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Improving Access to HIV Services for Mobile and Migrant ...

Improving Access to HIV Services for Mobile and Migrant ...

Chapter 4: IMF Executive

Chapter 4: IMF Executive Board Approves Three-Year US$117.8 Million Stand- By Arrangement with Antigua and Barbuda 1 1. In June 2010 the IMF approved a three-year Stand-By Arrangement (SBA) for US$ 117.8m to support the government’s efforts to restore fiscal and debt sustainability and set the stage for a sustained recovery. The global economic and financial crisis, falling tourism visits and reduced foreign related construction activities triggered a recession and contributed to a sharp decline in government revenue. This has aggravated an already unsustainable fiscal position resulting from longstanding fiscal imbalances and accumulation of a large stock of arrears to domestic and external creditors. 2. Following the IMF Executive Board’s discussion of Antigua and Barbuda, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, made the following statement: 3. “The Antiguan economy has been severely impacted by large exogenous shocks to tourism receipts, FDI (Foreign Direct investment) inflows, and remittances. These shocks have led to a marked decline in economic activity, weakened the balance of payments, and exacerbated an unsustainable fiscal position. “The government has formulated a comprehensive policy framework for restoring fiscal and debt sustainability which is supported by the IMF. The threepronged approach comprises front-loaded adjustment measures, debt restructuring, and structural reforms to further strengthen the fiscal position, address financial sector vulnerabilities, and foster growth. “Over the medium term, structural reforms will play a central role in the authorities’ efforts to further strengthen the fiscal position and balance the budget by 2012. These include the much needed strengthening of revenue collection agencies, public financial management reforms and improvements in the efficiency of public spending. Notwithstanding the strength of fiscal adjustment, the comprehensive public debt restructuring sought by the authorities is critical to achieving debt sustainability. 4. Following many years of accumulation of arrears to domestic and external creditors, the fiscal situation turned critical in 2009 as the recession led to a 20 percent decline in tax revenue. The overall fiscal deficit widened from 6 percent of GDP in 2008 to about 19 percent in 2009, public debt increased to 115 percent and the total stock of arrears rose to about 53 percent of GDP, or 45 percent of the outstanding public debt. 1 Based on the Press Release 10/232 June 8, 2010: IMF Executive Board Approves Three Year USD117m Stand By Arrangement with Antigua & Barbuda. http://www.imf.org/external/np/sec/pr/2010/pr10232.htm 24

5. The overall response to the fiscal situation was to implement, in 2009 measures which included a 20% increase in petroleum product prices, followed by an expansion in the VAT base, an increase in import duties, and excise tax on alcohol and tobacco for the 2010 budget,. On the expenditure side, there was a series of measures at reducing expenditure especially with salaries in the public sector. 6. The debt restructuring of the public debt to resolve the large stock of arrears required agreements with creditors on a comprehensive restructuring of both domestic and external debt with the aim of achieving interest savings of about 4½ percent of GDP in 2010. In addition in the fiscal area, reforms were implemented related to tax administration, public financial management, social security, and civil service reforms. 7. The IMF have indicated their confidence in the measures and expressed the view that the authorities are in compliance with the IMF’s policy on arrears, based on their good faith efforts to engage with their external creditors and commitment to clear all arrears to multilateral institutions. 2 8. The Antigua & Barbuda Stand By Agreement with the IMF. The government as part of the debt restructuring and the requirement to raise additional revenue as a result of the reduced revenues and payment arrears introduced a number of micro taxes similar to other innovative financing mechanisms. These included increases in % of GDP in the following areas: i. consumption tax on oil products – 0.5% of GDP in 2009 and 1.5% of GDP in 2010. This is a specific tax which in 2004 was EC$2.95 for motor spirits and EC$2.89 for diesel oil. ii. import duties – 0.6% of GDP in 2010 iii. embarkation tax – 0.2% of GDP in 2010. This changed from US$10 to US$25 for non-caricom citizens and EC$37 to EC$50 for CARICOM citizens iv. expansion in VAT base – 2.1% of GDP. The Antigua and Barbuda Sales Tax will stay the same but the revenue is expected to increase through tax compliance, improvements in filing rates, and collection of back taxes. 3 v. excise duty on tobacco and alcohol – 0.2% of GDP in 2010. 2 Antigua and Barbuda: 2010 Article IV Consultation and Request for Stand-By Arrangement—Staff Report; Supplements; Public Information Notice; Press Release; and ED’s Statement. IMF September 2010 3 Budget Statement 2011 25

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