Caribbean & Central America - 17 February 2004

The International Monetary Fund (IMF) ended a 10-day mission to Dominica on 11 February with a relatively upbeat statement, saying 'there is evidence of the economy bottoming out, which marks the end of the economic decline of the last few years and signals an incipient economic recovery as reflected by positive developments in manufacturing and tourism, despite the ongoing downward trend in the banana sector'.

The IMF is supporting the Dominican economy with a three-year Poverty Reduction and Growth Facility (PRGF), and in December it approved an US$11.25m credit, of which US$3.5m has been released.

The IMF praised the government for 'progressively regaining control of the budgetary situation as tax collections strengthen […] and expenditures are kept in check'. It added that 'shortfalls in external financing have been reduced'.

With the government adhering to the IMF programme, it is expected that it will achieve a primary surplus (that is a positive fiscal balance before interest) of 0.5% of GDP in 2004/05. The downside, however, is that the IMF is calling for a further reduction of 10% in the public-sector wage bill over the next two fiscal years. Not surprisingly, the demand is being opposed by Dominica Public Service Union (DPSA), while the government is trying to negotiate with the European Union for funds to pay for the redundancy packages.