The IMF says following the post-pandemic rebound in St Kitts, the economy is facing challenges with real GDP growth moderated to 1.5 per percent in 2024. The report stated that the fiscal deficit increased to 11 per percent of GDP in 2024, mainly driven by a sharp decline in Citizenship-by-Investment (CBI) revenue amid recent reforms aimed at strengthening the CBI programme. The current account deficit widened due to lower CBI inflows.
The report stated that there were lower contributions from tourism and government services, while inflation eased to 1 per cent.
In 2025, economic growth is projected to strengthen to 2 per cent supported by expanding tourism, while inflation is expected to remain stable. In the medium term, growth is forecast to rise to 2½ per cent, benefiting from large energy projects. Nonetheless, fiscal deficits are forecasted to remain high in the medium term, driven by expectations of structurally lower CBI revenue, resulting in public debt exceeding 70 per cent of GDP by 2030.
The IMF said near-term risks to growth are tilted to the downside, but progress in fostering renewable energy provides upside potential over the medium term. The report stated that uncertainty and volatility of CBI revenue pose a significant two-sided risk, but a further decline in CBI revenue would pressure fiscal accounts. Downside risks include a slowdown in key source markets for tourism, global financial instability, and commodity price volatility.
The IMF Directors encouraged the authorities to implement a prompt and decisive fiscal consolidation to keep public debt below the regional debt ceiling and reduce reliance on the Citizenship by Investment Program (CBI).
This would create space for capital expenditure, resilience against natural disasters, and contingent liabilities. The directors stressed that fiscal consolidation should be driven by tax revenue mobilisation and reductions in current expenditures, anchored by fiscal rules.
Directors supported the authorities’ plan to establish a Sovereign Wealth Fund to absorb upsides in CBI revenue and called for continuing improvements in the CBI framework, including its transparency. They also welcomed the authorities’ initiatives to implement reforms to improve the sustainability of the Social Security Fund.
Directors underscored that further progress is needed to strengthen the financial sector, including to reduce NPLs and meet the ECCB’s prudential requirements. They emphasised the importance of continuing to strengthen the balance sheet of the systemic bank and to revitalise its business model.
