IMF flags rising fiscal challenges in Dominica, presses for reform action
Dominica’s economy continued to grow in 2025 after the pandemic, but the International Monetary Fund is urging the government to tighten fiscal policy, strengthen financial oversight, and accelerate structural reforms to safeguard long-term stability.
Christopher Faircloth led an IMF mission that finished its 2026 Article IV consultation on March 26. The mission noted that the economy was doing well but warned that rising debt, widening deficits, and weaknesses in the financial sector are making things riskier.
The IMF said that real GDP expanded by 4.5% in 2025, up from 3.5% the year before. This was because the tourism sector was now 36% larger than before the epidemic, and public investment projects were still underway. Inflation dropped to 2.3 per cent, but the current account deficit remained high at 38 per cent of GDP because construction requires many imports.
The main fiscal deficit rose to 4.5 per cent of GDP due to large infrastructure expenditures, including major highways and geothermal transmission lines. This ended years of progressive stabilisation. Even though public debt is lower than its epidemic high of 118 per cent of GDP, it remains high at 103 per cent, well above the regional target of 60 per cent.
The Fund said that Dominica’s current fiscal path does not meet the standards of its Fiscal Rule, which requires the primary surplus to be at least 2% until debt falls below 60% of GDP. It further said that Dominica’s Disaster Resilience Strategy calls for building buffers that are equal to 12% of GDP.
The IMF says that to reach these goals, the government needs to make an extra EC$60 million in fiscal consolidation over the next two years. Half of that should happen by FY2026/27. The Fund stressed the need to cut back on revenue from Citizenship by Investment (CBI) and improve tax collection, all while safeguarding social programs and investments that will help the economy thrive.
The IMF said that large non-performing loans and high sovereign exposures remain problems, even though banks are liquid and well-capitalised. Borrowing unions, which now account for 53% of private-sector borrowing, are considerably more vulnerable because they have weak capital buffers and outdated rules.
The IMF asked for tougher implementation of provisioning norms, the completion of ongoing asset-quality reviews, and full engagement in regional regulatory efforts.
The research says that a lot of changes need to be made to make businesses more competitive and resilient, such as:
- Updating customs and making a single-window platform for everyone
- Improving digital infrastructure and vocational training
- Making business processes and laws better
- Improving governance and due diligence in the CBI program
The IMF also underlined the need to modernise how the government handles money, set up the long-delayed Fiscal Responsibility Committee, and make the statistics tools that support decisions better.
Growth is predicted to decline to about 3% in 2026–27 and subsequently to about 2% as big construction projects come to an end. By 2035, public debt is expected to be 70% of GDP. However, the IMF still thinks Dominica is at a high risk of going into debt difficulty.
Risks remain largely on the downside, including geopolitical tensions, uncertainty about CBI inflows, and Dominica’s high risk of natural disasters.
The IMF team commended the Dominican government for their “warm hospitality, cooperation, and constructive dialogue.”
Whole report at https://www.imf.org/en/news/articles/2026/03/27/mcs-03272026-dominica-staff-concluding-statement-of-the-2026-article-iv-mission.