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International Monetary Fund. Western Hemisphere Dept.

construction and tourism sector activity and their favorable spillovers on the rest of the economy, supported by surging inflows from its Citizenship-by-Investment (CBI) program. Large CBI inflows continued in 2015, albeit at a slower pace, reflecting the temporary impact of the program reform and increased competition from similar programs in the region. Consumer price inflation turned negative, owing to lower global commodity prices and recent VAT and Import Duty exemptions on food items that carry a large weight in the CPI basket. The banking system remained broadly

International Monetary Fund. Western Hemisphere Dept.

reduce the debt-to-GDP ratio to 68 percent, the lowest in the region. The structural reform agenda has achieved significant improvements in tax administration and public financial management. Additional efforts are needed to secure these gains, while enhancing the resilience of the economy to shocks, including from natural disasters, a sudden stop in CBI inflows, and domestic and regional financial sector risks. Recent Economic Developments 2. The economy grew at an estimated 5 percent in 2015, somewhat below the 6 percent growth in 2013–2014 . Strong

International Monetary Fund. Western Hemisphere Dept.
This 2016 Article IV Consultation highlights that economy of St. Kitts and Nevis continued its strong growth at about 5 percent, recording the strongest growth in the region during 2013–15. Strong growth has been underpinned by construction and tourism sector activity and their favorable spillovers on the rest of the economy, supported by surging inflows from its Citizenship-by-Investment (CBI) program. Large CBI inflows continued in 2015, albeit at a slower pace. The medium-term outlook is positive, but remains dependent on developments in CBI inflows. Growth is expected to moderate to 3.5 percent in 2016 and 3 percent, on average, over the medium term.
International Monetary Fund. Western Hemisphere Dept.

budget. Debt has declined faster than planned, reflecting higher GDP growth and advance debt repayments, to reach 79 percent of GDP at end-2014 compared to 100.8 percent at end-2013. The near-term outlook remains strong, but there are risks on the horizon. The imposition of visa requirements by Canada, combined with new competition on the CBI front, from neighboring countries and globally, raising uncertainty regarding future CBI inflows. Further, while the high fiscal surplus allows the government to accommodate the expected decline in tax revenues from the

International Monetary Fund. Western Hemisphere Dept.

credit recovered modestly by 0.5 percent (y/y) in December 2014, following two years of contraction, reflecting banks’ low risk appetite and the elevated NPL ratio. On other hand, bank liquidity continued to grow, fuelled by strong deposit growth associated with high CBI inflows and government savings. Credit to Private Sector (In EC$ million) Sources: Authorities and IMF staff estimates. Outlook: Strong but with New Risks 7. Near-term economic growth is set to continue, albeit at a somewhat slower pace . Growth is expected to slow to about 5

International Monetary Fund. Western Hemisphere Dept.

This 2016 Article IV Consultation highlights that economy of St. Kitts and Nevis continued its strong growth at about 5 percent, recording the strongest growth in the region during 2013-15. Strong growth has been underpinned by construction and tourism sector activity and their favorable spillovers on the rest of the economy, supported by surging inflows from its Citizenship-by-Investment (CBI) program. Large CBI inflows continued in 2015, albeit at a slower pace. The medium-term outlook is positive, but remains dependent on developments in CBI inflows. Growth is expected to moderate to 3.5 percent in 2016 and 3 percent, on average, over the medium term.

International Monetary Fund. Western Hemisphere Dept.

Context and post-program performance: Macroeconomic conditions continued to improve, with the economy recording a second year of strong growth of about 6 percent, significantly higher than envisaged in the 9th Review. The fiscal balance has also been exceptionally strong, reflecting both robust tax revenues and continued strong growth of CBI budgetary fees, while the debt-to-GDP ratio has fallen more rapidly than projected, to 79 percent of GDP. A new government won elections and assumed power in February 2015, which delayed the PPM mission. Article IV: The last Article IV consultation was concluded on March 19, 2014. Current discussions focused on sustaining fiscal prudence, making progress with debt-land swaps, and boosting reform momentum following a further widening of tax exemptions and heightened uncertainty about future CBI inflows. The mission also urged the development of a plan for managing the CBI inflows, support for the regional bank strategy while continuing to strengthen bank oversight, preserving debt sustainability with a strategy for moving forward with the debt-land swap, implementing growth enhancing reforms focusing on strengthening tourism, developing cost-effective energy solutions, and improving the business environment. Post-Program Monitoring: The 36-month SBA for SDR 52.51 million (590 percent of quota) was concluded on July 27, 2014, with total withdrawals of SDR 47.37 million. Following several advance repayments, Fund credit outstanding fell to 298 percent of quota as of end-June 2015, placing St. Kitts and Nevis under Post-Program Monitoring till May 2016, absent additional early repayments.

International Monetary Fund. Western Hemisphere Dept.

Context and post-program performance: Macroeconomic conditions continued to improve, with the economy recording a second year of strong growth of about 6 percent, significantly higher than envisaged in the 9th Review. The fiscal balance has also been exceptionally strong, reflecting both robust tax revenues and continued strong growth of CBI budgetary fees, while the debt-to-GDP ratio has fallen more rapidly than projected, to 79 percent of GDP. A new government won elections and assumed power in February 2015, which delayed the PPM mission. Article IV: The last Article IV consultation was concluded on March 19, 2014. Current discussions focused on sustaining fiscal prudence, making progress with debt-land swaps, and boosting reform momentum following a further widening of tax exemptions and heightened uncertainty about future CBI inflows. The mission also urged the development of a plan for managing the CBI inflows, support for the regional bank strategy while continuing to strengthen bank oversight, preserving debt sustainability with a strategy for moving forward with the debt-land swap, implementing growth enhancing reforms focusing on strengthening tourism, developing cost-effective energy solutions, and improving the business environment. Post-Program Monitoring: The 36-month SBA for SDR 52.51 million (590 percent of quota) was concluded on July 27, 2014, with total withdrawals of SDR 47.37 million. Following several advance repayments, Fund credit outstanding fell to 298 percent of quota as of end-June 2015, placing St. Kitts and Nevis under Post-Program Monitoring till May 2016, absent additional early repayments.

International Monetary Fund. Western Hemisphere Dept.

2017 ARTICLE IV CONSULTATION June 2, 2017 Key Issues Context . St. Kitts and Nevis attained the strongest growth and fiscal performance in the ECCU region in recent years, with public debt set to meet the ECCU’s 60 percent of GDP target in 2018. The strong macroeconomic performance owes much to the robust Citizenship-by-Investment (CBI) inflows as well as overall prudent macroeconomic policies. However, CBI revenues fell significantly last year and are expected to fall further going forward. In this context, additional efforts are needed to secure the

International Monetary Fund. Western Hemisphere Dept.