IMF approves US$8.2 million in emergency aid for St. Lucia

WASHINGTON, CMC – The executive board of the International Monetary Fund (IMF) has approved US$8.19 million in emergency assistance for St. Lucia to cope with the economic consequences of Hurricane Tomas.

The Washington-based financial institution said the financial assistance consists of a US$5.85 million disbursement under the IMF’s Rapid Credit Facility (RCF), and about US$2.34 million under the Fund’s Emergency Natural Disaster Assistance (ENDA).

Hurricane Tomas struck St. Lucia on October 30, 2010 causing loss of life and significant damage to the nation’s road network, water supply, and agriculture sector.

The latest but still preliminary estimates suggest that total damages amount to US$336 million, or about 34 per cent of GDP.

“St. Lucia has been severely affected by Hurricane Tomas, which caused loss of life and significant damages to infrastructure and agriculture,” said Murilo Portugal, IMF’s deputy managing director and acting chair.

“The reconstruction efforts are expected to have a significant fiscal and balance of payment impact, mainly in 2011, posing difficult policy challenges. It will be important to maintain macroeconomic stability and debt sustainability during the rehabilitation,” he added.

Portugal said despite a temporary deterioration in the fiscal position, the Stephenson King administration remains committed to the medium-term debt target, stating that it intends to keep commercial borrowing to a minimum by limiting the financing of the rehabilitation and reconstruction efforts to available grants and external concessional financing.

Key consolidation measures include introducing a market valuation-based property tax in early 2011 and a value-added tax by April 2012, and controlling the civil service wage bill over the medium term.

A formal public sector investment programme will also be initiated, to increase the efficiency of spending and underpinned by a medium-term expenditure framework, Portugal said.

He said the authorities continue to make progress on other structural reforms, noting that efforts are ongoing to enhance the investment climate conducive to private sector growth, and to strengthen the oversight and resilience of the financial sector, including through the establishment of the Single Regulatory Unit.

“The authorities’ prudent management of the reconstruction efforts, together with the continued sound policies to enhance the fiscal position and address structural issues, will help St. Lucia maintain fiscal sustainability and achieve the medium-term debt target,” Portugal said.