Basseterre, St. Kitts and Nevis [Press Secretary’s Office]: The recent International Monetary Fund (IMF) report gave insight into the financial status of the Federation of Saint Kitts and Nevis.
Mr Alexandre Chailloux of the IMF Mission and his delegation visited the Federation for the 2023 Article IV consultation sessions on macroeconomic policies and economic developments in January 2023 (16–27).
The report outlined several initiatives undertaken by the previous government administration to address the economic downturn and the impact of these decisions on the nation’s finances.
“The previous administration made a substantial repurchase of land (7.6 per cent of GDP) from the land-to-debt swap arrangement, hereby reducing its deposits and contingent liability (which now remains at 12 per cent of GDP). These measures came at a cost to public finances: despite receiving record-high CBI revenues, the government incurred the largest primary deficit in two decades”, the report stated.
The IMF report went on to further outline the financial projections for the Federation stating that “growth is projected at 4.5 per cent in 2023, supported by a strong recovery in tourism and other service sectors. In the short term, downside risks dominate, primarily stemming from global headwinds impacting key tourism source markets and commodity price volatility.”
However, the IMF expressed concern for the Citizenship by Investment (CBI) Programme due to the nation’s heavy reliance on the programme for economic sustainability over the past seven years.
The report stated, “the growing dependence on volatile and uncertain CBI revenue is a major source of vulnerability. Further worsening of global financial conditions could affect bank capital. Natural disasters pose an ever-present downside risk. On the other hand, medium-term prospects for an acceleration of the transition to renewable energy and increased investment in resilience by the public sector could represent material upside risks…In the medium term, a holistic overhaul of the taxation framework will be of the essence to reduce dependency on CBI and to maintain fiscal space. The use of budget resources should be geared towards increasing sustainability.”
The current St. Kitts-Nevis Labour Party Administration is on the right track in its stance to evolve the CBI programme and transform the economy into a Sustainable Island State as outlined in the recent 2023 Budget Address.
The Prime Minister of Saint Kitts and Nevis and Minister of Finance, Hon. Dr Terrance Drew in his 2023 Budget Address stated that it is his administration’s intent to “use the CBI revenues to fuel our plans to implement a diversified economy”.
The Prime Minister added, “we forecast that the revenues from our CBI Programme will be significant over the next few months. If such financial projections are realized, it is our Government’s goal to create a Sovereign Wealth Fund which will be responsibly managed by high-level professionals. This Fund will be used to safely invest in international markets and industries over the long term. We will ensure, by legislation, that the Fund can only be tapped into for rainy days such as natural disaster response and not for addressing recurrent expenses.”
Hon. Dr. Terrance Drew further highlighted the significance and benefits of our nation’s CBI Programme, outlining the importance of exercising due diligence. He stated, “Our citizenship is precious; therefore, the evolved CBI Programme will invite bold and creative top-notch investors to our shores who will develop innovative industries in St. Kitts and Nevis, the construction of real estate 18 developments pursuant to our Government’s priority infrastructure list, and in all things, bring substantial benefit to the People of Saint Christopher and Nevis”.
The full statement of the 2023 Article IV Mission can be accessed via this link, https://www.imf.org/en/News/Articles/2023/01/31/cs13123-st-kitts-and-nevis-staff-concluding-statement-of-the-2023-article-iv-mission.