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The Executive Board of the International Monetary Fund on July 10, 2009 approved a disbursement in an amount equivalent to SDR 3.28 million (about US$5.1 million) to Dominica under the rapid-access component of the Exogenous Shocks Facility (ESF).

Following extensive damage to crops and infrastructure from two hurricane strikes in 2007-08, Dominica’s economy has been further affected by the global downturn. Over the past year, tourism earnings, FDI inflows and remittances have fallen sharply, leading to slower growth and a weaker external current account. IMF financing would help limit the decline in Dominica’s external reserves, including by catalyzing support from the international donor community.

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

“Following the damage to crops and infrastructure from two hurricanes in 2007–08, the Dominican economy has been further affected by the global downturn. Tourism earnings, FDI inflows, and remittances have been reduced significantly, leading to slower growth and a weaker external current account.

“The authorities are dealing with the effects of the exogenous shocks on several fronts. These include post-hurricane rehabilitation, accelerated implementation of capital projects to contain unemployment, and increased social spending to protect the most vulnerable groups. A temporary increase in public expenditure was needed to ease the economic effects of natural disasters and, more recently, of the global slowdown.

“The authorities are responding appropriately to this deterioration in the fiscal position. They plan a modest recovery in FY 2009/10, and have reiterated their commitment to target, in subsequent years, annual primary surpluses of at least 3 percent of GDP so as to place the still-high public debt on a robustly downward trajectory. This can be achieved by further prioritizing capital projects and financing these projects largely with external concessional resources.

The government intends to continue to move towards adopting a medium term expenditure framework to improve the predictability of capital expenditure and its consistency with the medium-term fiscal objectives. Efforts to reduce debt-related vulnerabilities and weaknesses in the nonbank financial sector are also planned to continue.

“In the near term, Fund financing will help reduce the decline in external reserves and catalyze support from the international donor community to help mitigate the exogenous shocks. Over the medium term, the government’s economic recovery strategy will improve the business climate and critical infrastructure, so as to place the economy on a path of higher growth and poverty reduction,” Mr. Portugal said.

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