Antigua finance minister disagrees with IMF on local economy

by: - May 3, 2014
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Harold Lovell (GIS photo)

Harold Lovell (GIS photo)

ST JOHN’S, Antigua (CMC) – The Antigua and Barbuda government says it does not consider the island’s fiscal situation to be unsustainable as it responded to an International Monetary Fund (IMF) report that it is concerned that the macroeconomic performance of Antigua and Barbuda has deteriorated in recent times.

Finance Minister Harold Lovell says the Baldwin Spencer government has adopted new strategies to stimulate the economy with which the Washington-based financial institution disagreed.

He said those fiscal measures include the major tax breaks given under the Tourism and Business (Special Incentives) Act and the reduction in Personal Income Tax.

“We agreed to a package of incentives which ultimately will cause persons, we expect, to be attracted to investment in Antigua. It’s intended as a stimulus. The IMF does not like measures of that nature.

“We felt we had to reduce the taxes in terms of attracting investment by locals and foreigners and obviously it’s not something they agree with.”

The IMF said the deterioration in the macroeconomic performance had been observed in the months following the conclusion of the three-year-old Stand-By Arrangement, weakening the growth outlook and exacerbating downside risks.

The IMF said the local economy is facing “headwinds”.

“In 2013, economic growth was somewhat lower than projected at the time of the SBA review and the fiscal deficit widened substantially. This year, the economy is expected to grow by 1.6 per cent, up from 0.5 per cent in 2013; and inflation is expected to remain subdued at around one per cent,” the IMF said.

“However, risks to this outlook are high, stemming in particular from the country’s unsustainable fiscal situation, and the large share of nonperforming loans in the banking system,” the Washington-based financial institution said.

It said that the executive directors had noted with “concern that the macroeconomic performance has deteriorated in the months following the conclusion of the SBA with the Fund, weakening the growth outlook and exacerbating downside risks”.

Lovell said, while the Spencer government respects the views of the IMF, it will also make decisions independently.

“We also agreed we would trim a bit off the Personal Income Tax… That’s not something they (IMF) agreed with, but we’re a sovereign country and we continue to do the things which we, in our view, think are the right things to do.

“At the end of the day, it’s one position against another position. We respect their position, we just don’t agree with it,” Lovell added.

Caribbean Media Corporation