WASHINGTON, CMC – The executive board of the International Monetary Fund (IMF) says growth in the economies of the Eastern Caribbean Currency Union (ECCU) is estimated to have moderated to 2.8 percent last year.
The ECCU groups the islands of Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.
The IMF board, which concluded the 2026 regional consultation on common policies of member countries of the ECCU, said this was supported by ongoing construction and strong tourism performance, notwithstanding a slowdown in arrivals from post-pandemic recovery levels. Inflation continued to moderate in line with global trends in fuel and food prices.
However, the Washington-based financial institution said fiscal outcomes lagged economic performance, and union-wide public debt reduction has stalled.
It said that the external position continues to be assessed as weaker than the level implied by fundamentals and desirable policies, with elevated current account deficits financed largely by foreign direct investment (FDI) inflows.
“Nonetheless, the ECCB’s (Eastern Caribbean Central Bank) reserve position has remained stable and the currency backing ratio high. The financial system remains broadly stable, but legacy balance sheet weaknesses and non-bank vulnerabilities persist.”
The IMF said that growth is projected to moderate further amid elevated downside risks, and that real GDP growth is expected to slow to 2.4 percent in 2026 as higher fuel and other import costs triggered by the war in the Middle East weigh on activity, alongside binding tourism capacity constraints.
“Growth is expected to ease further over the medium term owing to weak productivity, adverse demographic trends, and limited fiscal space to sustain current levels of public investment.”
The IMF said that heightened global uncertainty and geopolitical tensions, including the risk of higher and more sustained global oil prices, amplify the region’s long-standing vulnerabilities stemming from heavy reliance on tourism and imports, exposure to global commodity price volatility and natural disasters, elevated public debt, and dependence on Citizenship by Investment (CBI) program inflows.
The IMF board said that strengthening union-wide institutional mechanisms to reinforce fiscal sustainability and resilience is a key policy priority.
It said that uneven progress in public debt reduction, partly reflecting high exposure to recurrent external shocks and sizeable social and development investment needs, puts union-wide attainment of the 60 percent of gross domestic product (GDP) regional debt target by 2035 at risk.
“A collective commitment to time-bound operationalization of rules-based national fiscal frameworks, grounded in harmonized design principles, would strengthen fiscal discipline, support sustained debt reduction, and better equip the union to navigate future shocks.
“This should be supported by enhanced peer review of fiscal performance at the ECCB Monetary Council, strengthening public accountability through the establishment of independent national oversight committees, clearer specification of the public debt target perimeter, and collaborative efforts to address data gaps and strengthen technical capacity underpinning macro-fiscal projections.”
The IMF board said that deeper policy coordination would help preserve space for public investment and strengthen resilience.
It said rationalizing costly tax exemptions, especially in tourism, and strengthening social safety nets to reduce reliance on distortionary, untargeted fiscal responses to shocks would improve fiscal performance and efficiency.
It said policy responses to renewed fuel and other import price pressures should balance short-term mitigation with medium-term fiscal objectives without jeopardizing fiscal sustainability, be anchored in available fiscal space, and rely on targeted, temporary measures, supported by the development of more symmetric and rules-based retail fuel pricing frameworks.
The IMF board said that lessons from the post-Hurricane Beryl financing framework underscore the value of layered risk management.
“Over time, greater centralization of fiscal accountability, funding, and risk-contingency mechanisms could future-proof the union’s resilience and development prospects. This would help underpin confidence once sovereign funding structures mature and impose greater market discipline on public finances, as well as create scope to overcome structural funding constraints stemming from limited scale and high shock vulnerability.”
The IMF also said that oversight of non-banks must be strengthened. The prompt establishment of the Eastern Caribbean Financial Standards Board (ECFSB) and the expedited adoption of minimum prudential standards for credit unions are essential to limit regulatory arbitrage between bank and non-bank deposit-taking institutions and excessive risk-taking.
“In the interim, national authorities should strengthen capital and provisioning requirements, coordination on good supervisory practice, and legal supervisory and regulatory powers. Enhanced monitoring of insurance sector exposures, particularly for property-related risks, remains important.”
The IMF board said harmonized strengthening of CBI regimes under the Eastern Caribbean Citizenship by Investment Regulatory Authority (ECCIRA) can safeguard these important investment inflows and better harness their economic benefits through greater accountability and transparency.
“Greater transparency of CBI flows is critical to improve economic data accuracy and strengthen assessment of regional vulnerabilities.”
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