WASHINGTON, CMC – The manager board of the Worldwide Financial Fund (IMF) says Dominica’s economic system has continued its enlargement and that actual gross home product (GDP) grew by 3.5 % final yr, supported by a restoration in tourism and focused growth funding to spice up financial capability and competitiveness.
In a press release following its Article IV session with the Caribbean island, the IMF govt board stated that inflation has eased from its 2023 peak of seven %, averaging 3.1 % in 2024.
“Tourism arrivals have surpassed pre-pandemic ranges by roughly 32 %, however the composition has shifted in the direction of cruise guests over stayovers. The labor market restoration stays uneven, with formal employment lagging behind general development.”
The Washington-based monetary establishment stated that fiscal and exterior imbalances have narrowed however stay massive. The first steadiness improved by 2¼ share factors (ppts) to a deficit of two % of GDP within the monetary yr 2023/24, reflecting declines in major present spending that greater than offset reasonably decrease revenues.
The IMF stated public debt has steadily declined from its pandemic peak however stays elevated at 100% of GDP. It stated the present account deficit narrowed by two factors to 32¼ % of GDP in 2024, reflecting larger tourism receipts.
“The monetary system is liquid with a blended credit score image and steadiness sheet fragilities that require monitoring. Financial institution credit score has declined additional since 2023, reflecting ongoing de-risking amid persistent steadiness sheet challenges, notably elevated non-performing loans (NPLs) and nonetheless fragile provisioning.
In the meantime, the credit score union (CU) sector is quickly increasing its lending portfolio regardless of weak capitalization, excessive non-performing loans (NPLs), and restricted provisioning. Modernizing the supervisory framework governing these establishments is a precedence to safeguard monetary sector stability given their rising systemic significance.”
The IMF Government Board acknowledged that Dominica’s financial enlargement is poised to proceed, however dangers to the outlook are elevated and tilted to the draw back.
It’s projected that actual GDP development will common 3.5 % over the following three years, underpinned by ongoing funding in flagship infrastructure initiatives that may increase tourism capability and facilitate a transition to lower-cost geothermal vitality.
The IMF acknowledged that the heavy import-related content material of those initiatives has eroded the exterior place, which is assessed to be considerably weaker than implied by medium-term fundamentals and fascinating coverage settings. Nonetheless, gradual enhancements are anticipated as vital capital outlays wind down and monetary consolidation intensifies.
It acknowledged that dangers are elevated, reflecting Dominica’s vulnerability to pure catastrophe shocks and amid the evolving commerce coverage and geopolitical surroundings.
The manager board acknowledged that extra formidable fiscal consolidation than presently envisioned underneath the authorities’ insurance policies is important to cut back financial imbalances, mitigate catastrophe dangers, and assist reinforce prospects for resilient development.
“The general danger of debt misery is excessive, and as such, it’s crucial to rebuild fiscal buffers by reaching and sustaining a major surplus of three.5 % of GDP from 2026 onward to cut back public debt under 60 % of GDP by 2035 in addition to adequately capitalize the Vulnerability and Resilience Fund to mitigate catastrophe dangers.”
The manager board acknowledged that the technique ought to concentrate on broadening the income base, optimizing expenditures to protect area for macro-critical investments, and enhancing the concentrating on and sustainability of social safety applications.
It stated decreasing steadiness sheet vulnerabilities and strengthening regulatory oversight are crucial.
“For banks, priorities embrace stricter enforcement of provisioning and NPL requirements, managing mortgage loss allowances, and facilitating the disposal of impaired property whereas intently monitoring sovereign and international funding exposures.
“For credit score unions, reforms to modernize the prevailing regulatory regime is crucial by reinforcing the Monetary Providers Unit’s operational independence, enhancing risk-based supervision, updating regulatory thresholds, strengthening provisioning and mortgage administration frameworks, and bolstering enforcement instruments.”
The IMF stated that continued structural reforms are important for fostering resilient and sustainable development and that addressing structural challenges that hinder monetary intermediation stays a precedence.
It welcomed the upcoming launch of a regional credit score bureau, including that complementary reforms ought to purpose at modernizing collateral, foreclosures, and chapter frameworks.
“Eliminating gaps in schooling and coaching relative to financial wants is crucial to enhance labor market outcomes. A complete method is required to foster innovation and allocative effectivity, together with exploiting digitalization and streamlining administrative processes for tax compliance, enterprise registration, and allowing.”
The IMF acknowledged that concerted efforts to strengthen institutional frameworks and mitigate dangers ought to proceed, with a concentrate on supporting surveillance, financial planning, and coverage implementation.
It acknowledged that progress on regional coordination throughout Citizenship-by-Funding (CBI) applications to boost due diligence and transparency is welcome.
“Proactive engagement to deal with evolving considerations round Dominica’s CBI regime stays crucial to safeguard this important supply of growth financing,” it stated.
Underneath the CBI program, Dominica gives citizenship to international traders in alternate for a considerable funding within the island’s socio-economic growth.
