WASHINGTON, United States (CMC) — The International Monetary Fund (IMF) says St Kitts-Nevis needs a multi-pronged strategy to preserve macro-financial stability and hard-earned gains in debt sustainability.

The Washington-based financial institution said that although the twin-island federation continued to enjoy strong macroeconomic performance in recent years, the outlook is highly dependent on developments in the Citizenship by Investment Programme (CIP).

The IMF said the economy continued its strong growth at around five per cent, recording the strongest growth in the region over 2013-2015.

“Strong growth has been underpinned by construction and tourism sector activity and their favourable spill-over on the rest of the economy, supported by surging inflows from its Citizenship-by-Investment programme.

“Large CIP inflows continued in 2015, albeit at a slower pace, reflecting the temporary impact of the program reform and increased competition from similar programs in the region.”

The IMF said that the elements of the new strategy should include strengthening the fiscal framework to reduce reliance on CIP inflows, while preserving the accumulated savings from the CIP programme and further improving public financial management.

It said the strategy also calls for resolving the debt-land swap to safeguard financial stability, while mitigating emerging financial sector risks; and enhancing competitiveness, diversification, and resilience to shocks, including from natural disasters.

“A prudent medium-term fiscal framework with a zero primary balance target, net of CIP receipts and Sugar Industry Diversification Foundation (SIDF) grants, would help safeguard fiscal sustainability, with the adjustment paced over the medium-term.”

The IMF said that the framework would help build resilience to negative surprises in future CIP inflows, and facilitate accumulation of fiscal buffers to address external shocks and absorb unforeseen financing needs if tax performance disappoints after CIP flows decline.

“Implementing this framework requires broadening the tax base, including by streamlining tax incentives and further improving compliance, especially at the Nevis Island Administration (NIA) level, as well as containing recurrent spending.”

It said that the authorities’ commitment to a comprehensive review of the concessions regime is welcome, as well as plans to contain the wage bill and spending on goods and services.

The IMF said that establishing a ‘Growth and Resilience Fund’ can help preserve the accumulated savings from the CIP programme, while providing a contingency buffer for future shocks, such as costly natural disasters.