- Fiscal imbalances have widened sharply in the aftermath of repeated external shocks with public debt rising by 45 percentage points of GDP since 2019 to 113 percent of GDP in 2025.
- Growth is expected to slow in 2026-27, reflecting higher oil prices, a weaker global outlook, and the normalisation of construction activity, before stabilising at 2.7 percent over the medium term.
WASHINGTON, USA – The executive board of the International Monetary Fund (IMF) completed the Article IV Consultation for St Vincent and the Grenadines. The authorities need more time to consider the publication of the staff report prepared for this consultation.
St Vincent and the Grenadines’ economy has shown resilience in the face of repeated shocks, but vulnerabilities remain significant. Over the past six years, the country has been hit by the pandemic and two major natural disasters and is now facing an oil price shock stemming from the war in the Middle East. Consequently, the fiscal position has deteriorated markedly: deficits have widened, and public debt has risen by 45 percentage points of GDP since 2019, with roughly half of the increase occurring in the last two years, to 113 percent of GDP in 2025.
Growth moderated to 3.7 percent in 2025 as the post-pandemic rebound faded, although tourism and construction remained strong. Inflation continued to ease, averaging 0.9 percent, reflecting the unwinding of earlier external price shocks and smaller contributions from food, transport, and housing. The current account deficit widened to 20 percent of GDP in 2025, mainly driven by construction-related imports and increased profit repatriation by hotels, despite strong growth in tourism receipts. The fiscal deficit was 12 percent of GDP in 2025, 9 percentage points above its 2019 level. Bank credit to households and micro firms has been insufficient amid a fast expansion by credit unions and is projected to slow further as rising bank exposure to government debt crowds out private sector lending.
Looking ahead, growth is expected to slow further in 2026-27, reflecting higher oil prices, a weaker global outlook, and the normalisation of construction activity, before stabilizing at 2.7 percent over the medium term. Inflation is projected to rise sharply, reaching 2.9 percent by end-2026 due to higher commodity prices, before easing to around 2 percent. The current account deficit is projected to remain large, at around 20 percent of GDP in 2026, and narrow only gradually to 17 percent of GDP by 2031.
Risks to the outlook are tilted to the downside. The country has been at high risk of debt distress since 2016, with fiscal indicators weakening further in recent years. The country is highly exposed to natural disasters, which could have significant fiscal impacts. Externally, a more prolonged war in the Middle East would further weaken growth, worsen the terms of trade, and raise inflation.
A strong and sustained policy effort, centered on fiscal consolidation and supported by structural and financial sector reforms that support growth, is needed to reduce debt and strengthen resilience.
Executive board assessment
Executive directors agreed with the thrust of the staff appraisal. They noted that the economy faces a challenging economic environment. Repeated external shocks have widened fiscal deficits, placed public debt on an unsustainable path, and increased external imbalances, while the war in the Middle East has worsened the near‑term outlook. Against this background, directors welcomed the authorities’ commitment to tackling high and rising debt. They encouraged them to swiftly translate this commitment into concrete and feasible measures to reduce debt, while complementing them with growth‑promoting structural reforms.
Most directors called for urgent, upfront, and sustained fiscal consolidation to restore debt sustainability; while a few directors would favor a more gradual adjustment to mitigate the social and economic impact. Directors agreed that the fiscal adjustment should rely primarily on expenditure rationalisation, while protecting the vulnerable and safeguarding health and education spending. On the revenue side, preserving and broadening the tax base, enhancing tax administration, and carefully designing the planned citizenship‑by‑investment (CBI) program will also be important. Noting the recent emergency package to mitigate the impact from the war in the Middle East, directors stressed that any support measures should remain timebound, well‑targeted, and calibrated.
Directors supported the authorities’ plan to update the Fiscal Responsibility Framework, which would help anchor fiscal consolidation. Noting that fiscal consolidation alone will not be sufficient to restore debt sustainability, directors called for a comprehensive strategy that also includes stronger public debt management, growth‑promoting structural reforms, and support from multilateral and bilateral partners.
Directors stressed the importance of advancing structural reforms to boost growth and employment, improve debt dynamics, and reduce external imbalances. They agreed that the energy transition would lower electricity costs, reduce exposure to volatile energy prices, and strengthen resilience. Directors noted that improving the business environment would further support private sector development. They welcomed the authorities’ commitment to addressing skills mismatches and enhancing data adequacy. Directors stressed the importance of continued capacity building to support the authorities’ efforts.
Directors recommended stronger oversight of credit unions and reforms to support adequate credit growth by strengthening existing intermediation channels. They also agreed that reducing the sovereign‑bank nexus through fiscal consolidation would support private credit growth. While supporting the authorities’ financial development goals, directors encouraged careful consideration of the establishment of a national development bank given the associated fiscal risks. They welcomed continued efforts to strengthen the AML/CFT framework, including to mitigate risks associated with the planned CBI program.
It is expected that the next Article IV consultation with St Vincent and the Grenadines will be held on the standard 12‑month cycle.