The International Monetary Fund (IMF) has given the Commonwealth of Dominica a thumbs up following the conclusion of an article IV consultation on May 31.

The Eastern Caribbean state was noted to have rebounded to pre-pandemic output levels as real gross domestic product (GDP) grew by 5.6 per cent in 2022 and by an estimated 4.7 per cent in 2023. These improvements were credited to the success of tourism and citizenship by investment (CBI) revenue. This was accompanied by a reduction in inflation from 9.75 per cent in 2022 to 2.25 per cent at the end of 2023.

“Dominica’s economic outlook is positive, predicated on a continued recovery in tourism and the implementation of the country’s economic modernisation and resilience-building agenda. The transition to local geothermal energy production, as well as expanded airport and hotel capacity, is expected to sustain economic activity, reduce the dependency on fossil fuels, and boost tourism. The current account deficit is expected to narrow as tourism exports expand while import growth slows as the construction of large infrastructure projects is gradually completed,” the IMF report stated on the improving economic picture.

Although the IMF projects 4.6 per cent in real GDP growth and 2.2 per cent inflation for 2024, it said the country should focus on greater fiscal consolidation as these initiatives would help reduce debt, meet fiscal goals and self-insure against disaster risks. This would be supported by strengthening the tax administration and compliance management, reintroducing the VAT (value added tax) applied to the electricity price fuel surcharge and broadening the non-CBI revenue base by streamlining tax incentives.

“Directors underscored the need to protect the most vulnerable by enhancing the efficiency and sustainability of the social protection framework, including by better targeting social assistance programmes. Reforming the pension scheme to ensure its long-term sustainability amid rising demographic pressures would also be important,” the report added.

The financial system continues to remain stable and well-capitalised despite slightly elevated non-performing loans and credit growth to the private lagging nominal GDP growth. Although credit union recapitalisation is an ongoing process, the IMF highlighted the need to strengthen financial system oversight and reduce balance sheet vulnerabilities along with granting statutory independence to the Financial Services Unit. Further strengthening the CBI programme frameworks and addressing the remaining AML (anti-money laundering) and CFT (combatting the financing of terrorism) deficiencies will be key in addressing some of the structural impediments to financial intermediation.

“Directors welcomed Dominica’s modernisation and climate adaptation agenda, including the authorities’ Climate Resilience and Recovery Plan. They noted that the ongoing transition to renewables alongside reforms to improve the business environment and address labor market frictions would further enhance competitiveness and growth prospects. Directors underscored the importance of improving statistical compilation, tax administration, and public financial management frameworks—including CBI reporting systems — to enhance policy management. They encouraged the authorities to leverage IMF technical assistance to support their reform efforts,” the report concluded.