When the rates are so high, the market will lose confidence in you. “You may not be able to access the market and you need the market to refinance and so that is the issue. “You then have to pay high costs and that is exactly what happened in Greece, what happened in Spain. So when you have a very high debt, you have to cut. This has become very clear. “Meanwhile, you have to look at where you make the cuts to cut the deficits. The austerity program may not necessarily be helpful for growth but you also need growth because it is growth that brings the jobs, brings the wealth to the people and because if you are looking for the debt to GDP ratio, if you don’t have growth, your debt ratio will increase, so you need a boost,” said Zhu. St Lucia in October is on schedule for Article IV Consultation. A report is expected to be derived from this consultation. According to the IMF, this type of consultation is mandatory for member state and St Lucia being a member will be continually monitored by IMF economists who will exchange views with the government and the Central Bank and focus on whether there are risks to their own and global stability that argue for adjustments in economic or financial policies. Discussions mainly focus on exchange rate, monetary, fiscal, and financial policies. During their missions, IMF staff also typically meets with other stakeholders, such as parliamentarians and representatives of business, labor unions, and civil society to help evaluate the country’s economic policies and direction. October also happens to be the month when VAT will be implemented in St Lucia and the IMF has given the assurance that they will be monitoring closely how VAT is monitored in St Lucia.
IMF to hold consultation in St Lucia
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