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The International Monetary Fund (IMF) has urged the Government of Saint Kitts and Nevis to press ahead with stronger fiscal reforms and disciplined economic management as the country faces mounting debt pressures, declining Citizenship by Investment (CBI) revenues, and ongoing global economic uncertainties.

Following bilateral consultations under Article IV, the IMF Executive Board stated that continued fiscal consolidation, supported by a robust fiscal resilience framework, will be essential to stabilise public debt, rebuild government financial buffers, and reduce the Federation’s vulnerability to external economic shocks.

According to the IMF, a “moderately frontloaded consolidation programme” — combining expenditure rationalisation with increased revenue mobilisation — could help stabilise public debt at the Eastern Caribbean Currency Union’s regional benchmark by 2031.

The Executive Directors noted that stricter fiscal management would also strengthen government deposits and improve the country’s ability to respond to future economic disruptions, natural disasters, or external crises.

“Current expenditure requires further rationalization, including streamlining goods and services spending,” the IMF Executive Board stated.

The Washington-based institution reported that economic growth in St. Kitts and Nevis slowed during 2025 but is expected to rebound to approximately two percent in 2026 before strengthening gradually over the medium term.

The IMF projected that the recovery will be driven by increased construction activity, agriculture, renewable energy development, and continued expansion within the tourism sector. However, the Fund warned that elevated oil prices linked to instability and conflict in the Middle East could negatively impact the Federation through higher transportation and tourism-related costs.

Inflation is also projected to increase moderately to 2.2 percent in 2026 due to higher global food and energy prices before stabilising over time.

Meanwhile, the IMF highlighted concerns about the country’s widening current account deficit, which stood at 14.6 percent of Gross Domestic Product (GDP) in 2025 — significantly above pre-pandemic levels.

The Executive Board acknowledged that the Federation’s banking sector remains broadly stable despite lingering vulnerabilities. It also praised ongoing progress in geothermal and solar energy projects, which are expected to strengthen long-term energy resilience and economic sustainability.

A major area of concern identified by the IMF was the continued decline in revenues generated through the Citizenship by Investment Programme.

The Fund stated that falling CBI inflows contributed significantly to the country’s overall fiscal deficit widening to 11.7 percent of GDP in 2025. Public debt also moved closer to the ECCU benchmark of 60 percent of GDP, while government deposits continued to decline.

The IMF warned that persistently low CBI revenues could keep fiscal deficits elevated through 2026 and beyond, causing public debt levels to rise further if corrective action is not implemented.

While the IMF maintained that debt sustainability remains intact, it cautioned that contingent liabilities associated with public banks and the Social Security Fund (SSF) continue to pose significant fiscal risks.

The Executive Board also called for urgent reforms to the Social Security Fund, warning that reserves could become depleted by 2040 without immediate parametric adjustments.

In recommending ways to strengthen government revenues, the IMF suggested rolling back several COVID-era tax concessions, broadening the Value Added Tax (VAT) base, strengthening property taxation systems, increasing excise taxes, and improving tax administration and compliance mechanisms.

The Executive Board further stressed the importance of formally adopting fiscal rules tied to the regional debt benchmark.

“This would help the authorities’ ongoing efforts to reduce reliance on Citizenship by Investment revenues, mitigate fiscal procyclicality, and strengthen policy credibility,” the IMF stated.

The Fund also welcomed plans to establish a Sovereign Wealth Resilience Fund, describing it as a potentially important mechanism for managing fluctuations in CBI revenues, improving disaster preparedness, and supporting long-term fiscal sustainability.

The IMF additionally urged continued reforms within the financial sector, including resolving legacy non-performing loans (NPLs), strengthening financial provisioning standards, and reducing investment risks within banking institutions.

It also called for comprehensive reform of the Development Bank to help safeguard both financial and fiscal stability, while encouraging stronger oversight frameworks for the non-banking financial sector through the Financial Services Regulatory Commission (FSRC).

The latest IMF assessment comes at a time when regional governments across the Caribbean continue balancing economic recovery efforts with rising global uncertainties, inflationary pressures, debt management challenges, and evolving geopolitical risks.