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---

### Recent developments
- Real GDP growth: "Growth in 2024 is estimated at 3.5 percent", driven by retail and trade, construction, and tourism.
- Tourism:
  - Arrivals at "131 percent of pre-pandemic levels", with a composition shift "towards cruise visitors over higher value-added stayovers".
  - Cruise arrivals: 124 percent of pre-pandemic levels in 2024; Stayover arrivals: 89 percent of pre-pandemic levels in 2024.
- Inflation:
  - "Inflation picked up during 2023—peaking at 7 percent in September—but eased to 2.1 percent by end-2024".
- Labor market:
  - "The labor market recovery remains uneven, with formal employment lagging behind overall growth."
  - Lag partly attributed to "the heavy imported labor component of large projects."
- Fiscal outcomes and public debt:
  - "The primary balance improved by 2¼ percentage points (ppts) to a deficit of 2 percent of GDP in FY2023/24."
  - Cumulative adjustment of "4¼ percent of GDP (both on a primary and overall balance basis) ... including 2¼ percent of GDP consolidation during FY2023/24".
  - "Total public debt has declined from its post-pandemic peak of 112½ percent of GDP but remains elevated at 100 percent of GDP" and is "assessed at high risk of debt distress."
  - Domestic arrears "have more than halved since the post-pandemic peak—but remain high at 3.5 percent of GDP."
- External sector:
  - "The current account deficit narrowed by 2 ppts to 32¼ percent of GDP in 2024" (also reported as "32.2 percent of GDP in 2024"), reflecting higher tourism receipts.
  - External imbalances remain large due to import-heavy infrastructure projects.

### Outlook and risks
- Growth projections:
  - "Real GDP growth is projected to average 3½ percent over the next three years" and "is projected to average 3½ percent in the coming years before converging to 2 percent in the long term."
- Inflation and current account:
  - "Inflation is expected to recede to 2 percent, in line with trading partner trends."
  - "The current account should revert to its norm over the medium-term on the back of increased tourism and a normalization of investment-related imports."
- Debt trajectory and vulnerabilities:
  - "Public debt is set to decline gradually in coming years ... but remains above the prudential currency union debt benchmark and is susceptible to shocks."
  - Key downside risks: "vulnerability to natural disaster shocks", "evolving trade policy and geopolitical environment", and uncertain Citizenship-by-Investment (CBI) flows.
- Executive Board assessment highlights:
  - "Dominica’s economic expansion is poised to continue, but risks to the outlook are elevated and tilted to the downside."
  - Overall risk of debt distress is characterized as "high."

### Financial sector and balance-sheet vulnerabilities
- Banking sector:
  - "The financial system is liquid with a mixed credit picture and balance sheet fragilities that require monitoring."
  - "Bank credit has declined further since 2023 reflecting ongoing de-risking amid persistent balance sheet challenges, notably elevated non-performing loans (NPLs) and still fragile provisioning."
  - Banks: credit contracted by 5 percent since 2022; banks now comprise less than half of total private sector credit.
  - Banks remain well-capitalized but NPLs exceed regulatory thresholds; provisioning is overstated by excess reserves.
  - Priorities: enforce provisioning and NPL standards, manage loan loss allowances, facilitate disposal of impaired assets, and closely monitor sovereign and foreign investment exposures.
- Credit unions (CU):
  - "The credit union (CU) sector is expanding its lending portfolio rapidly, despite weak capitalization, high NPLs, and limited provisioning."
  - Credit unions now constitute 41 percent of total credit.
  - Regulatory priorities: modernize supervisory framework, reinforce Financial Services Unit (FSU) operational independence, enhance risk-based supervision, update regulatory thresholds, strengthen provisioning and loan management frameworks, and bolster enforcement tools.
- Structural reforms to support intermediation:
  - Launch of a "regional credit bureau" is welcome.
  - Complementary reforms: "modernizing collateral, foreclosure, and bankruptcy frameworks."

