WASHINGTON, DC — AFTER conducting a week-long review of St. Kitts and Nevis' economic position earlier this month, the International Monetary Fund (IMF) has released its findings.
Based on the review, the IMF projects the Federation’s economy to grow to 2 percent in 2025, up from 1.5 percent in 2023. This projection is supported by an uptick in tourism, while inflation is expected to remain steady at around 2 percent.
"In the medium term, growth is projected at 2.5 percent, and inflation is expected to remain stable. Progress has been made in the transition to renewable energy, as the geothermal project is nearing the drilling phase with funding secured,,” the IMF stated.
The report highlighted that the current account deficit (CAD) widened to 15 percent of GDP in 2024, up from 12 percent in 2023. This figure remains significantly higher than pre-pandemic levels, reflecting a decline in Citizenship by Investment (CBI) inflows and widening fiscal deficits. The IMF projects the CAD to remain around 12 percent of GDP in the medium term, with the external position assessed as weaker than implied by medium-term fundamentals and desirable policies.
The fiscal deficit is projected to remain substantial, with public debt expected to rise. The IMF estimates the fiscal deficit at 11 percent of GDP in 2024, primarily driven by a sharp reduction in CBI revenue. Recent reforms to the CBI programme, reinforced by international agreements, suggest that while CBI revenue will likely be structurally lower, it will become more sustainable going forward.
The fiscal deficit is expected to decrease to 9 percent of GDP in 2025, influenced by an increased wage bill and a temporary reduction in Value-Added Tax (VAT). The IMF noted that public debt is projected to rise to 61 percent of GDP in 2025 and could reach 68 percent by 2030. However, the IMF assesses the overall risk of sovereign debt stress as moderate, with fiscal deficits anticipated to decline modestly due to efforts to control expenditures.
In its concluding statement, the IMF welcomed the planned establishment of a Sovereign Wealth Fund (SWF). The Fund is expected to absorb any excess CBI revenue, reduce the impact of volatile CBI inflows on the budget, and create fiscal buffers against natural disasters.
The Federation was commended for improvements made to the CBI framework, but the IMF emphasized the need for greater transparency. It recommended that comprehensive annual reports following external audits be published regularly, including detailed statistics on applications and financial accounts.
