MEFD October 2018

Published: Monday December 3rd, 2018

Indications are that the domestic economy continued to show modest signs of improvement over the review period, benefiting from growth in the tourism sector and relatively stable foreign direct investment activity. Reflecting in part the initial effect of the hike in the value added tax (VAT) rate in July of this year, along with gains in international fuel costs, domestic inflation firmed during the 12 months to August. In the fiscal sector, the deficit contracted during the first quarter of FY2018/19, due to a VAT-led increase in tax receipts, which eclipsed the modest gain in expenditure. Monetary developments featured a decline in bank liquidity, as the falloff in total deposits outpaced the reduction in credit, while foreign currency loan financing to the public sector, underpinned the expansion in external reserves.

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