### Fiscal strategy, consolidation scenarios, and policy recommendations
- Fiscal consolidation target:
  - Critical to "rebuild fiscal buffers by achieving and maintaining a primary surplus of 3½ percent of GDP from 2026 onward" to:
    - "(i) reduce public debt below 60 percent of GDP by 2035; and (ii) adequately capitalize the Vulnerability and Resilience Fund to mitigate disaster risks."
- Fiscal framework pillars and targets:
  - Pillar 1: National Fiscal Rule (NFR) — primary surplus of at least 2 percent of GDP by FY2026/27 per the 2021 Fiscal Responsibility Act.
  - Pillar 2: Vulnerability Risk and Resilience Fund (VRF) — accumulation target of 12 percent of GDP at rate of 1.5 percent per year from current level of 1 percent of GDP.
- Staff-recommended consolidation paths:
  - Scenario 1 (reach Pillar 1 objective of 2 percent primary surplus): would breach the 2035 debt target by almost 6 ppts and would not add to VRF balances.
  - Scenario 2 (staff-recommended): sustain a 3½ percent of GDP primary surplus from FY2026/27, directing additional savings to both VRF and DRF (prioritizing VRF until target achieved). Under this path:
    - Debt ratio would fall to 59¾ percent in 2035.
    - VRF balances would rise to 12 percent of GDP by 2032.
    - Requires cumulative EC$75 million of additional adjustment during the coming two years over the baseline (compared to EC$40 million under Scenario 1).
  - Financing stance: prioritize non-debt creating flows (e.g., CBI flows and grants) and concessional loans; sustain proactive posture to allay third-party concerns to safeguard CBI flows.
- Menu of revenue and expenditure measures (two-year cumulative savings):
  - Aggregate consolidation: Total: 5.31 percent of GDP; EC$112.8 million.
  - Revenue measures total: 2.85 percent of GDP; EC$59.3 million; 52.6 percent of total.
    - VAT rate increase by 3 percentage points: 1.83 percent of GDP; EC$38.0 million; 33.7 percent of total.
    - Highway levy: 0.13 percent of GDP; EC$3.1 million; 2.8 percent of total.
    - Tourism levy (hotels and tourism sites): 0.36 percent of GDP; EC$6.9 million; 6.1 percent of total.
    - Solid waste fee: 0.11 percent of GDP; EC$1.5 million; 1.3 percent of total.
    - End discretionary import duty exemptions (Cabinet concessions): 0.59 percent of GDP; EC$9.9 million; 8.8 percent of total.
  - Expenditure measures total: 2.55 percent of GDP; EC$53.4 million; 47.4 percent of total.
    - Rationalize goods and services line (excluding CBI due diligence): 0.37 percent of GDP; EC$7.2 million; 6.4 percent of total.
    - Tariff adjustment on hospital services: 0.24 percent of GDP; EC$4.9 million; 4.3 percent of total.
    - Rescaling National Employment Program (decrease by one-third): 0.91 percent of GDP; EC$19.1 million; 16.9 percent of total.
    - Rescaling Housing Program (decrease by one-fifth): 1.12 percent of GDP; EC$23.2 million; 19.8 percent of total.
- Growth impact: proposed consolidation mix expected to have muted growth impact—0.1 ppt weaker relative to the baseline—reflecting preservation of flagship investments and protection for the vulnerable.
- Policy priorities:
  - "Broadening the revenue base."
  - "Optimizing expenditures to preserve space for macrocritical investment."
  - "Enhancing the targeting and sustainability of social protection programs."
  - "Rationalize current expenditures, improve social spending efficiency, and prioritize investment with clear economic returns."

### Social protection, pensions, and financing of arrears
- Social protection:
  - Framework is fragmented and largely unconditional; assistance spending approximately double that of peers despite comparable per capita GDPs.
  - Reform priorities: centralized beneficiary registry and management information system to minimize overlap and improve targeting.
  - Initiative to establish a centralized database and a digital payment system progressing; modifications expected within a year with support transitioning from the World Bank to the World Food Program.
- Pension system:
  - Sustainability indicators worsened; depletion of reserves now estimated by 2050 (earlier estimate in 2024 Article IV consultation was 2063).
  - Recommended reforms: combination of measures to raise contribution rates, lower replacement rates, and align the retirement age at 65 for all employees.
- Financing strategy and domestic arrears:
  - Authorities intend to prioritize concessional loans; secured two concessional loans from the Caribbean Development Bank and the World Bank.
  - Part of these loans will be dedicated to settling domestic arrears, with plans to clear roughly 60 percent of obligations over the next four years through equal annual installments.
  - Government arrears (unpaid checks) were 3.5 percent of GDP as of February 2025.

### External sector assessment and balance of payments
- Overall assessment:
  - Dominica’s external position in 2024 is estimated to be substantially weaker than the level implied by medium-term fundamentals and desirable policies.
  - CA deficit narrowed to 32.2 percent of GDP in 2024 from 34.2 percent in 2023.
  - NIIP in 2024: -69.6 percent of GDP; Gross Assets: 107.4 percent of GDP; Debt Assets: 82.2 percent of GDP; Gross Liabilities: -177.0 percent of GDP; Debt Liabilities: -91.1 percent of GDP.
- Capital and financing:
  - Historically reliant on FDI and CBI revenues to finance external deficits.
  - FDI: averaged 7.3 percent of GDP since hurricane Maria (7.0 percent of GDP in 2024).
  - CBI revenues rose to around 30 percent of GDP during 2021-24 and are projected to moderate to around 15¾ percent of GDP from 2026.
  - Capital transfers (including CBI): 2024 capital transfers: 21.8 percent of GDP; "of which Citizenship by Investment" 2024: 31.5 percent of GDP (table entries reflect historical series and proportions).
- Reserves and FX:
  - Imputed reserves (end-2024): US$168.3 million; covers 4.4 months of imports and 31.4 percent of broad money in 2024.
  - Net imputed international reserves projected: 2025: 179.8; 2030: 241.7 (millions of U.S. dollars).
- REER and competitiveness:
  - CA model implies a substantial (54.0 percent) overvaluation of the REER; IREER model indicates neither over- nor undervaluation.
  - Elevated input prices such as electricity and labor costs noted; geothermal energy transition expected to reduce fuel imports and electricity costs once completed.

