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georgetown floods
The heavy rains in April left extensive damage to infrastructure, agriculture, and housing.

The International Monetary Fund (IMF) on Monday approved US$2 million under the Rapid Credit Facility (RCF) for St. Vincent and the Grenadines to help the country meet the urgent balance of payments need caused by torrential rains, flooding and landslides in April.

The natural disaster, which caused extensive damage to roads and bridges, agriculture, and housing, was the second to hit the nation in less than six months.

Last October, Hurricane Tomas had a similar impact and preliminary estimates of the destruction from the flooding and landslides put the damage at about 3.6 per cent of Gross Domestic Product.

Nemat Shafik, Deputy Managing Director and Acting Chair of the IMF’s Executive Board noted that SVG has suffered significant damage to infrastructure, housing, and agriculture, adding that high reconstruction and rehabilitation costs have weakened the fiscal position and created an urgent balance of payments need.

“In light of the high public debt, the authorities have reiterated their intention to rely mainly on grants and concessional resources to finance budgetary needs, while enhancing their efforts to increase revenue collections, including through the recently established Large Taxpayer Unit. They have also committed to contain wages and limit other current expenditures,” Shafik further said in a statement.

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Shafik said that authorities in Kingstown “remain focused on their objective to secure debt sustainability over the medium term.

“To this end, they are strongly committed to generate the needed primary surpluses to ensure that the debt to GDP ratio remains on a firmly declining path.

“The authorities are undertaking further structural reforms to improve the business climate and raise the growth potential. In this context, they are strengthening the governance of state-owned enterprises and reforming the civil service and the pension system. Legislation to establish the Single Regulatory Unit will be submitted to Parliament in the months ahead, paving the way for enhancing the supervision of the nonbank financial sector,” Shafik said.

On February 28, the IMF approved a first disbursement under the RCF of US$3.26 million to help the country cope with the damage caused by Hurricane Thomas.

The RCF, which provides rapid financial assistance for low-income countries with an urgent balance of payments need, does not require any program-based conditionality or review.

However, economic policies are expected to address the underlying balance of payments difficulties and support policy objectives including macroeconomic stability and poverty reduction.

Financing under the RCF carries zero interest until end 2011, has a grace period of 5.5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.