The IMF staff's 2026 Article IV mission to Saint Vincent and the Grenadines found that despite economic resilience, the nation faces significant vulnerabilities including wide fiscal deficits, high public debt, and large external imbalances. Decisive policy action is urgently needed, encompassing prompt and sizeable fiscal consolidation, structural reforms, and financial sector strengthening to support growth and enhance resilience. The outlook is subject to downside risks from natural disasters and global shocks like the war in the Middle East.
Every atomic assertion extracted from the underlying record, ranked by evidence strength.
About half of the increase in Saint Vincent and the Grenadines' debt ratio occurred in the last two years, reaching 113 percent of GDP in 2025.
The primary balance in Saint Vincent and the Grenadines would have to improve by 11 percentage points of GDP during 2027-29 to achieve a reduction in debt.
The transition to renewable energy in Saint Vincent and the Grenadines could significantly lower energy costs for households and firms and build resilience against volatile oil prices.
Wide fiscal deficits, high and rising public debt, and large external imbalances underscore the need for decisive policy action in Saint Vincent and the Grenadines.
Saint Vincent and the Grenadines has suffered from the pandemic and two major natural disasters in the past six years.
Saint Vincent and the Grenadines is now facing the oil price shock from the war in the Middle East, which would particularly hit the vulnerable.
The fiscal situation in Saint Vincent and the Grenadines has continuously deteriorated since the pandemic.
The debt ratio of Saint Vincent and the Grenadines rose by 45 percentage points of GDP since 2019.
Tourism and construction remained strong in Saint Vincent and the Grenadines in 2025.
Since November, the new government of Saint Vincent and the Grenadines has introduced VAT-free days, expanded the wage bill, and increased social support as one-off measures.
The 2026 budget for Saint Vincent and the Grenadines, passed in February, envisages a deficit of 19 percent of GDP.
Capital expenditure plans for Saint Vincent and the Grenadines in 2026 remain ambitious, at 17 percent of GDP.
IMF staff projects a deficit of 12 percent of GDP in Saint Vincent and the Grenadines in 2026, assuming lower capital expenditure than budgeted in line with past underexecution.
Without a decisive change in policies, public debt in Saint Vincent and the Grenadines is set to continue to rise.
Gross financing needs for Saint Vincent and the Grenadines are projected to reach 26 percent of GDP by 2031 under the baseline scenario.
A more protracted war in the Middle East would further weaken growth, deteriorate the terms of trade, and push up inflation in Saint Vincent and the Grenadines.
The war in the Middle East has worsened the near-term outlook for growth and inflation in Saint Vincent and the Grenadines.
Growth in Saint Vincent and the Grenadines moderated to 3.7 percent in 2025 as the post-pandemic rebound faded.
Achieving a debt reduction implies reaching a 3 percent of GDP primary surplus in Saint Vincent and the Grenadines by 2029.
Growth in Saint Vincent and the Grenadines is expected to decelerate further in 2026-27 due to higher oil prices, a weaker global outlook, and normalization of construction activity, converging to 2.7 percent in the medium term.
Inflation in Saint Vincent and the Grenadines is projected to rise sharply to 2.9 percent by end-2026 because of war-related commodity price shocks and thereafter stabilize at 2 percent.
External imbalances in Saint Vincent and the Grenadines remain large.
The current account deficit in Saint Vincent and the Grenadines widened to 20 percent of GDP in 2025, mainly driven by construction-related imports and increased profit repatriation by hotels, despite strong growth in tourism receipts.
The external position of Saint Vincent and the Grenadines is assessed to be substantially weaker than the level implied by medium-term fundamentals and desirable policies.
The current account deficit in Saint Vincent and the Grenadines is projected to remain high, at around 20 percent of GDP in 2026, and only narrow gradually to 17 percent of GDP by 2031.
Bank credit growth to households and micro firms in Saint Vincent and the Grenadines has been insufficient amid a fast expansion by credit unions.
The local bank in Saint Vincent and the Grenadines, which dominates the financial sector, has low non-performing loans (NPL), adequate provisions, and high capital, but also a very large sovereign exposure.
