Grenada must return to its key fiscal rule by 2027 to safeguard debt sustainability, the International Monetary Fund (IMF) said on Wednesday, after the country temporarily suspended the measure in 2024 to fund recovery from Hurricane Beryl.

The IMF, concluding its annual Article IV economic assessment, said the temporary suspension of the primary balance rule was justified to create space for post-disaster reconstruction. This led to an estimated 2025 primary deficit of 3.2 per cent of gross domestic product (GDP).

However, the fund’s Executive Board endorsed staff advice that “returning to the fiscal rules in 2027 is important to safeguard fiscal discipline and keep debt on a sustainable path”. Grenada’s rule mandates a central government primary balance floor of 1.5 per cent of GDP, a surplus level the IMF projects will be achieved that year.

The return to a 1.5 per cent surplus from 2027 is projected to help place Grenada’s public debt firmly on a downward trajectory, with a key debt target of 60 per cent of GDP now forecast to be achieved by 2033.

The call for renewed fiscal rigour comes alongside praise for Grenada’s recent economic resilience. The IMF estimates real GDP growth accelerated to 4.4 per cent for 2025, driven by strong investment and construction, while inflation moderated to 0.3 per cent.

“The temporary suspension of the primary balance rule provided fiscal space for post-disaster reconstruction without disrupting other priority spending,” the IMF report stated. It credited “prudent savings” of substantial revenues from Grenada’s Citizenship-by-Investment (CBI) programme for providing a critical buffer.

Looking ahead, the IMF projects growth will gradually slow from its current pace to an estimated potential rate of 2.7 per cent by 2029, as the boost from large-scale public investment wanes.

The report flagged significant external sector challenges, assessing Grenada’s 2024 position as “weaker than the level implied by medium-term fundamentals”. A large current account deficit, estimated at 17.5 per cent of GDP for 2025, is expected to remain elevated due to high construction-related imports.

The island’s high vulnerability to natural disasters and dependence on tourism and imports were cited as principal downside risks. The IMF urged careful management of ambitious public investment projects to avoid cost overruns and warned of vulnerabilities in the non-bank financial sector needing close monitoring.

To bolster durable growth, the fund recommended policies to strengthen domestic economic foundations beyond foreign investment-driven tourism. It called for enhancing local business linkages to the tourism sector, reducing trade frictions, and investing in human capital.

The report also highlighted “data deficiencies” in key economic statistics as an impediment to policy-making, urging Grenada to prioritise improvements in its statistical capacity.