### Debt sustainability analysis (DSA) — key findings and stress tests
- Public debt and risk:
  - Public debt has declined from a post-pandemic peak of 112½ percent of GDP to around 100 percent of GDP in FY2023/24 and is projected under baseline to decline gradually but remain above the ECCU regional target of 60 percent of GDP by 2035 under current policies.
  - Overall risk of debt distress: High; risk of external debt distress: Moderate.
- DSA baseline and scenarios:
  - Staff active scenario: target a 3½ percent primary surplus from FY2026; estimated EC$75 in additional adjustment measures to be phased in during the coming two years.
  - Under the strengthened consolidation scenario public debt projected to decline to 59.8 percent of GDP by 2035 (versus 67.1 percent under the baseline).
  - Consolidation plan fully capitalizes the VRF to 12 percent of GDP by 2032 under the active scenario (VRF would remain at 1 percent of GDP under baseline).
- Stress tests and shocks:
  - Financial market contingent liability shock calibrated at 7 percent of GDP.
  - "Catastrophic Climate Event" scenario: reoccurrence of a typical hurricane in the second half of FY2024/25, with declines in real GDP by 1.5 ppts, export growth by 3.5 ppts, and an increase in debt-to-GDP by 10 ppts.
  - Standardized and tailored stress tests show extreme adverse scenarios can breach debt thresholds; realism tools and sensitivity analysis highlight strong sensitivity to real GDP growth, primary balance, and exports.
- Selected DSA figures (as reported):
  - Central government debt (incl. guaranteed): 2024: 100.6 percent of GDP; 2025: 96.9; 2026: 94.1; 2030: 83.4.
  - External debt (gross): 2024: 89.7 percent of GDP; 2025: 82.1.
  - External debt (nominal) selected projections and indicators appear across DSA tables and stress tests (see Annex excerpts for full series).
- Policy implications:
  - Earmark CBI revenue to resilience and debt reduction (VRF and DRF); prioritize non-debt creating financing; strengthen fiscal framework and PFM to reduce vulnerability to shocks.

### Structural reforms to boost potential growth and productivity
- Long-term growth puzzle:
  - Potential growth estimated to have dropped from 5 percent in the 1980s to nearly zero in the decade leading up to COVID-19.
  - Decline driven mainly by weakening in total factor productivity (TFP) (75 percent of total estimated decline), with physical capital (~20 percent) and human capital (~16 percent) also contributing.
  - Natural disaster impact: Hurricane Maria (2017) caused an estimated loss and damage totaling 226 percent of GDP; a typical natural disaster event estimated to weigh on growth by 2½ ppts on average.
- Firm-level findings and policy priorities:
  - Firm-level misallocation: potential TFP gain from eliminating resource misallocations estimated at 45 percent in Dominica; resolving main obstacles could raise firm-level productivity by up to 44 percent.
  - Top firm-reported obstacles: insufficient access to finance (20 percent), inadequately educated workforce (15 percent), burdensome customs and trade regulations (12 percent), limited access to land (11 percent), and cumbersome tax rates (10 percent).
  - Policy priorities: improve access to finance (regional credit bureau, modernize collateral/insolvency laws), enhance vocational training and education to close skills gaps, streamline tax administration and business registration/licensing/permitting, and accelerate geothermal energy transition.
- Geothermal Energy Transition (GET):
  - Phase I on track for end-2025: powerplant build and partial transmission upgrade to supply the Southern capital area (roughly half the country).
  - Phase II: full network build-out to the entire country via Northern transmission lines; Phase II financing pending.
  - GET expected to lower fuel imports and electricity costs and raise growth potential contingent on completion.
- Digitalization:
  - National Digital Transformation Strategy (2020–26): over 250 government services now available online under the World Bank-funded Caribbean Digital Transformation Project.
  - Ongoing initiatives include digital health information system, digital ticketing infrastructure for tourism sites, digital payments, and a universal identifier (U-ID).
  - Demand- and supply-side actions to build digital skills and literacy emphasized.

