The Executive Board of the International Monetary Fund (IMF) on August 1, 2014 approved a disbursement of an amount equivalent to SDR 4.15 million (about US$6.4 million) for St. Vincent and the Grenadines to be drawn equally from the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) at SDR 2.075 million or about US$3.2 million each. This disbursement will help the country meet an urgent balance-of-payments need due to severe flooding and landslides in December 2013 that caused massive damage to infrastructure, housing and agriculture.
Following the Executive Board’s discussion of St. Vincent and the Grenadines, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“St. Vincent and the Grenadines suffered massive damages to infrastructure, housing, and agriculture as a result of severe floods in December 2013. Emergency relief and high rehabilitation costs have weakened the fiscal position and created an urgent balance of payments need at a time when the economy is striving to recover from previous natural disasters and the global economic downturn.
“Rehabilitation and reconstruction spending is expected to widen the fiscal deficit this year. Mindful of the high and growing public debt, the authorities have reiterated their intention to rely mainly on grants and concessional resources to finance the recovery. At the same time, they will step up their efforts to mobilize budgetary resources by increasing revenue collection, containing the wage bill, and reducing transfers to state-owned enterprises.
“Looking ahead, the authorities remain committed to securing a sustainable fiscal position. To this end, they intend to generate a primary surplus of at least 2 percent of GDP in the medium term to ensure that the debt-to-GDP ratio is put on a declining path.
“The authorities are also stepping up structural reforms to enhance resilience to natural disasters and climate change, and to ensure strong and lasting growth. They are developing programs to improve emergency responses and to strengthening physical infrastructure. Efforts are also ongoing to enhance the business environment, improve access to the country by air, and streamline customs clearance. The authorities also intend to carry out civil service and pension reforms, which will boost competitiveness and employment.”
The RCF (http://www.imf.org/external/np/exr/facts/rcf.htm) was created under the newly established Poverty Reduction and Growth Trust (PRGT) and provides rapid financial assistance for low-income countries with an urgent balance-of-payments need.
The RFI (http://www.imf.org/external/np/exr/facts/rfi.htm) provides the same type of financial support for all member countries. Neither requires any explicit program-based conditionality or review. However, economic policies are expected to address the underlying balance-of-payments difficulties to support broader policy objectives, including growth. and in the case of the RCF, poverty reduction. Financing under the RCF carries zero interest (at least until end-2014), has a grace period of 5.5 years, and a final maturity of 10 years.1 Financing under the RFI is at the adjusted rate of charge, currently [1.08] percent, has a grace period of 3.25 years, and a final maturity of 5 years.
1 The Fund reviews the level of interest rates for all concessional facilities under the PRGT every two years, with the next review expected for end-2014.