Government says no to some measures proposed by IMF
THE GOVERNMENT of St Vincent and the Grenadines (SVG), has said no to some the of measures put forward by the International Monetary Fund (IMF) coming out of its recently concluded Article 4 Mission earlier this month.
Minister of Finance, Camillo Gonsalves, dived into the Concluding Statement from the IMF visit during the May 9, 2024, sitting in the House of Assembly.
He said the IMF had given SVG’s economy a “clean bill of health” with economic growth projected at 4.9 percent in 2024 with a favourable outlook subject to downside risks.
One of the recommendations the Finance Minister said government has said no to is the suggestion to implement measures to make the country’s tax system “more progressive”.
“They also make a number of suggestions, Madam Speaker, about making our tax system more progressive and changing some of the tax incentives that we have and streamlining VAT in particular ways.”
The statement said that the IMF’s proposed reform roadmap includes enhancing the progressivity and fairness of personal income tax, improving the design of tax incentives and corporate income tax, streamlining value-added tax (VAT), and modernizing recurrent property tax.
“In a very lengthy conversation with the Ministry of Finance led by the Honourable Prime Minister, he pointed out to the IMF that some of their suggestions would likely not achieve the desired effect in the context of a small island economy like St.Vincent and Grenadines and encouraged them to go beyond checking a box of economic or fiscal orthodoxy and trying to work out exactly how these things would work in the context of the Vincentian economy.”
Minister Gonsalves said government is already moving ahead with some recommendations such as an improved tax collection system, the reform of the National Insurance Services (NIS), as well as changes to the labour force to be more inclusive of youth and women.
The IMF also said in the statement that reform measures for the NIS should be advanced to ensure the sustainability of the Fund in the long term.
“…others we think, require more study. And there’s some that we disagree with out right. The International Monetary Fund is not a stranger to our disagreement. We have disagreed with them in the past over the issue of austerity when they were champions of austerity. We
have disagreed with them in the past when they were championing the privatization of major state owned enterprises like power and water and in time, succeeding analysis by the IMF have conceded that our position in the context of a small island developing state was likely correct.”
Minister Gonsalves said while they value the economic analysis by the IMF, measures will only be implemented if they align with the philosophy of the Unity Labour Party (ULP) and are of benefit to Vincentians, otherwise “we reject them.”
The IMF said overall economic growth in SVG reached 3.1 percent in 2022 and is estimated to have accelerated to 5.8 percent in 2023, supported by large public and private investment and robust recovery in tourism and partially offset by a drop in agriculture due to lingering effects from volcanic eruptions and historic high temperatures of 2023.
The statement also said the primary balance is expected to improve to a surplus of about 3.25 percent of Gross Domestic Product from 2026 once the large-scale capital projects, such as the Kingstown Port project near completion.
“This would put the debt-to-GDP ratio on a downward path from 2025 and, if sustained, reach 60 percent before the regional target date of 2035,” the statement read.
Comments
