Published 24 November 2022
Buckie Got It, St.Kitts and Nevis News Source
Credited by: SKN News Source
BASSETERRE’S FLAGSHIP CITIZENSHIPBY INVESTMENT (CBI) WAS SHOWING SIGNS OF WEAKNESS since 2017 when earnings from the initiative began sliding according to the Article IV Report of the International Monetary Fund (IMF) made public this week by the incumbent Labour government.
However, the St Kitts and Nevis economy wasn’t hurt by the declining CBI receipts because of strong performances by the tourism sector, and decreases in the import bill.
This week, Prime Minister Dr Terrance Drew unveiled his administration’s blueprint to shore up the CBI by strengthening its legislation and the Unit tasked with its management to ensure the nation maintains a progressive and sustainable programme while cementing the Federation’s place as a leader in the money-making industry.
Drew said this: “Our government has been committed to working tirelessly to strengthen and improve our CBI programme for enhanced sustainability within a framework of Integrity. While we have always been the benchmark of the citizenship by investment value proposition, we understand that in order to remain as one of the most sought-after economic citizenship programmes in the world, we need to evolve.”
“We are not making these important decisions in isolation. We have been in discussion with all the relevant stakeholders in the sector, this includes local developers and international investors. There will be much stronger oversight and leadership in the CBI Unit. Our government is implementing strengthened legislative and administrative structures to ensure that real estate projects funded by the CBI programme are completed.”
“To this end we are seeking trusted investors who see the potential of our nation to put capital behind creative and strong projects that will enhance our offering,” PM Drew explained during a press conference.
The Prime Minister announced formation of an Economic Council to assess the financial status of our economy and chart the way forward. In the quest, the new body has already met with representatives of the Ministry of Finance, National Bank, Social Security, Development Bank, the Treasury, and Inland Revenue.
The Article IV report which followed up on consultation with St Kitts and Nevis authorities said “Directors acknowledged significant challenges, including those associated with declining Citizenship by Investment (CBI) inflows, financial sector vulnerabilities, tighter global financial conditions, and weather-related shocks. Against this background, Directors encouraged policies to safeguard macroeconomic and financial stability, together with reforms to strengthen competitiveness and foster inclusive growth.”
It warned that “absent any corrective policies, public debt is expected to increase over the medium term, as revenue from CBI receipts further declines.”
It said major fiscal adjustment was necessary to reverse the debt dynamics advising this should “focus on both revenue and expenditure measures, including streamlining tax incentives, restructuring activities funded by the Sugar Industry Diversification Foundation, and containing the wage bill through a multi-year framework.”
The IMF also advised Basseterre since 2018 to establish a Growth and Resilience Fund (GRF), linked to a fiscal responsibility framework as a vital measure “to maintain fiscal buffers to assist in covering the cost of natural disasters.”
Access to the GRF “could be used to respond to adverse shocks and to support natural disaster resilience investment projects,” the Article IV report counselled.
While growth “decelerated marginally in 2017 as the continued decline in CBI inflows slowed growth in construction, (IMF said) [c]onsumer inflation was low, partly due to a small contraction in food prices.”
In the meantime, Basseterre’s “overall fiscal balance remained in surplus but has deteriorated markedly since its 2013-peak, and the debt-to-GDP ratio increased marginally from the previous year. The current account deficit remains high and only marginally declined in 2017, as the decline in CBI receipts was more than offset by growing tourism receipts and a significant decrease in imports” according to the Fund’s report.
It said in 2017 foreign reserves at the Eastern Caribbean Central Bank (ECCB) remained at comfortable levels, “well above the various reserve- adequacy metrics”.
Then too, the banking sector reported capital and liquidity ratios that were well above the regulatory minimum, but has elevated non-performing loans (NPLs) and risks, including delays in completing the debt-land swap arrangement and loss of Corresponding Banking Relationships (CBRs).”
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually annually. An IMF team visits the country, collects economic and financial information, and discusses with officials, the country’s economic developments and policies.