IMF urges gov’t to save for hard times

IMF Mission Chief for Peru and Antigua and Barbuda, Leo Bonato speaking during the Antigua and Barbuda Chamber of Commerce and Industry’s Business Breakfast Forum held on Thursday. (Photo by Kadeem Joseph)
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By Kadeem Joseph

The International Monetary Fund (IMF) has suggested that Antigua and Barbuda should create a rainy-day fund since it is currently existing in a world “full of uncertainty and risks”.

During a presentation at a recent breakfast forum organized by the local Chamber of Commerce and Industry, the IMF Mission Chief for Peru and Antigua and Barbuda, Leo Bonato posited that such a move is important so that there will be a “fiscal buffer” during difficult periods.

“In the currency union, you don’t have a lot of policy levers to move. You don’t have monetary policy,” he explained. “So you basically have fiscal policy and structural policies, which means fiscal policy, if it’s good, should help impede in which the economy is weak and should save entire times when the economy is strong.”

The IMF official highlighted a weak fiscal position is among the major domestic risk factors to a country’s economic outlook, adding that high debt, which he identified as a “common problem”, is a contributing factor to the financial uncertainty.

Bonato said a decline in tax revenues, a problem underscored by Prime Minister Gaston Browne during his budget presentation, is also an area of concern.

“Revenues are declining, and that’s a problem. If you don’t have the money to finance the government’s activities, you are in trouble. If you don’t provide services to the population, that certainly is going to affect the economy,” he said.

Uncertain Citizenship by Investment inflows and spending pressures are added factors that are contributing to the financial uncertainty.

Elaborating further on the Citizenship by Investment Programme, Bonato warned against using revenues from the programme to address recurrent expenditure.

He is, however, suggesting that these funds are better spent on projects that the country can do without in a situation of difficulty.

 “So, for example, certain investment projects dealing with climate resilience, these sort of things, I think, the funds are good to be used for and certainly not to finance the current activities of the government,” he stated.

Bonato said uncertainties with corresponding banking relationships and natural disasters are also risks to Antigua and Barbuda’s economic outlook.

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