IMF Highlights Growth Opportunities, Fiscal Reforms for St. Kitts and Nevis in 2025 Report

The International Monetary Fund (IMF) has released its 2025 Article IV Consultation on St. Kitts and Nevis, highlighting the country’s post-pandemic recovery, ongoing fiscal vulnerabilities, and need for structural reform. The Government has approved the publication of the Staff Report, which underscores the importance of resilience-building through energy transition, economic diversification, and sustainable fiscal practices.

Slowing Growth, Resilient Recovery

According to the IMF, real GDP growth in 2024 slowed to 1.5%, a dip from post-pandemic rebound levels, mainly due to weaker contributions from tourism and government services. Still, the economy has shown resilience. Inflation eased to around 1%, driven by declining global commodity prices and tempered domestic activity.

Tourism continues to be a key economic driver. While stayover visitors have nearly returned to pre-pandemic numbers, cruise arrivals remain below expectations. For 2025, growth is projected at 2%, with a medium-term outlook of 2.5%, supported by expanding tourism and renewable energy projects, including a major geothermal initiative.

Fiscal Pressures and Revenue Decline

The report reveals mounting fiscal strain. The fiscal deficit widened to 11% of GDP in 2024, a stark contrast to earlier years, primarily due to a steep drop in Citizenship-by-Investment (CBI) revenue—from 22% in 2023 to 8% in 2024—following tighter programme reforms. The underperformance of corporate tax receipts and persistent current expenditures also contributed to the shortfall.

Government deposits fell to 10% of GDP, and public debt, while relatively stable at 52%, could rise above 70% by 2030 without fiscal correction. The 2025 budget forecasts a reduced 4% deficit, banking on a rebound in CBI flows and spending curbs. However, IMF projections remain cautious, expecting the deficit to hover around 10%.

A temporary VAT reduction from 17% to 13%, combined with a social support programme, is anticipated to exert further pressure on fiscal balances in early 2025.

Challenges in Accessing Development Financing

During his appearance on The Roundtable on 13th May, 2025, Prime Minister Hon. Dr. Terrance Drew addressed the Federation’s struggle to access concessionary financing, despite its high GDP per capita.

“Our GDP may look strong per capita, but it is small in absolute terms—just over USD $1 billion. This prevents us from qualifying for many grants and low-interest loans, even as we need hundreds of millions to fund critical infrastructure like a new hospital or geothermal projects,” Dr. Drew explained.

He emphasised the importance of recognising economic vulnerability, not just income levels, and reiterated the Federation’s commitment to transitioning into a Sustainable Island State.

Financial Sector Strength and Risks

The financial sector shows signs of improvement. Banks have reduced non-performing loans (NPLs) and maintained strong capital levels. However, credit growth surged by 10% in 2024, largely in mortgages, while credit unions expanded even faster—raising concerns over high delinquency rates.

The Development Bank of St. Kitts and Nevis remains fragile, burdened by weak capital and elevated NPLs. The IMF has urged financial sector reform, including stricter regulatory oversight for credit unions and restructuring of the Development Bank to mitigate contingent fiscal risks.

The proposed Sovereign Wealth Fund (SWF) for managing CBI inflows is seen as a promising tool to stabilise revenue streams and enhance transparency.

Labour Gaps and Structural Reform

Structural impediments, including labour market mismatches, have reduced potential growth. The government is working to align education and training with private sector needs, particularly in tourism and healthcare.

The IMF welcomed these efforts but stressed the urgency of implementing broader structural reforms, improving public service delivery, and enhancing credit access to boost long-term productivity and inclusivity.

Energy Transition and Climate Resilience

The Federation’s energy transition is central to its growth agenda. Key projects like the geothermal development, now advancing toward the drilling phase, are expected to reduce import costs, increase energy security, and support economic diversification.

Given St. Kitts and Nevis’s exposure to natural disasters, the IMF called for resilient infrastructure, improved insurance frameworks, and investment in climate-smart water and energy systems. Proposals include an inter-island power grid, desalination plants, and disaster-resilient public investment planning.

IMF Board Assessment and Outlook

The IMF Executive Board acknowledged the government’s dedication to reform but urged fiscal consolidation through better revenue mobilisation, prudent spending, and clear fiscal rules.

Directors stressed the importance of enhancing CBI programme governance, reinforcing financial oversight, and accelerating renewable energy deployment. Improving natural disaster preparedness remains a top priority for securing long-term economic resilience.

While the report reflects data available up to 27th March, 2025, it does not account for global developments since 2nd April, 2025, including ongoing trade tensions.

St. Kitts and Nevis remains at a pivotal moment—navigating immediate fiscal pressures while laying the groundwork for a more sustainable and equitable economic future.

Access the full IMF Staff Report: IMF Report – St. Kitts and Nevis 2025 Article IV Consultation

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