### Human capital, gender, and labor market
- Human capital challenges:
  - Structural frictions—education and training mismatches—impede labor outcomes and growth.
  - Policy recommendations: enhance vocational training and accreditation, modernize education systems, recalibrate NEP to provide targeted and time-bound training.
- Gender and participation:
  - Closing the labor force participation gender gap (narrowed to around 6.5 percent in recent years) could raise GDP by nearly 6 percent, adding an average annual growth impulse of roughly 0.6 percent over the next decade.
  - Policy actions: address childcare costs, promote flexible work arrangements, strengthen legal protections against discrimination, invest in women’s technical training, and ease access to finance for women-owned microbusinesses.
- Data gaps:
  - Most recent Labor Force Survey from 2011; need to resume and update labor force statistics. Authorities and partners to pursue a labor force survey and GDP rebasing.

### Institutional strengthening, AML/CFT, and PFM
- Institutional weaknesses:
  - Underdeveloped statistical compilation and PFM frameworks; under-resourcing in the Central Statistical Office (CSO); irregular CBI reporting and data gaps.
- Recommended actions:
  - Strengthen statistical compilation, medium-term budgeting, fiscal reporting, treasury operations, public investment management, and budget processes.
  - Reconfigure budget processes to support fiscal rule operationalization by FY2026/27, including three-year fiscal framework and mid-term budget review.
  - Build on IMF capacity development programs; request IMF support for GDP rebasing and labor force survey.
- AML/CFT and correspondent banking:
  - Meaningful progress made on AML/CFT reforms following the 2023 CFATF Mutual Evaluation Report.
  - Actions: Virtual Asset Business Regulations and VASP Guidelines enacted in 2024; staffing increases at FSU and FIU; establishment of a CBI application due diligence unit within the FIU.
  - Dominica adopted the Six Principles for CBI programs agreed regionally in 2023; authorities aim for full CFATF compliance by end-2026.

### Risk assessment highlights (Annex III)
- Conjunctural risks with high relative likelihood: Trade policy and investment shocks (Impact: Medium), Sovereign debt distress (Impact: High).
- Structural risks: Deepening geoeconomic fragmentation (Relative Likelihood: High; Impact: Medium), Cyberthreats (High/Medium), Climate change (Medium/High).
- Domestic risks of note:
  - Rising domestic arrears (Relative Likelihood: High; Impact: High) — policy response: improve cash and debt management.
  - Fiscal under-performance and lower CBI revenues (Relative Likelihood: Medium; Impact: High) — policy response: mobilize alternative revenue and improve expenditure efficiency.

### Key statistics and projections (selected figures from tables and text)
- Real GDP growth (annual): 2023: 4.7; 2024: 3.5; 2025: 4.2; 2026: 3.3; 2027: 2.9.
- Consumer prices, period average: 2024: 3.1; 2025: 2.8; long-run: 2.0.
- Inflation (end of period series excerpt): 2.1, 3.1, 2.3, 2.0, 2.0, 2.0, 2.0.
- Central government primary balance: FY2023/24: "a deficit of 2 percent of GDP"; Primary balance series: 2023: -2.0; 2024: 0.1; 2025: 0.4; 2026: 0.7; 2027: 1.0.
- Primary balance excluding CBI: 2024: -29.9 percent of GDP; 2025: -23.3; 2026: -15.0.
- Overall balance (percent of GDP): 2024: -2.9; 2025: -2.7; 2026: -2.2; 2027: -1.6.
- Central government debt (incl. guaranteed): 2024: 100.6 percent of GDP; 2025: 96.9; 2026: 94.1; 2030: 83.4.
  - External debt share (PPG external): 2024: 69.3 percent of GDP.
  - Domestic debt share: 2024: 31.3 percent of GDP.
- Current account balance: 2024: -32.2 percent of GDP; 2025: -30.4; 2026: -23.1.
- Exports of goods and services: 2024: 31.8 percent of GDP; 2025: 35.0.
- Imports of goods and services: 2024: 65.5 percent of GDP; 2025: 66.5.
- Capital and financial account: 2024: 33.5 percent of GDP.
- Capital transfers (including CBI): 2024: 21.8 percent of GDP; (table entry) "of which Citizenship by Investment" 2024: 31.5 percent of GDP.
- Nominal GDP (EC $ millions): 2024: 1,885; 2025: 2,020; 2030: 2,563.
- Net imputed international reserves, end-year (millions of U.S. dollars): 2024: 168.3; 2025: 179.8; 2030: 241.7.
- Months of imports of goods and services: 2024: 4.4; 2025: 4.3; 2026: 5.0.
- External debt (gross): 2024: 89.7 percent of GDP; 2025: 82.1.
- Baseline assumption on CBI inflows: stabilizing at 15¾ percent of GDP.

