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Antigua and Barbuda to Seek IMF Stand-By Arrangement
by A & B Government News
Posted: Oct 19, 2009 19:13 UTC
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ST. JOHN’S, Antigua - Based on discussions held over the past week with representatives of the International Monetary Fund, Antigua and Barbuda is to seek support from the IMF through its Stand-by Arrangement. While the Ministry and the IMF officials have agreed in principle on the parameters of the Fiscal Consolidation Programme, there still needs to be some fine tuning so that the targets agreed upon between the Government and the Fund are manageable and attainable. The IMF team will therefore return to Antigua in the coming weeks to conclude the arrangements. In the interim, Ministry of Finance officials will meet with the private sector, trade unions and other stakeholders to discuss the Fiscal Consolidation Programme.
During the week the five-member IMF team, accompanied by representatives from the Eastern Caribbean Central Bank (ECCB) and the Caribbean Development Bank (CDB) held detailed discussions with Ministry of Finance officials and representatives of statutory bodies. The discussions focussed on economic developments in Antigua and Barbuda and on the elements of the Fiscal Consolidation Programme.
The programme includes measures that will increase revenue, reduce expenditure and improve Antigua and Barbuda's debt position. On the expenditure side, the measures included in the Fiscal Consolidation Plan include:
1. Reducing expenditure on wages and salaries by 20 percent by 2012;
a. Reducing the level of overtime to no more than $5 million;
b. Continuing to reduce the size of the public sector through a programme of attrition over the next 5-7 years;
2. Outsourcing some of the services Government currently provides through a competitive bidding process. These include
i. Garbage collection
ii. Janitorial services
iii. Security
iv. School meals
3. Rationalising the number of ministries and departments to reduce recurrent costs including rent, and expenditure on goods and services. This will be done as a part of a wider public sector transformation programme which is to be spearheaded by a Public Sector Transformation Advisory Committee.
4. Reducing the level of transfers by adopting a more targeted approach to social programmes to protect the most vulnerable and by streamlining the number of overseas offices that depend on Government subventions to fund their operations. The intent is to save between $15 and $30 million per year over the short to medium term.
On the revenue side, the Government will focus on streamlining the current tax structure to ensure that the Government can collect revenue amounting to between 25 and 27 percent of GDP. A review of the revenue agencies has shown that there are significant leakages in collections resulting from poor revenue administration. The specific measures will include:
1. Reducing the number of items in the basket of zero-rated goods under the ABST. This tax is underperforming, partly because of low compliance and because of the high level of exemptions. Replacing the customs service tax with a measure that will ensure Antigua and Barbuda complies with World Trade Organisation obligations.
2. Implementing an excise tax on items such as alcohol, tobacco and ammunition.
3. Increasing the non-citizen land holding license from 5 percent to 10 percent.
4. Increasing the embarkation tax from $35 to $50 for Antiguan and Caricom nationals (all exempt persons remain the same) and US$25 for extra regional passengers.
5. Applying the passenger facility charge to in transit passengers.
The IMF delegation, ECCB and CDB officials agreed with Ministry officials that while these fiscal measures are expected to generate major improvements in the fiscal balances, they cannot by themselves secure the fiscal and debt sustainability that underpin strong and sustained economic growth. They must be accompanied by measures to address the more than 1.5 billion in arrears that form part of the public debt stock. Debt restructuring will be critical to restore sustainability. To secure the assistance of development agencies and partners, as well as creditors, it is necessary for Antigua and Barbuda to demonstrate commitment to fiscal consolidation.
In addition to laying the foundation for pursuing negotiations with the IMF for a Stand-by Arrangement, the past week's exercise has positioned the Government to finalize arrangements with the Caribbean Development Bank (CDB) to access US$30 million through a two-year Policy Based Loan. In the coming week, the Government will meet with representatives from the World Bank to discuss how the Bank may assist Antigua and Barbuda with its public sector transformation programme and with developing appropriate social protection mechanisms
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