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HomeNewsLocal NewsIMF urges CBI countries to save revenue for rainy days

IMF urges CBI countries to save revenue for rainy days

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by Kevon Browne

St. Kitts and Nevis (WINN) – One of the mandates of the Labour Administration was to diversify the Federation’s economy to free the country from its economic dependence on the revenue from the Citizenship by Investment Program (CBI).

While CBI programs across the Caribbean region contribute significantly to the economies, the industry is volatile if the strength and access of the “Golden Passports” are threatened.

In 2022, in response to the Russia/Ukraine war, the European Union’s Parliament, the United Kingdom and the United States of America threatened to impose Visa restrictions on countries with CBI schemes.

The move launched Caribbean leaders of countries that offer the program, including Antigua and Barbuda, Dominica and St Kitts and Nevis, to call out the EU’s parliament on the decision and how it would negatively affect the economies in the region.

Antigua and Barbuda Prime Minister Gaston Browne penned a letter last year explaining the possible impact, outlining the security procedures that have to be done to be approved for a Golden Passport. Browne said he believed the programs do not represent any risks to the EU, US and UK despite what the EU parliament surmised.

A US-Caribbean Roundtable on the programs, held in St Kitts and Nevis in February, resulted in five Eastern Caribbean States with CBI programmes committing to six CBI principles proposed by the US to be implemented in the programs going forward.

The six principles:

1. Collective agreement on the treatment of denials: Not to process applications from persons whose applications have been denied in another CBI jurisdiction by proactively sharing information on denials.

2. Interviews: Conduct interviews with applicants, whether virtual or in person.

3. Additional checks: Each jurisdiction will run checks on each application with the Financial Intelligence Unit of its respective country.

4. Audits: Audit the Programme annually or every two years in accordance with internationally accepted standards.

5. Retrieval of passports: Request law enforcement assistance to retrieve revoked/recalled passports.

6. Treatment of Russians and Belarusians: Suspend processing applications from Russians and Belarusians. Four jurisdictions have already suspended applications, and Grenada, which processes applications from Russians and Belarusians with enhanced due diligence, will suspend processing new applications from Russia and Belarus from March 31, 2023.

With all this focus on the CBI programs of the region in the last few years, their importance on the economic growth of the countries they serve has remained strong despite their volatility and the calls and plans for diversification.

The acting director of the International Monetary Fund (IMF) Western Hemisphere Department, Nigel Chalk, said while the CBI programs have been important to Caribbean countries, the volatility needs to be considered more.

“So these have been a very important feature of the region in the Caribbean, particularly for St. Kitts. We’re generally very supportive of those. They’ve generated [an] important amount of revenues for the countries. And those revenues offer the potential to be deployed in a range of areas. And [there are] lots of needs, including, as mentioned, to some extent socialist spending, but also, the region is very prone to hurricanes. There’s a lot of need to make the infrastructure more resilient, to adapt to climate change, and also to decarbonise the economy because these countries are very exposed to big shifts in global fuel prices. So I think on the whole the CBI [programs have] been important in these countries.”

Chalk went so far as to urge CBI territories in the region to save the revenues of CBI programs for rainy days and reduce spending habits.

“This revenue is very volatile. So I think you have to be very careful about spending that revenue in a lumpy way. So we prefer a system where the CBI revenue is basically saved, and some spending is derived from that revenue, basically through the stream of income that that savings creates. That’s a more stable system rather than having a kind of stop/go spending depending on how much CBI revenue you get in the year. And I think it’s really important to maintain the integrity and actually to improve the integrity of these schemes, given their reliance on sort of recognition by some of the larger economies. And in that the ECCU is moving ahead actually, I think recently, they had a press release that they’re moving heads improve the integrity of these schemes in conjunction with some of the larger economies.” – Nigel Chalk, acting director of the IMF Western Hemisphere Department, during a press conference on April 13.

The advice to save for a rainy day was further compounded when Chalk, despite saying the Caribbean is expecting growth, although slow growth, in 2023 with slight restrictions in 2024, warned that countries in the region should come up with contingencies if interest rates continue to rise due to relentless inflationary pressures.

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