The International Monetary Fund (IMF) has concluded its Article IV mission to St. Kitts and Nevis, releasing a statement on February 26, 2025, detailing the preliminary findings of its staff. The statement outlines the country's recent economic developments and future outlook, as well as recommended policies for fiscal consolidation and financial sector reform.
Economic growth in St. Kitts and Nevis is projected to rise to 2 percent in 2025 from 1.5 percent in 2024, driven by tourism with inflation remaining stable at around 2 percent. Medium-term growth is expected to reach 2.5 percent with continued stability in inflation rates. A significant development is the nearing drilling phase of a geothermal project aimed at transitioning to renewable energy.
The current account deficit widened significantly to 15 percent of GDP in 2024 due to declining Citizenship by Investment (CBI) inflows and increased fiscal deficits. It is anticipated that this deficit will stabilize around 12 percent of GDP over the medium term. Fiscal deficits are projected to remain large with public debt rising; a reduction in CBI revenue has contributed significantly to these figures.
Fiscal policy recommendations include implementing steady fiscal consolidation measures to maintain public debt below the regional ceiling of 60 percent of GDP. The IMF suggests anchoring fiscal consolidation through tax reforms and expenditure reductions while protecting capital investments.
"The planned establishment of a Sovereign Wealth Fund (SWF) is welcome," noted IMF staff, highlighting its potential role in absorbing volatile CBI revenues and creating fiscal buffers against natural disasters.
In terms of financial sector policy, progress has been made toward reducing non-performing loans (NPLs), but vulnerabilities persist with rapid bank credit growth reported at an annual rate of 11 percent amid high NPLs and low buffers.
"Progress to strengthen the systemic bank and safeguard public deposits should continue," stated IMF staff, encouraging further efforts from both government stakeholders and banks themselves.
Structural policy improvements are also suggested for enhancing medium-term growth prospects through better resource allocation across sectors like disaster preparedness frameworks.
Overall risks remain tilted towards downside factors such as fluctuations in CBI revenue or global market instability impacting domestic banks; however, opportunities exist particularly within renewable energy projects which could boost economic growth further down the line.
The IMF expressed gratitude towards St Kitts & Nevis authorities along with other counterparts involved during this mission's discussions: "The mission would like to thank...for constructive dialogue."