*Source: IMF staff report excerpt (DOMINICA STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION, 1dmaea2025001-print-pdf).*

### 3.1 percent in 2024. Tourism arrivals have surpassed pre-pandemic levels by roughly

### 1dmaea2025001-print-pdf - 3.1 percent in 2024. Tourism arrivals have surpassed pre-pandemic levels by roughly

### Recent developments
- Real GDP growth: "Growth in 2024 is estimated at 3.5 percent", driven by retail and trade, construction, and tourism.
- Tourism:
  - Arrivals at "131 percent of pre-pandemic levels", with a composition shift "towards cruise visitors over higher value-added stayovers".
- Inflation:
  - "Inflation picked up during 2023—peaking at 7 percent in September—but eased to 2.1 percent by end-2024".
- Labor market:
  - "The labor market recovery remains uneven, with formal employment lagging behind overall growth."
  - Lag attributed in part to "the heavy imported labor component of large projects."
- Fiscal outcomes and public debt:
  - "The primary balance improved by 2¼ percentage points (ppts) to a deficit of 2 percent of GDP in FY2023/24."
  - Cumulative adjustment of "4¼ percent of GDP (both on a primary and overall balance basis) ... including 2¼ percent of GDP consolidation during FY2023/24".
  - "Total public debt has declined from its post-pandemic peak of 112½ percent of GDP but remains elevated at 100 percent of GDP" and is "assessed at high risk of debt distress."
  - Domestic arrears "have more than halved since the post-pandemic peak—but remain high at 3.5 percent of GDP."
- External sector:
  - "The current account deficit narrowed by 2 ppts to 32¼ percent of GDP in 2024" (also reported as "32.2 percent of GDP in 2024" elsewhere in the text), reflecting higher tourism receipts.
  - External imbalances remain large due to import-heavy infrastructure projects.

### Outlook and risks
- Growth projections:
  - "Real GDP growth is projected to average 3½ percent over the next three years" and "is projected to average 3½ percent in the coming years before converging to 2 percent in the long term."
- Inflation and current account:
  - "Inflation is expected to recede to 2 percent, in line with trading partner trends."
  - "The current account should revert to its norm over the medium-term on the back of increased tourism and a normalization of investment-related imports."
- Debt trajectory and vulnerabilities:
  - "Public debt is set to decline gradually in coming years ... but remains above the prudential currency union debt benchmark and is susceptible to shocks."
  - Key downside risks: "vulnerability to natural disaster shocks", "evolving trade policy and geopolitical environment", and uncertain Citizenship-by-Investment (CBI) flows.
- Executive Board assessment highlights:
  - "Dominica’s economic expansion is poised to continue, but risks to the outlook are elevated and tilted to the downside."
  - Overall risk of debt distress is characterized as "high."

### Financial sector and balance-sheet vulnerabilities
- Banking sector:
  - "The financial system is liquid with a mixed credit picture and balance sheet fragilities that require monitoring."
  - "Bank credit has declined further since 2023 reflecting ongoing de-risking amid persistent balance sheet challenges, notably elevated non-performing loans (NPLs) and still fragile provisioning."
  - Priorities for banks: "stricter enforcement of provisioning and NPL standards, managing loan loss allowances, and facilitating the disposal of impaired assets, while closely monitoring sovereign and foreign investment exposures."
- Credit unions (CU):
  - "The credit union (CU) sector is expanding its lending portfolio rapidly, despite weak capitalization, high NPLs, and limited provisioning."
  - Regulatory priorities: "modernizing the supervisory framework governing these institutions ... reinforcing the Financial Services Unit’s operational independence, enhancing risk-based supervision, updating regulatory thresholds, strengthening provisioning and loan management frameworks, and bolstering enforcement tools."
- Structural reforms to support intermediation:
  - Launch of a "regional credit bureau" is welcome.
  - Complementary reforms: "modernizing collateral, foreclosure, and bankruptcy frameworks."

### Fiscal strategy and policy recommendations
- Fiscal consolidation target:
  - It is "critical to rebuild fiscal buffers by achieving and maintaining a primary surplus of 3½ percent of GDP from 2026 onward" to:
    - "(i) reduce public debt below 60 percent of GDP by 2035; and (ii) adequately capitalize the Vulnerability and Resilience Fund to mitigate disaster risks."
- Fiscal adjustment priorities:
  - "Broadening the revenue base."
  - "Optimizing expenditures to preserve space for macrocritical investment."
  - "Enhancing the targeting and sustainability of social protection programs."
  - "Rationalize current expenditures, improve social spending efficiency, and prioritize investment with clear economic returns."
- External and structural priorities:
  - Accelerate transition to geothermal energy to reduce fuel imports and bolster the external position.
  - Structural policies to boost growth:
    - "(i) reducing the skills gaps to improve labor market outcomes;"
    - "(ii) prioritize resilient and productive infrastructure with an immediate focus on a transition to renewables;"
    - "(iii) alleviating bottlenecks to allocative efficiency, including by streamlining regulatory processes for tax administration, business registration, licensing, and permitting."
- Institutional strengthening:
  - Strengthen AML/CFT legislation and procedures in line with CFATF recommendations.
  - Progress on "regional coordination across Citizenship-by-Investment (CBI) programs to improve due diligence and transparency."
  - Build statistical capacity and improve public financial management across "fiscal reporting, treasury operations, public investment management, and budget processes."

