WASHINGTON, CMC—The chief administrators of the Worldwide Financial Fund (IMF) say that whereas Dominica’s financial system has recovered strongly following the coronavirus (COVID-19) pandemic shock, fiscal and exterior imbalances stay excessive, with dangers together with exterior shocks, pure disasters, and risky Citizenship by Funding (CBI) revenues.
The chief board has simply accomplished the 2024 Article IV Session with Dominica, and whereas it agrees that the financial outlook is constructive, predicated on a continued restoration in tourism and the implementation of the nation’s financial modernization and resilience-building agenda, the continuing financial restoration gives a possibility to rebuild buffers and advance reforms to modernize the financial system and foster sustainable and resilient development.
An IMF mission reported in Could that actual gross home product (GDP) grew by 5.6 % in 2022 and an estimated 4.7 % in 2023, returning to pre-pandemic output ranges. It stated these outturns mirror a rebound in tourism supported by public funding and buoyant CBI revenues. Inflation fell from its 2022 peak of 9¾ % to 2¼ % by the tip of 2023, largely on account of softening world commodity costs.
The IMF stated public debt has steadily declined from its pandemic peak however stays elevated above 100% of GDP and that the present account (CA) deficit had been narrowing since 2019 however widened to 33.7 % of GDP in 2023, as greater imports for the development of strategic infrastructure tasks outweighed greater tourism receipts.
Of their evaluation of the financial system, the IMF govt administrators famous {that a} extra bold fiscal consolidation would assist Dominica meet the budgetary rule, self-insure in opposition to catastrophe dangers, and cut back debt vulnerabilities.
They really useful broadening the non-CBI income base by streamlining tax incentives, reintroducing the value-added tax (VAT) utilized to the electrical energy gas surcharge, equalizing diesel and gasoline excise charges, and strengthening tax administration and compliance administration.
The administrators stated eradicating the stamp obligation on outbound cash transfers would even be important and that they noticed scope to rationalize inefficient spending whereas prioritizing essential public investments with financial returns.
They inspired tariff changes on important public providers to scale back the fiscal prices of state-owned enterprises, concurring that Dominica’s financing technique ought to proceed to prioritize non-debt-creating flows.
The IMF administrators underscored the necessity to shield probably the most susceptible by enhancing the effectivity and sustainability of the social safety framework, together with by higher focusing on social help applications.
They stated reforming the pension scheme to make sure its long-term sustainability amid rising demographic pressures would even be vital, emphasizing the necessity to strengthen monetary system oversight and cut back stability sheet vulnerabilities, significantly for credit score unions.
The IMF stated granting the Monetary Companies Unit statutory independence would assist enhance its effectiveness and help risk-based supervision of non-bank monetary establishments. The administrators underscored the significance of addressing structural impediments to monetary intermediation and supported the authorities’ efforts.
They inspired additional strengthening of CBI program frameworks and addressing remaining AML/CFT deficiencies.
Beneath the CBI programme, Dominica offers citizenship to overseas buyers in return for his or her important contributions to the island’s socio-economic improvement.
Concerning Dominica’s modernization and local weather adaptation agenda, together with the Local weather Resilience and Restoration Plan, the administrators famous that the continuing transition to renewables alongside reforms to enhance the enterprise surroundings and tackle labor market frictions would additional improve competitiveness and development prospects.
They underscored the significance of bettering statistical compilation, tax administration, and public monetary administration frameworks, together with CBI reporting programs, to boost coverage administration.
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