The International Monetary Fund has warned Dominica that while its economy continues to grow, rising debt and fiscal pressures remain a concern.
The warning came from an IMF team led by Christopher Faircloth after completing its 2026 Article IV consultation with authorities in Roseau from March 16–26.
The team said economic activity strengthened in 2025, with growth rising to 4.5 per cent, driven by a rebound in tourism and ongoing development projects. Visitor arrivals were about 36 percent above pre-pandemic levels, while inflation eased to 2.3 per cent.
However, the IMF noted that the gains have been accompanied by widening imbalances. The country’s current account deficit remained high, largely due to increased imports linked to construction, while public debt, though reduced from its pandemic peak, is still estimated at about 103 per cent of gross domestic product.
Large infrastructure projects, including climate-resilient roads and geothermal energy development, have also contributed to a widening fiscal deficit in the last financial year.
Looking ahead, the IMF expects growth to slow to around 3 percent over 2026–27, before easing further to about 2 percent as construction activity declines. It said risks to the outlook are tilted to the downside, citing global geopolitical tensions, uncertainty over citizenship-by-investment revenues, and the ongoing threat of natural disasters.
The Fund said additional fiscal tightening will be needed to reduce debt and strengthen the country’s resilience. It estimates that further adjustments over the next two years will be required to meet regional fiscal targets and build financial buffers against disasters.
To achieve this, the IMF recommended measures to broaden revenue and improve spending efficiency, including reducing reliance on citizenship-by-investment income, strengthening tax collection, and better targeting social programmes.
It also pointed to the need for pension reforms and adjustments to some public service tariffs.
The financial sector was described as stable overall, with banks adequately capitalised and liquidity remaining strong. However, vulnerabilities persist, including high levels of non-performing loans and significant exposure to government debt.
The credit union sector, which now accounts for more than half of private sector lending, continues to expand but faces regulatory and capital challenges.
The IMF also called for wider reforms to support long-term growth, including improving infrastructure, strengthening education and skills training, and addressing barriers to business activity.
It added that strengthening public financial management and improving the quality of economic data will be key to supporting effective policymaking and ensuring that fiscal targets are met.
Leave a Reply