### Key statistics and projections (selected figures from Table 1 and text)
- Real GDP growth (annual): 2023: 4.7; 2024: 3.5; 2025: 4.2; 2026: 3.3; 2027: 2.9.
- Consumer prices, period average: 2024: 3.1; 2025: 2.8; long-run: 2.0.
- Central government primary balance: FY2023/24: "a deficit of 2 percent of GDP"; Primary balance series: 2023: -2.0; 2024: 0.1; 2025: 0.4; 2026: 0.7; 2027: 1.0.
- Primary balance excluding CBI: 2024: -29.9 percent of GDP; 2025: -23.3; 2026: -15.0.
- Overall balance (percent of GDP): 2024: -2.9; 2025: -2.7; 2026: -2.2; 2027: -1.6.
- Central government debt (incl. guaranteed): 2024: 100.6 percent of GDP; 2025: 96.9; 2026: 94.1; 2030: 83.4.
  - External debt share: 2024: 69.3 percent of GDP.
  - Domestic debt share: 2024: 31.3 percent of GDP.
- Current account balance: 2024: -32.2 percent of GDP; 2025: -30.4; 2026: -23.1.
- Exports of goods and services: 2024: 31.8 percent of GDP; 2025: 35.0.
- Imports of goods and services: 2024: 65.5 percent of GDP; 2025: 66.5.
- Capital and financial account: 2024: 33.5 percent of GDP.
- Capital transfers (including CBI): 2024 capital transfers: 21.8 percent of GDP; "of which Citizenship by Investment" 2024: 31.5 percent of GDP (table entries reflect historical series and proportions).
- Nominal GDP (EC $ millions): 2024: 1,885; 2025: 2,020; 2030: 2,563.
- Net imputed international reserves, end-year (millions of U.S. dollars): 2024: 168.3; 2025: 179.8; 2030: 241.7.
- Months of imports of goods and services: 2024: 4.4; 2025: 4.3; 2026: 5.0.
- External debt (gross): 2024: 89.7 percent of GDP; 2025: 82.1.

*DOMINICA STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION*

### 3.      The financial sector is    liquid with a mixed credit picture, but stability risks remain

### 3.      The financial sector is    liquid with a mixed credit picture, but stability risks remain

### Financial sector: liquidity, credit composition, and vulnerabilities
- Bank credit has contracted by 5 percent since 2022, reflecting de-risking—with banks now comprising less than half of total private sector credit.
- Credit union (CU) lending continues to grow rapidly, now constituting 41 percent of total credit.
- Banks remain well-capitalized but:
  - Improvements in non-performing loans (NPLs) and provisioning have been slow.
  - NPLs exceed regulatory thresholds.
  - Provisioning is overstated by excess reserves.
  - Banks maintain significant overseas investments and still elevated government exposure.
- Credit unions are undercapitalized and breach regulatory thresholds on NPLs and provisioning, creating regulatory gaps and arbitrage opportunities that increase financial stability risks given CUs’ growing systemic importance.
- Domestic arrears are not included in the authorities’ definition of public debt but are captured in the reported fiscal deficit; staff calibrates fiscal advice around the clearance of domestic arrears, which are incorporated in the underlying fiscal policy anchor.

### Key statistics on credit, NPLs, and provisioning (as reported)
- Bank credit contraction since 2022: 5 percent.
- Credit union share of total credit: 41 percent.
- NPL measurement: calculated using a 3-month threshold; Provisions include regulatory loan loss reserves.
- ECCU provisioning and NPL thresholds are referenced in the NPLs and Provisions chart (percent measures presented in source charts).

### Outlook and macroeconomic projections
- Real GDP growth projected average over next three years: 3½ percent.
- Growth convergence in the long run: 2 percent.
- Inflation (end of period) projections (selected years as in source table): 2.1, 3.1, 2.3, 2.0, 2.0, 2.0, 2.0 (table heading: Inflation (end of period)2.1 3.1 2.3 2.0 2.0 2.0 2.0).
- Primary fiscal balance (selected entries from table): 0.1 0.4 0.7 1.0 1.2 1.5 2.0.
- Overall fiscal balance (selected entries from table): -2.9 -2.7 -2.2 -1.6 -1.3 -1.0 -0.6.
- Overall fiscal balance, excl. CBI (selected entries): -32.9 -26.3 -17.8 -17.3 -17.0 -16.7 -16.2.
- Public Capital Expenditure (selected entries): 27.0 20.2 10.8 9.8 9.4 8.9 8.2.
- Public debt (selected entries): 100.6 96.9 94.1 91.5 89.0 86.4 83.4.
- Current account balance (selected entries): -32.2 -30.4 -23.1 -17.1 -14.1 -14.3 -13.3.
- Credit to the private sector (annual percent change, selected entries): -1.5 1.2 3.7 5.0 6.9 6.6 4.5.
- Baseline assumption on CBI inflows: stabilizing at 15¾ percent of GDP.

