The executive directors of the International Monetary Fund say continued fiscal consolidation, backed by a strong fiscal resilience framework, is critical for Saint Kitts and Nevis to stabilise debt, rebuild financial buffers, and reduce vulnerability to external shocks.
The directors made the statement following bilateral discussions under Article IV, noting that a moderately frontloaded consolidation programme combining expenditure rationalisation and revenue mobilisation could stabilise public debt at the regional benchmark by 2031.
They said higher government deposits under such a programme would also help rebuild fiscal buffers.
“Current expenditure requires further rationalization, including streamlining goods and services spending,” the IMF executive directors stated.
The Washington-based financial institution had earlier indicated that economic growth in the twin-island Federation slowed in 2025, but is projected to rebound to two per cent in 2026 and strengthen over the medium term.
According to the IMF, the projected improvement will be driven by construction, agriculture, renewable energy projects, and continued expansion in tourism activities. However, it warned that elevated oil prices linked to the war in the Middle East could weigh on the economy through impacts on tourism and transportation.
Inflation is expected to rise moderately to 2.2 per cent in 2026 due to higher global energy and food prices before stabilising over the medium term. The IMF also said the current account deficit remains high at 14.6 per cent of gross domestic product (GDP) in 2025, well above pre-pandemic levels.
The financial institution said the banking system remains broadly stable despite lingering vulnerabilities, adding that geothermal and solar energy projects are advancing steadily.
The IMF executive board said policy measures aimed at easing the impact of higher oil prices should be targeted and temporary. It also noted that tax revenue could be increased by rolling back COVID-era concessions, broadening the value-added tax (VAT) base, strengthening property taxation, increasing excise taxes, and improving tax administration.
The board said formally adopting fiscal rules anchored by the regional debt benchmark is essential to support fiscal consolidation efforts.
“This would help the authorities’ ongoing efforts to reduce reliance on Citizenship by Investment (CBI) revenues, mitigate fiscal procyclicality, and strengthen policy credibility. The planned Sovereign Wealth Resilience Fund is also welcome; its implementation would help manage CBI revenue volatility, enhance disaster resilience, and support long-term fiscal sustainability,” the executive board stated.
Under the CBI programme, foreign investors are granted citizenship of St. Kitts and Nevis in exchange for making substantial investments in the country’s socio-economic development.
The IMF noted that declining CBI revenues contributed to the overall fiscal deficit widening to 11.7 per cent of GDP in 2025, while public debt edged closer to the regional benchmark of 60 per cent of GDP and government deposits declined further.
It said persistently low CBI revenues are expected to keep fiscal deficits elevated in 2026 and over the medium term, with public debt projected to continue rising. While debt sustainability remains intact, the IMF warned that contingent liabilities from public banks and the Social Security Fund (SSF) pose significant risks.
The executive board also urged immediate parametric reforms to the SSF to prevent reserve depletion by 2040.
The IMF said capital positions within the banking system have strengthened and non-performing loan ratios have continued to decline, while credit growth has remained robust.
“Financial sector policies should focus on resolving legacy NPLs, strengthening provisioning, and further de-risking investment portfolios. Comprehensive reform of the Development Bank is critical to safeguard financial and fiscal stability. The FSRC’s oversight framework for the non-banking sector should be further strengthened,” the executive board added.
