Caribbean & Central America - February 2017 (ISSN 1741-4458)

*** IMF EXPECTS ‘MODERATE GROWTH’ FOR ST LUCIA. An International Monetary Fund (IMF) mission was in St Lucia in the second half of January for Article IV consultations. It reported that despite a weak tourist sector in 2016, unemployment continued to fall on the back of strong growth in agriculture and construction. Overall, growth was just 0.8% in 2016.

Construction and agriculture are expected to continue to perform strongly in 2017, but positive developments in tourism – new hotel capacity and increased direct flights from the US – could be diluted by the impact of the new airport tax.

The IMF is calling for a “multi-year fiscal consolidation plan” in order to contain debt and to reach the targeted debt-to-GDP ratio of 60% by 2030. It is calling for the plan to be included in the FY2017/18 budget. Key provisions should include broadening the tax base, controlling expenditure, and improving financing terms. The IMF views St Lucia’s “very high” taxes and charges on imports as having a negative impact on competitiveness. “Much needed investment in infrastructure, renewable energy, and natural disaster resilience should be financed with concessional lending rather than costly bond issuance.”

Revenues from St Lucia’s Citizenship by Investment (CIB) programme should be “used primarily to reduce debt”, the IMF argues.

*** JAMAICA FOCUSES ON PAYING DOWN DEBT. The Jamaican government has said that it will have met all the quantitative performance indicators set for it by the IMF for 2016 and will be “in a good place” when the IMF conducts its review in February and March.

Separately, on 9 February, Finance Minister Audley Shaw tabled estimates for expenditure for 2017/18. The headline figure is a large increase in allocations for public debt servicing, which has contributed to a 20% increase in the budget from J$592.7bn (US$4.62bn) last year to J$710bn (US$5.53bn). Of this, J$310bn (US$2.42bn) is for interest and amortisation payments.

*** SIMPSON MILLER GIVES LEAVING DATE. The leader of Jamaica’s opposition People’s National Party (PNP), Portia Simpson Miller, has said that she will be relinquishing her role as leader of the opposition on 2 April. Simpson Miller has led the party since replacing PJ Patterson in 2006. She was prime minister twice, first when she inherited the post from PJ Patterson in 2006-2007, and secondly from 2012-2016 after leading the PNP to victory.

*** IMF CONCLUDES ARTICLE IV CONSULTATION WITH SURINAME. In late January, the IMF reported on its December 2016 Article IV consultation with Suriname. The IMF reports a “challenging” economic outlook following an estimated GDP contraction of 9% for 2016, which in turn followed on from a 2.7% contraction in 2015. The Newmont Merian gold mine opened in October 2016, and the recession is expected to ease in 2017.

The budget deficit for 2016 is estimated to have been around 6% of GDP, with the debt-to-GDP ratio rising to 68% of GDP. Inflation is running at 60%. The IMF’s goal is to push Suriname towards a primary fiscal surplus by 2018. In line with this intention, the IMF “welcomed the authorities’ intentions to eliminate energy subsidies in 2017, fully reinstate fuel taxes, and implement VAT in 2018”.

The IMF is also urging Suriname to refrain from large wage increases, and to launch a “broad-based reform of the civil service”.