Credit unions in Saint Vincent and the Grenadines have maintained rapid lending.
The economic outlook for Saint Vincent and the Grenadines is subject to downside risks.
Saint Vincent and the Grenadines has been at high risk of debt distress since 2016, while fiscal indicators have further weakened.
Saint Vincent and the Grenadines is exposed to natural disasters, with potentially sizable fiscal implications.
Under the baseline with no change in policies, fiscal deficits in Saint Vincent and the Grenadines are projected to remain large, propelling the debt ratio to 145 percent of GDP by 2031.
The high risk of debt distress in Saint Vincent and the Grenadines calls for urgent fiscal consolidation.
IMF staff and the authorities of Saint Vincent and the Grenadines agree on the need to promptly implement an ambitious fiscal consolidation to avoid the prospects of a disorderly fiscal adjustment.
The authorities of Saint Vincent and the Grenadines may consider marketable assets for privatization.
Developing a contingency plan with concrete measures would allow the government of Saint Vincent and the Grenadines to promptly act, should fiscal risks materialize.
IMF staff proposed an illustrative active policy scenario to reduce the risk of debt distress in Saint Vincent and the Grenadines.
The proposed scenario aims to change the debt trajectory within three years and achieve the regional debt target of 60 percent of GDP in the long term for Saint Vincent and the Grenadines.
Fiscal deficits in Saint Vincent and the Grenadines have widened, driven by post-disaster rebuilding and relief, large construction projects, and rising current expenditure.
Prompt and sizeable fiscal consolidation, structural reforms, and financial sector reforms are needed to reduce debt, support growth, and enhance resilience in Saint Vincent and the Grenadines.
A 3 percent of GDP primary surplus would need to be maintained over the long term in Saint Vincent and the Grenadines.
As tax revenue is already relatively high in Saint Vincent and the Grenadines, the fiscal adjustment would have to be carried out mainly through expenditure measures.
IMF staff welcome the authorities' work on their debt reduction strategy for Saint Vincent and the Grenadines.
The authorities of Saint Vincent and the Grenadines have already prepared a comprehensive strategy to put the debt ratio on a downward trajectory.
The next step for Saint Vincent and the Grenadines' debt reduction strategy would be to identify and quantify concrete measures.
Expenditure measures in Saint Vincent and the Grenadines should prioritize streamlining, while protecting the vulnerable, especially amid the oil price shock.
A comprehensive expenditure review would be useful to identify areas for streamlining in Saint Vincent and the Grenadines.
The authorities of Saint Vincent and the Grenadines have expressed interest in technical assistance from the International Monetary Fund for an expenditure review.
The wage bill in Saint Vincent and the Grenadines is high based on the country's own historical record and international comparisons and could be reduced through natural attrition and wage moderation.
Other primary expenditure categories in Saint Vincent and the Grenadines also remain above pre-pandemic averages and should be rationalized, while protecting health and education.
Reforming the public sector pension system in Saint Vincent and the Grenadines, based on past International Monetary Fund advice, would help streamline expenditure.
Social support programs in Saint Vincent and the Grenadines need to protect the vulnerable, but digitalization of assistance could help better identify and target beneficiaries and limit leakage.
IMF staff support the authorities' plan to review investment policies and to strengthen public investment management in Saint Vincent and the Grenadines.
Key priorities for public investment in Saint Vincent and the Grenadines would be critical infrastructure and investment in resilience to natural disasters.
Public investments in marketable assets can have distortionary economic effects and should be avoided in Saint Vincent and the Grenadines.
Reforms are needed to strengthen the public investment management framework in Saint Vincent and the Grenadines.
Tax revenue needs to be preserved, and tax administration further strengthened in Saint Vincent and the Grenadines.
A comprehensive tax reform in Saint Vincent and the Grenadines would result in a more growth-friendly and equitable system.
The authorities of Saint Vincent and the Grenadines have expressed interest in additional technical assistance from the International Monetary Fund for tax reform.
Saint Vincent and the Grenadines' economy has demonstrated resilience in the face of repeated shocks, but significant vulnerabilities remain.