St. Kitts and Nevis (WINN); The IMF is advising the government of St. Kitts and Nevis to contain the public wage bill, broaden the tax base and improve fiscal management of the debt and cash management framework of the Nevis Island Administration.
In the recently released staff report from the Article IV consultation between the IMF and government officials, the Fund noted the government’s continued efforts at economic management and policy strengthening, however several recommendations were made with regard to maintaining fiscal sustainability in the federation.
The IMF Executive Directors recommended improving oversight of public corporations and encouraged further prepayment of expensive debt, while underscoring the need to carefully manage the fiscal implications of the planned universal health coverage.
In their assessment of the banking sector, Directors noted that despite adequate capital and liquidity levels, the financial sector faces risk from delays in the sale of lands under the 2014 land for debt swap, loss of correspondent banking relationships, and high nonperforming loans.
According to the report the local authorities have renewed their efforts to expedite land sales, agreeing with the IMF on the urgency to complete the sale of lands under the 900 million-dollar land for debt swap arrangement in order to limit fiscal and financial risks to the institutions involved.
The IMF Directors welcomed the authorities’ commitment to establish a Growth and Resilience Fund later this year to “preserve and manage the fiscal savings from Citizen By Investment inflows”, emphasizing that CBI inflows would need to be monitored closely for their impact on the banking system.
They continue to warn against an over-reliance on CBI revenues, recommending that those revenues be prudently invested and be prioritized for debt reduction and building resilience against natural disasters.
The Directors added that measures would be needed to contain the “quasi-fiscal spending of the Sugar Industry Diversification Foundation”.