St .Kitts and Nevis/IMF Executive Board Concludes 2026 Article IV Consultation with St. Kitts and Nevis

 

 

IMF Executive Board Concludes 2026 Article IV Consultation with St. Kitts and Nevis

FOR IMMEDIATE RELEASE

Washington, DC – May 8, 2026: In concluding the 2026 Article IV consultation with St. Kitts and Nevis, Executive Directors endorsed staff’s appraisal as follows.^[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.^[2]

Economic growth slowed in 2025 but is expected to rebound to 2 percent (y/y) in 2026 and strengthen over the medium term. The projected pickup this year is supported by construction, agriculture, renewable energy projects, and the continued expansion of tourism activities, although elevated oil prices associated with the war in the Middle East would weigh on the economy through their impact on tourism and transportation sectors. Inflation is expected to rise moderately to 2.2 percent in 2026, driven by higher global energy and food prices, before stabilizing over the medium term. The current account deficit remains wide at 14.6 percent of GDP in 2025, well above the pre-pandemic average. The banking system remains broadly stable, although vulnerabilities persist. Geothermal and solar energy projects are advancing steadily.

With Citizenship-by-Investment (CBI) revenue declining further, the overall fiscal deficit widened to 11.7 percent of GDP in 2025, public debt edged up closer to the 60 percent of GDP regional benchmark, and government deposits declined further. Persistently low CBI revenues are expected to keep deficits elevated in 2026 and over the medium term, while public debt is projected to continue rising. Debt sustainability is maintained, but contingent liabilities from public banks and the Social Security Fund (SSF) pose significant risks.

Near-term growth risks are tilted to the downside, while inflation risks are tilted to the upside. Heightened global policy uncertainty—including related to CBI programs—geopolitical tensions, and volatility in commodity and financial markets, could weigh on CBI inflows and tourism, and adversely affect banks’ investment portfolios. Persistently high oil prices could weigh further on growth and exacerbate inflationary pressures. Domestically, financial-sector weaknesses and exposure to natural disasters could pose fiscal risks. On the upside, a successful energy transition could strengthen medium-term growth.

Executive Board Assessment

Continued fiscal consolidation, supported by a strong fiscal resilience framework, is critical to stabilize debt, rebuild buffers, and reduce vulnerability to shocks. Under a moderately frontloaded consolidation scenario combining expenditure rationalization and revenue mobilization, public debt would stabilize at the regional benchmark by 2031 and higher government deposits would help rebuild buffers. Current expenditure requires further rationalization, including streamlining goods and services spending. Policy measures to mitigate the impact of higher oil prices should be well targeted and timebound. Tax revenue has ample scope to increase through rolling back Covid-era concessions, broadening the VAT base, strengthening property taxation, increasing excises, and improving tax administration.

Formally adopting fiscal rules anchored by the regional debt benchmark is essential to underpin fiscal consolidation efforts. This would help the authorities’ ongoing efforts to reduce reliance on CBI revenues, mitigate fiscal procyclicality, and strengthen policy credibility. The planned Sovereign Wealth Resilience Fund is also welcome; its implementation—in line with IMF TA—would help manage CBI revenue volatility, enhance disaster resilience, and support long‑term fiscal sustainability. Parametric reforms to the SSF should proceed without delay to prevent reserve depletion by 2040.

The banking system remains broadly stable, although vulnerabilities persist. Capital positions have strengthened and NPL 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.

Structural reforms are essential to raise medium-term growth potential. Priorities include accelerating renewable energy projects, enhancing the investment climate, and addressing labor-market skills mismatches. Continued efforts to improve data adequacy are also important.

St. Kitts and Nevis: Selected Economic Indicators 2021-27
							Est.			Proj.
	2021	2022	2023		2024			2025			2026		2027
	(Annual percentage change, unless otherwise specified)
National income and prices
Real GDP (market prices)	0.6	10.5	4.6		1.7			1.5			2.0		2.5
Real GDP (factor cost)	1.9	8.0	4.6		1.9			2.1			2.3		2.5
Consumer prices, period average	1.9	3.8	1.6		1.9			1.5			2.2		2.1
Real effective exchange rate appreciation (+) (end-of-period)	1.2	2.7	3.6		1.1			1.3			2.2		2.1
Money and credit 1/
Broad money	8.9	3.7	-1.9		2.5			16.0			10.2		8.2
Change in net foreign assets	9.1	-7.1	-6.3		-12.8			-2.3			-2.0		-1.8
Net credit to general government	-4.8	4.9	0.3		9.3			11.7			8.1		6.7
Credit to private sector	7.7	5.9	5.1		10.8			10.0			6.5		5.3
	(In percent of GDP)
Public sector 2/
Total revenue and grants	47.5	46.1	43.9		33.1			30.7			32.2		32.7
o/w Tax revenue	19.4	18.8	19.7		19.9			19.5			20.2		20.2
o/w CBI fees	23.8	25.8	22.2		8.6			5.3			6.0		6.5
Total expenditure and net lending	42.0	50.4	43.7		44.4			42.4			40.8		40.2
Overall balance	5.5	-4.2	0.2		-11.3			-11.7			-8.7		-7.5
Total public debt (end-of-period)	73.0	64.5	60.0		58.1			58.4			64.0		68.7
General government deposits (percent of GDP) 3/	31.0	22.0	20.8		11.0			7.2			3.0		2.9
External sector
External current account balance	-3.4	-10.8	-13.7		-13.0			-14.6			-15.4		-14.2
Trade balance	-25.3	-35.3	-35.4		-35.6			-34.1			-36.4		-35.9
Memorandum items
Net international reserves, end-of-period
Holdings of SDRs, in millions of U.S. dollars	312.8	270.3		262.4		270.7			269.0			267.3		265.5
Nominal GDP at market prices (in millions of EC$)	2,277	2,599		2,793		2,836			2,921			3,085		3,233
Sources: St. Kitts and Nevis authorities; ECCB; UNDP; World Bank; and IMF staff estimates and projections.
1/ The series for monetary aggregates have been revised consistent with the 2016 Monetary and Financial Statistics Manual and Compilation Guide.
2/ Consolidated general government balances. Primary and overall balances are based on above-the-line data.
3/ Includes only central government deposits at the commercial banks.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF’s Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the https://www.imf.org/St. Kitts and Nevis page.

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Fernando Puchol fpuchol@IMF.org

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