The Executive Board of the International Monetary Fund (IMF) today completed the tenth and final review of Antigua and Barbuda’s economic performance under a program supported by a Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 16.875 million (about $25.4 million).

This is the last review under the SBA, which will expire on June 6. Owing to strong implementation by the authorities, the Fund-supported program has been successfully completed.

The aims of the program were largely achieved despite considerable challenges. The fiscal deficit dropped from 18 percent of GDP in 2009 to just over 1 percent in 2012. Fiscal adjustment and debt restructuring have put the debt ratio on a downward path with the debt ratio dropping from 102.5 percent of GDP in 2009 to 89 percent of GDP at the end of 2012. Additionally, the economic recovery is picking up speed with improvements in the tourism and construction sectors.

Nevertheless, significant challenges remain. Much of the adjustment under the program has come from cuts in public spending and investment, while tax revenue targets for 2013 have been met largely through one-off payments of back taxes. Another risk looms in the expiration of debt relief and upcoming payments due to foreign creditors. Further improvements in the collection of tax revenues are necessary to allow the authorities to meet their targets and while making needed public investment. In particular, the elimination of tax exemptions and a broadening of the tax base could help.

In completing the review the Executive Board approved the authorities’ request for a waiver of nonobservance of the performance criterion on the central government budget expenditure arrears accumulation. The waiver was granted on the basis of the temporary and minor nature of the deviations from the program objectives and the corrective measures undertaken by the authorities.

After the expiration of the SBA, Antigua and Barbuda and the IMF will continue to maintain a constructive policy dialogue. In accordance with Fund policy, Post Program Monitoring¹ (PPM) will now be initiated.

The 36-month SBA was approved on June 7, 2010 (see Press Release No. 10/232) for an original amount of total access equivalent to SDR 81 million (about US$121.9 million).

Following the Executive Board’s discussion, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, stated:

“The recovery in Antigua and Barbuda is starting to take hold, with tourism and construction returning to pre-crisis levels. Nevertheless, risks to the macroeconomic outlook remain, given the dependence on imports and tourism from advanced markets, and vulnerability to natural disasters.

“The authorities’ have successfully implemented their program, supported by a Stand-By Arrangement, under very challenging circumstances, and the economy is now better positioned for a robust recovery. Fiscal consolidation and debt restructuring have reduced the debt ratio and arrears, while structural reforms have improved revenue administration and public financial management. The strong first quarter fiscal performance puts public finances in a good position to achieve 2013 targets, consistent with the goal of reducing the debt ratio to 60 percent of GDP by 2020.

“Fiscal consolidation continues to be achieved largely through expenditure contraction, at the expense of public investment, jeopardizing the sustainability of further adjustment. Contingent liabilities and rising external financing needs in 2014 and beyond may also require additional adjustment. In light of these challenges continued efforts are needed to improve revenue administration, rationalize tax expenditures and move forward with civil service reform.

“The resolution of Antigua and Barbuda Investment Bank (ABIB) is now expected by end-June 2013. This will be critical for sustaining confidence in the banking system, and will release resources to advance reforms in banking supervision, regulation and the consolidation of the indigenous banks. The government has taken important steps to operationalize the asset management company to take over the residual assets from ABIB’s resolution.

“Antigua and Barbuda will continue its close policy dialogue with the Fund under the post-program monitoring framework.”

¹ The central objective of PPM is to provide for closer monitoring of the policies of members that have substantial Fund credit outstanding following the expiration of their arrangements. Under PPM, members undertake more frequent formal consultation with the Fund than is the case under surveillance, with a particular focus on macroeconomic and structural policies that have a bearing on external viability.