March 4, 2011

IMF approves US$3m loan to SVG

The International Monetary Fund (IMF) on Tuesday, March 1, approved a loan of US$3.26 million for St. Vincent and the Grenadines.{{more}}

The Executive Board of the IMF approved the loan under the Rapid Credit Facility (RCF) to help St. Vincent and the Grenadines manage the economic impact of Hurricane Tomas, which struck this country on Saturday, October 30.

The Board’s approval enables the immediate disbursement of the full amount.

The hurricane inflicted significant damage to agriculture, housing and infrastructure. The initial assessment conducted by the government estimated the cost of damage at 5 per cent of gross domestic product. Once reconstruction is factored in, the costs are expected to be much higher. The RCF-supported program aims to address the urgent balance of payments need arising from the hurricane.

The RCF, which provides rapid financial assistance for low-income countries with an urgent balance of payments need, does not require any program-based conditionality or review. However, economic policies are expected to address the underlying balance of payments difficulties and support policy objectives including macroeconomic stability and poverty reduction. Financing under the RCF carries zero interest (until end 2011), has a grace period of 5 1/2 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.

Following the Executive Board’s discussion of St. Vincent and the Grenadines, John Lipsky, First Deputy Managing Director and Acting Chair, stated:

“St. Vincent and the Grenadines suffered significant damage to agriculture, housing, and infrastructure as a result of Hurricane Tomas in October 2010. High reconstruction and rehabilitation costs have created an immediate balance of payments need and new challenges for policymakers.

“Because of hurricane-related spending, the fiscal deficit is expected to widen in 2011. In light of the elevated public debt, the authorities have reiterated their commitment to rely mainly on grants and concessional resources to finance the budgetary imbalance. In the event that additional grants and concessional financing do not materialize, contingency measures will be deployed to limit the deficit.

“The authorities remain committed to securing fiscal and debt sustainability over the medium-term. To this end, they have implemented fiscal reforms to facilitate the primary surpluses needed to put the debt to GDP ratio on a firmly declining path.

“The authorities are also stepping up structural reforms to ensure strong and lasting growth over the medium-term. Public finance management is being strengthened, including by enhancing the oversight of state-owned enterprises. On the financial side, legislation to establish the Single Regulatory Unit will be submitted to Parliament in the months ahead, paving the way for enhanced supervision of non-banks.”