An International Monetary Fund (IMF) team, led by Mr. Faircloth, visited Roseau from March 24 to April 3 to discuss Dominica’s economic progress. After the visit, the IMF shared a statement highlighting the country’s achievements and offering recommendations for the future.
Dominica’s Economy Keeps Growing
Dominica’s economy grew by 3.5% in 2024, thanks to a strong recovery in tourism and smart investments in development projects. Tourism has bounced back, with visitor numbers 32% higher than before the pandemic, though more people are coming on cruises rather than staying longer. Inflation has also calmed down to 3.1% in 2024, compared to 7% in 2023. However, job growth in formal sectors hasn’t kept up with the overall economic progress.
A comprehensive policy approach is required to alleviate impediments to innovation and allocative efficiency.
Finances Improving, But Debt Remains High
The government has made progress in balancing its budget, moving from a deficit to a small surplus of 0.1% of GDP expected in FY2024/25. This improvement comes from new taxes on items like sugary drinks, alcohol, tobacco, and diesel, as well as slower spending on big projects. Public debt, which peaked at 112.5% of GDP in FY2020/21 after natural disasters and the pandemic, is now around 100% of GDP—still high compared to other Eastern Caribbean Currency Union (ECCU) countries.
Looking Ahead: Growth and Challenges
The IMF expects Dominica’s economy to grow by 4.25% in 2025, driven by investments in tourism and a shift to affordable geothermal energy. Over time, growth is likely to settle at 2% as major projects wrap up. The trade deficit is also expected to shrink by 2028, thanks to more tourism, fewer fuel imports, and the geothermal energy transition. However, risks like global trade tensions, natural disasters, and lower Citizenship by Investment (CBI) funds could create challenges.
IMF Recommendations for a Stronger Future
The IMF suggests Dominica take steps to strengthen its economy and reduce risks:
- Balance the Budget: Aim for a steady surplus of at least 2% of GDP starting in 2026 to lower public debt below 60% of GDP by 2035. This will require saving about EC$75 million over two years through better tax collection and careful spending.
- Boost Revenue and Cut Costs: Raise money by improving tax systems, adding fees for tourism and highways, and reducing tax breaks. On spending, focus on efficiency, support job training programs, and adjust housing aid to target those most in need.
- Protect Against Disasters: Build up the Vulnerability, Risk, and Resilience Fund (VRF) to prepare for natural disasters, which are a big risk for the island.
- Strengthen Banks and Credit Unions: Keep a close eye on the financial system, especially credit unions, which are growing fast but face issues like high bad loans. Update rules to make the financial sector safer and more reliable.
- Support Growth: Improve education, modernize laws for businesses, and use digital tools to make it easier to start and run companies. The shift to geothermal energy will also help reduce reliance on imported fuel.
Working Together for Progress
The IMF praised Dominica’s efforts and pledged ongoing support to help with data collection, financial management, and policy planning. The team thanked the Dominican authorities for their warm hospitality and open discussions during the visit.
