IMF says Dominica’s fiscal outlook deteriorated despite high revenues from the island’s CBI program3/23/2017 The International Monetary Fund (IMF) has reported that Dominica’s fiscal outlook has deteriorated, despite high revenues from the DLP Administration’s CBI program. An IMF team visited Dominica from 7th to 20th March, to conduct its 2017 Article IV consultation.
Their report stated as follows: “Despite high Citizenship-By-Investment (CBI) revenues, the fiscal outlook has deteriorated, largely due to lower projected grant revenues; a downward revision in the projected yields of the fiscal consolidation measures; the increase in social transfers; and the reduction of the corporate income tax rate in January 2017. As a result, the use of government deposits to cover financing needs would be necessary, to reach the regional debt target of 60 percent of GDP by 2030, without increasing the fiscal consolidation effort above the commitments in the RCF disbursement.” The report also stated that economic activity remained weak in 2016, due to a number of factors, but projected growth to accelerate to above 3% in 2017-2018. It further stated; “Economic activity in 2016 remained weak as capacity constraints and unfavourable weather conditions slowed public investment more than anticipated. Growth is projected to accelerate to above 3% in 2017- 2018 on the back of a pickup in public investment and several large-scale projects, and to stabilize at a potential rate of 1.5% over the medium term.” The report said the island’s external current account deficit, also known as the trade deficit, “is projected to widen, due to the increase in imports of goods and services during the execution of reconstruction investment, and the large investment projects. In the medium term, the external balance is projected to gradually improve as agriculture, tourism, and manufacturing recover, and geothermal electricity generation reduces oil imports”. The report also stated that bank’s credit to the private sector remains weak, due to “insufficient bankable projects, persisting low profitability, and high non-performing loans (NPLs). The authorities took steps to increase the capital of the National Bank of Dominica, but persistent actions are needed to improve the soundness of financial institutions and to reduce NPLs, including though the operationalization of the Eastern Caribbean Asset Management Company”.
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