The global economic slowdown has strongly affected the tourism activity in the Caribbean region. The impact in St. Lucia has been considerable, since government tax revenue, foreign exchange reserves and employment are all closely linked to the tourism industry. The arrangement will help mitigate the impact of the global crisis on the country's economy.

Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, issued the following statement:

“St. Lucia has been severely affected by the global economic and financial crisis. Sharp declines in tourism, foreign direct investment (FDI), and remittances from abroad have led to significant pressure on St. Lucia's fiscal and balance of payments positions. Real GDP growth is projected to contract by as much as 2½ percent and unemployment to increase substantially in 2009.”

“The authorities' response to the crisis has been broad-based. The fiscal program for FY 2009-10 aims at maintaining macroeconomic stability while protecting social spending, with measures to enhance tax revenue and control expenditures. Among the measures on the revenue side are the introduction of a flexible petroleum pricing mechanism, the implementation of a market-valuation based property tax, and the introduction of a value-added tax in 2010. On the expenditure side, the authorities intend to prioritize spending, control costs, and only implement projects for which funding is available. Fund financing will help ease the balance of payments pressures, shore up external reserves, and catalyze support from the international donor community.”

“The authorities are committed to placing public debt on a downward path, and to fostering the private sector by improving the business environment and infrastructure. They are committed to strengthening the regulation and supervision of the nonbank financial sector through a package of supportive legislation and the establishment of a Financial Regulatory Supervisory Authority.”

“The authorities' implementation of prudent policies, together with support from the international donor community, will help position St. Lucia for a solid recovery once the global recession bottoms out.”#