Against the background of the global economic crisis, the International Monetary Fund (IMF) has approved a $117.8 million loan to support the Antigua and Barbuda’s plan to recover from mounting government debt, weak economic growth, and the effects of the economic crisis.
The global lender announced June 8 that the money will help Antigua and Barbuda, a country of 85,000 people, implement a three-year plan, which includes
- Spending cuts and revenue raising measures to substantially reduce the large budget deficit
- A debt strategy to reduce debt servicing costs
- Policy reforms to mitigate risks in the financial sector.
“The authorities’ comprehensive and bold strategy merits strong support of the international community,” said IMF Deputy Managing Director Murilo Portugal in a statement following the IMF Executive Board’s decision. “While subject to considerable risks, if fully implemented, the program will provide a framework for the needed adjustment and financing, placing Antigua and Barbuda’s economy back on a path of macroeconomic stability and sustained economic growth.”
Economy to grow in 2011
With the plan in place, the IMF predicts growth in Antigua and Barbuda will resume in 2011 after a contraction of 7 percent in 2009, and will pick up to about 4 percent by 2015.
Antigua and Barbuda’s economy was devastated by the global economic crisis. In addition, the country’s large debt burden has magnified the fallout from the recession by limiting the government’s options to implement policies to cushion the blow from the crisis.
Sharp falls in tourism of 13 percent, and tourism-related foreign direct investment, and a decline in the amount of funds sent home by Antiguan and Barbudans living abroad, have led to a contraction in the economy. At the same time, with limited financing options, the government has had to raise taxes to offset falling revenues.
Economic reforms are needed to put the public finances on sound footing, and establish the basis for sustained strong economic growth. Antigua and Barbuda’s economic program demonstrates its commitment to meeting these challenges.
The government plan includes a restructuring of domestic debt owed mainly to the social security scheme, and the country’s external creditors will also participate in Antigua and Barbuda’s return to sustainable debt levels.
Reforms to target the root of the problem
In order to make sure Antigua and Barbuda’s recovery is sustainable in the long run, the plan also includes a number of reforms in key areas, including
• Tax policy: to improve collection and administration
• The public sector: to reduce costs and increase efficiency
• Public financial management reforms: to prioritize public spending and investments.
Stability in the financial sector to reduce risks
Part of the authorities’ plan includes measures to strengthen the domestic banking system, which suffered in the wake of the collapse of the Stanford International Bank.
All these initiatives are designed to maintain a solid and stable banking system for Antigua and Barbuda.