Dominica is among several Caribbean countries implementing a CBI through which foreign investors are granted citizenship of the country in return for making a significant investment in its socio-economic development.
In a paper which examined the CBI before the passage of Hurricane Maria last September, the Washington, D.C.-based financial institution stated that due to the highly volatile and unpredictable nature of CBI receipts, “the policy options to allocate such revenues should be carefully examined with sufficient consideration given to potential effects on the country’s medium and long-term macroeconomic fundamentals”.
The IMF had noted that the Dominica CBI inflows had reached near 10 percent of gross domestic product (GDP), increasing the country’s reliance on these revenues. It argued that that given their volatile and unpredictable nature, CBI revenues should be used prudently.
“Their use should be mindful of the chances of a sudden stop in these flows,” the IMF noted.
“It is therefore key to prioritize investment, debt reduction, and saving in lieu of current expenditure, which is typically more difficult to reverse.”
It stated that to avoid the need for a sharp fiscal adjustment when the windfall revenues diminish or come to a sudden stop, priority should be given to boosting infrastructure, debt reduction and saving. The IMF claimed that based on the examples used to analyze the program, additional capital expenditure would help close the infrastructure gap and permanently raise the level of income in the economy; saving accumulation would provide for a smooth transition when or if CBI revenues come to a sudden stop.