### Risks to the outlook
- Overall risk level: elevated and tilted to the downside.
- External risks: trade policy shocks, geoeconomic fragmentation, commodity price volatility disrupting tourism, trade, FDI, and income channels.
- Financial risks: tighter financial conditions could trigger losses on overseas investments, affecting domestic credit and FDI.
- Climate risks: extreme climate events pose significant growth risks.
- Domestic fiscal risks: fiscal underperformance, rising arrears, and lower-than-expected CBI inflows could weaken activity, jeopardize flagship projects, exacerbate imbalances, and potentially trigger debt distress risks—particularly if coupled with higher global or domestic interest rates.
- Amplification channel: local financial sector vulnerabilities could amplify shocks.
- Upside risk: stronger-than-expected dividends from flagship projects.

### Authorities’ views on outlook and risks
- Authorities broadly concurred with staff’s assessment of the economic outlook and balance of risks.
- They underscored flagship development projects are on schedule and will underpin growth.
- Authorities argued staff may understate economic dividends from flagship projects, suggesting fiscal buffers could be restored with less demanding adjustments.
- Authorities reported strong tourism performance in 2025 and expect competitiveness gains as the international airport and geothermal project complete.
- They acknowledged downside risks, notably rising protectionist sentiment, and highlighted bilateral and regional initiatives to mitigate risks (e.g., Caribbean exemption from U.S. port fees on China-built vessels; coordinated efforts to strengthen governance and due diligence in CBI programs within the ECCU).
- Authorities indicated CBI inflows have been healthy this fiscal year and remain committed to proactive engagement to safeguard CBI financing.

### Policy discussion: priorities and recommendations
- Overarching priorities:
  - Rebuild fiscal buffers while prioritizing critical investment.
  - Enhance financial intermediation and oversight.
  - Advance structural reforms to alleviate constraints to competitiveness and productivity.

A. Rebuilding Fiscal Buffers
- FY2024/25: a further improvement in fiscal balances is anticipated; authorities raised excise taxes on sugary drinks, alcohol, and tobacco, and increased the excise on diesel.
- Expected FY2024/25 outcome: a small primary surplus of 0.1 percent of GDP (based on data through the first two-thirds of the year).
- Under current policies, public debt projected to decline to 69¾ percent of GDP by 2035 but remain at high risk of debt distress.
- Required fiscal framework elements:
  - Pillar 1: National Fiscal Rule (NFR) — primary surplus of at least 2 percent of GDP by FY2026/27 per the 2021 Fiscal Responsibility Act.
  - Pillar 2: Vulnerability Risk and Resilience Fund (VRF) — accumulation target of 12 percent of GDP at rate of 1.5 percent per year from current level of 1 percent of GDP.
- Staff recommended consolidation path:
  - Attain a primary surplus of 3½ percent of GDP by FY2026/27 and sustain it over the medium term.
  - Scenario 1 (only reaching Pillar 1 objective of 2 percent primary surplus) would breach the 2035 debt target by almost 6 ppts and would not add to VRF balances.
  - Scenario 2 (staff-recommended): sustain a 3½ percent of GDP primary surplus from FY2026/27, directing additional savings to both VRF and DRF (prioritizing VRF until target achieved). Under this path:
    - Debt ratio would fall to 59¾ percent in 2035.
    - VRF balances would rise to 12 percent of GDP by 2032.
    - Requires cumulative EC$75 million of additional adjustment during the coming two years over the baseline (compared to EC$40 million under Scenario 1).
  - Financing stance: prioritize non-debt creating flows (e.g., CBI flows and grants) and concessional loans; sustain proactive posture to allay third-party concerns to safeguard CBI flows.

