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IMF Country Report No. 20/54

ST. LUCIA

2019 ARTICLE IV CONSULTATION—PRESS RELEASE; AND STAFF REPORT

February 2020

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2019 Article IV consultation with St. Lucia, the following documents have been released and are included in this package:

  • A Press Release.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on a lapse of time basis, following discussions that ended on November 8, with the officials of St. Lucia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 21.

  • An Informational Annex prepared by the IMF staff.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

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© 2020 International Monetary Fund

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ST. LUCIA

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION

January 21, 2020

Key Issues

Context. St. Lucia’s near-term growth prospects are favorable, supported by large infrastructure investment and robust tourist inflows. However, longer-term growth continues to be impeded by high public debt, lingering vulnerabilities in the financial system, and structural impediments to private investment. Diminishing policy buffers further weaken the country’s resilience to external shocks against the backdrop of a precarious global outlook.

Rebuilding policy space. Fiscal consolidation is needed to bring debt onto a downward path, rebuild policy space, and provide St. Lucia with flexibility to respond to negative shocks. Policies should focus on measures that increase revenues and finance much-needed investments to make the economy more resilient to natural disasters and climate change. A fiscal rule, supported by a clear medium-term institutional framework for fiscal policy, should be adopted to guide the pace and composition of the needed fiscal consolidation.

Strengthening bank balance sheets and financial intermediation. Completion of long-pending legislative initiatives, alongside stronger regional and domestic financial oversight, should provide banks with incentives to strengthen their balance sheets and increase the efficiency of financial intermediation. There is also a need to draw on supervisory and regulatory tools to respond to emerging risks from rising overseas investments of the banks and the rapid expansion of lending by credit unions.

Supporting resilient, sustainable growth. The authorities should step up efforts to address the institutional, financing and capacity gaps in its climate and disaster response strategy. Supply-side reforms are needed to unlock potential growth by improving the business environment, reducing energy costs, enhancing labor productivity, and further diversifying the economy.

Approved By

Nigel Chalk (WHD) and Mary Goodman (SPR)

Discussions for the 2019 consultation took place in Castries on October 29– November 8, 2019. The team comprised Messrs. Ding (head), Hukka, Moeller, and Vargas (all WHD). Ms. Levonian and Mr. Williams (OED) joined the concluding meetings. The mission met with the Honorable Prime Minister Chastanet, Permanent Secretary Thomas and other senior government officials, representatives of the opposition, the private sector, and labor unions. Ms. Aghababyan and Ms. Kalla assisted in the preparation of the staff report.

Contents

  • RECENT DEVELOPMENTS AND OUTLOOK

  • A. Context

  • B. Current Trends

  • C. Outlook and Risks

  • POLICY DISCUSSIONS

  • A. Rebuilding Policy Space

  • B. Strengthening Financial Sector Balance Sheets and Financial Intermediation

  • C. Supporting Resilient, Sustainable Growth

  • STAFF APPRAISAL

  • BOXES

  • 1. Fiscal: Major Tax Measures

  • 2. Fiscal: Baseline and Adjustment Scenarios

  • FIGURES

  • 1. Recent Developments

  • 2. External Sector Developments

  • 3. Fiscal Sector Developments

  • 4. Banking System Developments

  • 5. Credit Union Sector Developments

  • 6. External Competitiveness and Structural Weaknesses

  • TABLES

  • 1. Selected Social and Economic Indicators, 2015–24

  • 2a. Central Government Operations, 2015–24 (In millions of EC Dollars)

  • 2b. Central Government Operations, 2015–24 (In percent of GDP)

  • 3. Balance of Payments Summary, 2015–24

  • 4. Monetary Survey, 2015–19

  • 5. Banking System Summary Data, 2013–18

  • ANNEXES

  • I. Implementation of Previous Staff Advice

  • II. External Sector Assessment

  • III. Risk Assessment Matrix

  • IV. Debt Sustainability Analysis

  • V. The Potential Impact of a Hotel Accommodation Fee

  • VI. Carbon taxation in St. Lucia: An Update

  • VII. Emerging Risks from Credit Unions

  • VIII. Implementation of the 2018 CCPA Recommendations

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ST. LUCIA

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX

January 21, 2020

Prepared By

Western Hemisphere Department (in consultation with other departments and the Caribbean Regional Technical Assistance Center, CARTAC)

Contents

  • FUND RELATIONS

  • RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS

  • STATISTICAL APPENDIX

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Press Release No. 20/63

FOR IMMEDIATE RELEASE

February 24, 2020

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

St. Lucia: 2019 Article IV Consultation-Press Release; and Staff Report
Author: International Monetary Fund. Western Hemisphere Dept.