The International Monetary Fund concluded its 2026 Article IV consultation with St. Vincent and the Grenadines on June 12, reporting that public debt has risen sharply to 113 percent of GDP as repeated external shocks have widened fiscal imbalances and weakened the country's economic outlook.
Public debt increased by 45 percentage points of GDP since 2019, with roughly half of that rise occurring in the last two years alone, the IMF said. The fiscal deficit reached 12 percent of GDP in 2025, 9 percentage points above its pre-pandemic level in 2019. The country has been classified at high risk of debt distress since 2016.
Growth moderated to 3.7 percent in 2025 as the post-pandemic rebound faded, although tourism and construction remained strong, according to the IMF assessment. Looking ahead, the Fund said growth is expected to slow further in 2026-27, reflecting higher oil prices from the Middle East conflict, a weaker global outlook, and the normalization of construction activity. Growth is projected to stabilize at 2.7 percent over the medium term.
Inflation averaged 0.9 percent in 2025 as earlier external price shocks unwound. However, the IMF projects inflation will rise sharply to 2.9 percent by end-2026 due to higher commodity prices linked to the war in the Middle East, before easing back to around 2 percent.
The current account deficit widened to 20 percent of GDP in 2025, driven by construction-related imports and increased profit repatriation by hotels, despite strong growth in tourism receipts. The Fund said the deficit is projected to remain large at around 20 percent of GDP in 2026 and narrow only gradually to 17 percent by 2031.
The IMF noted that bank credit to households and micro firms has been insufficient amid rapid expansion by credit unions, and is projected to slow further as rising bank exposure to government debt crowds out private sector lending.
Risks to the outlook are tilted to the downside, the Fund said. St. Vincent and the Grenadines is highly exposed to natural disasters, which could have significant fiscal impacts. Externally, a more prolonged war in the Middle East would further weaken growth, worsen the terms of trade, and raise inflation.
IMF Executive Directors called for urgent, upfront, and sustained fiscal consolidation to restore debt sustainability, emphasizing that the adjustment should rely primarily on expenditure rationalization while protecting vulnerable groups and safeguarding health and education spending. Directors also supported updating the Fiscal Responsibility Framework and pursuing a comprehensive strategy that includes stronger public debt management, growth-promoting structural reforms, and support from multilateral and bilateral partners.
The Article IV consultation comes as small island developing states across the Caribbean face mounting debt burdens compounded by the spillover effects of the Middle East conflict, including higher energy and food import costs. The IMF noted that a strong and sustained policy effort centered on fiscal consolidation and supported by structural reforms is needed to reduce debt and strengthen resilience.
Sources: imf.org
