WASHINGTON, DC – The International Monetary Fund (IMF) has told the Timothy Harris-led Team Unity that the sale of lands under the debt-land swap arrangement must be completed urgently to limit fiscal and financial risks.
After 27 months in office Prime Minister Harris is yet to keep a manifesto promise to repeal The Vesting of Certain Lands Act.
The IMF told him that a clear action plan and timetable with concrete milestones are needed.
“Completing existing purchase proposals and stepped up marketing to generate sales, including through real-estate agents and the SLSC website, will help establish momentum and remove the policy uncertainty,” said the IMF on Friday after the conclusion of a three-week visit to St. Kitts and Nevis under its Article IV Consultation.
It welcomed cooperation with the Citizenship by Investment Unit (CIU) and the St. Kitts Investment Promotion Agency (SKIP) which should support these efforts.
The IMF said banks in St. Kitts and Nevis are still burdened by high levels of nonperforming loans (NPLs).
“Their swift resolution is critical to limit further deterioration, revive credit expansion, and support economic growth,” said the IMF.
It said the establishment of the ECAMC will allow for a more efficient collection and disposal of distressed assets.
“Ongoing efforts to modernize the foreclosure and insolvency frameworks would help maximize recovery. The new collateral appraisal guidelines, credit bureau, and land registry should help contain future losses from NPLs,” the IMF said warning the government that it should “monitor other potential risks, including the implications of a slowdown in CBI inflows for the banking system.”
“While the direct impact may be limited, and even though the local and CBI-related real-estate markets are segmented, and most CBI-properties are self-financed, slower inflows may affect banks through reduced construction activity and its spillover effects on borrowers’ repayment capacity” the IMF said.
It advised that the authorities should monitor market developments closely and ensure adequate prudential oversight to minimize any potential effects on banks of further slowdown in CBI inflows and the ending of the 5-year holding-period for existing CBI properties.
It said the authorities should adopt a comprehensive strategy to overcome persistent structural challenges that continue to limit the potential for inclusive growth.
“Ongoing efforts to expedite business registration, establish a dedicated land-registry, credit bureau, and SME partial-credit-guarantee scheme, and revise the foreclosure legislation should improve the weak business environment that lags peers. Alternative investment options under the CBI program could channel funds to renewable energy, health, education, supporting skill development and economic diversification, while also reducing the risk of asset bubbles,” the IMF said.