Dr Ralph Gonsalves, Prime Minister of St Vincent and the Grenadines. (FILE)
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Washington – The International Monetary Fund (IMF) Wednesday said it had approved a request of US$16 million from St Vincent and the Grenadines for emergency financing assistance to help address the challenges posed by the coronavirus (COVID-19) pandemic.
The IMF said that the pandemic has hit the Caribbean island hard, noting also that tourism receipts have dried up, as arrivals have come to a complete halt.
The Washington-based financial institution said that its support will help cover some of these needs and allow the Ralph Gonsalves government to ease the impact on the population, including increased spending and health and social protection.
The IMF Executive Board approved the funding under the Rapid Credit Facility (RCF) mechanism that will also be used to cover the island’s balance of payment and fiscal needs stemming from the outbreak of the COVID-19 pandemic.
“The disbursement is set at the maximum available access under the RCF instrument of 100 per cent of quota. St. Vincent and the Grenadines is a small state, vulnerable to external shocks, including large natural disasters,” the IMF said.
It said that the economy is now projected to contract by 5.5 per cent, 7.8 percentage points below pre-COVID-19 projections.
“A drop in fiscal revenues, combined with additional direct health and social expenditures, will increase the fiscal deficit and financing needs. IMF support will help cover some of these needs and allow the government to ease the impact on the population.”
IMF deputy managing director, Tao Zhang, said lower tourism receipts and remittance inflows, coupled with decreased foreign direct investment, have given rise to an urgent balance of payments need.
He said the authorities in St Vincent and the Grenadines also face large fiscal needs to immediately increase public health spending and support the most vulnerable.
“The authorities have responded to the pandemic by swiftly implementing containment measures and a fiscal package, which includes an increase in funding for the health sector, various public construction projects to generate jobs, financial support to agriculture and fishery sector, and programmes to support displaced workers and the most vulnerable.”
Zhang said that the St Kitts-based Eastern Caribbean Central Bank (ECCB) also took measures to facilitate the provision of credit and safeguard financial stability.
He said the ECCB and national supervisors are also working closely and keep intensified monitoring of financial sector vulnerabilities.
“The authorities are committed to meeting the regional debt target of 60 per cent of gross domestic product (GDP) by 2030. Once the crisis has abated, they plan to reprioritise capital spending, contain the growth of the wage bill, enhance taxpayer compliance, and rationalize exemptions from import duties and VAT on imports.
“IMF emergency support under the Rapid Credit Facility will help fill St Vincent and the Grenadines’ balance of payments needs. Fund financing will also help catalyse additional donor support. The authorities are committed to ensuring transparency and good governance in the use of COVID-19-related spending,” Zhang added. (CMC)