B. Measures to attain the recommended consolidation path
- Revenue and expenditure measures can attain the path while preserving investment priorities; proposed measures build on 2024 AIV recommendations.
- Revenue measures (cumulative two-year savings and EC$ millions from staff table):
  - Total revenue measures: 2.85 percent of GDP; EC$59.3 million; 52.6 percent of total.
  - VAT rate increase by 3 percentage points: 1.83 percent of GDP; EC$38.0 million; 33.7 percent of total. (Note in table: A smaller rate increase of 1 (2) ppts is estimated to yield 0.6 (1.2) percent of GDP in additional revenue, respectively.)
  - Highway levy: 0.13 percent of GDP; EC$3.1 million; 2.8 percent of total.
  - Tourism levy (hotels and tourism sites): 0.36 percent of GDP; EC$6.9 million; 6.1 percent of total.
  - Solid waste fee: 0.11 percent of GDP; EC$1.5 million; 1.3 percent of total.
  - End discretionary import duty exemptions (Cabinet concessions): 0.59 percent of GDP; EC$9.9 million; 8.8 percent of total.
- Expenditure measures (cumulative two-year savings and EC$ millions from staff table):
  - Total expenditure measures: 2.55 percent of GDP; EC$53.4 million; 47.4 percent of total.
  - Rationalize goods and services line (excluding CBI due diligence): 0.37 percent of GDP; EC$7.2 million; 6.4 percent of total.
  - Tariff adjustment on hospital services: 0.24 percent of GDP; EC$4.9 million; 4.3 percent of total.
  - Rescaling National Employment Program (decrease by one-third): 0.91 percent of GDP; EC$19.1 million; 16.9 percent of total.
  - Rescaling Housing Program (decrease by one-fifth): 1.12 percent of GDP; EC$23.2 million; 19.8 percent of total.
- Aggregate consolidation from menu of options:
  - Total: 5.31 percent of GDP; EC$112.8 million; 100.0 percent of cumulative savings (two-year horizon).
- Growth impact: proposed consolidation mix expected to have muted growth impact—0.1 ppt weaker relative to the baseline (see Annex IV)—reflecting preservation of flagship investments and protection for the vulnerable.

C. Social protection and pension sustainability
- Social protection framework: fragmented and largely unconditional; assistance spending approximately double that of peers despite comparable per capita GDPs.
- Reform priorities:
  - Centralized beneficiary registry and management information system to minimize overlap, track beneficiaries, identify gaps/duplicates, and facilitate payments.
  - Ongoing international partner efforts to set up centralized management information system and digitalized payment tools are welcome.
- Pension system:
  - Sustainability indicators worsened; depletion of reserves now estimated by 2050 (earlier estimate in 2024 Article IV consultation was 2063).
  - Recommended reforms: combination of measures to raise contribution rates, lower replacement rates, and align the retirement age at 65 for all employees.

### Authorities’ policy stance and next steps
- Authorities agreed additional consolidation is needed and will explore policy options in upcoming budget cycle.
- Potential revenue measures under consideration: new tourism levies (on sites and hotels), higher medical service fees, and a solid waste charge.
- Any prospective VAT rate adjustment would be accompanied by a lowering of income tax rates to partially offset yields.
- Expenditure actions: seek greater efficiencies to preserve macrocritical investment space; prioritize reduction in current transfers, partly via tariff adjustments on key public services.
- Negotiations with public sector unions on a new collective agreement are advancing in line with fiscal framework objectives.
- An audit of the National Employment Program (NEP) is ongoing to inform reforms.
- Authorities noted that evolving trade policy shocks could affect the timing of adjustment, particularly given the fiscal rule becomes binding in FY2026/27.

*Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1dmaea2025001-print-pdf.pdf*

### 13.      Enhancing the efficiency and sustainability of social protection programs remains a

### 13.      Enhancing the efficiency and sustainability of social protection programs remains a priority

### Social protection and pensions
- Initiative to establish a centralized database and a digital payment system to reduce overlap and better tailor social assistance to the most vulnerable households is progressing.
- Modifications to payment system are expected to be implemented within a year with support transitioning from the World Bank to the World Food Program.
- Pension system sustainability challenges have intensified; authorities are reviewing options including:
  - accelerating the phasing in of previously agreed contribution rate increases;
  - extending the number of years required to qualify for a pension;
  - reducing accrual rates;
  - adjusting early retirement provisions.

### Financing strategy and domestic arrears
- Authorities intend to prioritize concessional loans in their financing strategy.
- Recently secured two concessional loans from the Caribbean Development Bank and the World Bank.
- Part of these loans will be dedicated to settling domestic arrears, with plans to clear roughly 60 percent of obligations (prioritizing vintage arrears) over the next four years through equal annual installments.

### Strengthening financial system balance sheets and intermediation
- Reducing balance sheet vulnerabilities and strengthening oversight are urgent priorities, particularly for Credit Unions (CUs) given their systemic importance.
- Banking sector findings and priorities:
  - NPL ratios remain high despite sales, write-offs, and restructurings, impairing credit activity.
  - Policy priorities: enforce regulatory standards for provisioning and NPL treatment, effectively manage loss allowances, and facilitate the disposal of impaired assets.
  - Risks from elevated sovereign exposure and rising overseas investments should be closely monitored.
- Credit Unions (CU) findings and priorities:
  - Elevated credit activity relative to banks partly reflects regulatory arbitrage between banks and CUs.
  - FSU’s modernization of the regulatory framework and enhancement of risk-based supervision by end-2025 is welcome.
  - Priorities include reinforcing operational independence of FSU; tightening risk-based capital requirements; updating regulatory thresholds; strengthening provisioning requirements; enhancing loan management frameworks to reduce evergreening risks; bolstering enforcement tools including expanded administrative intervention authority.
  - Broader financial-stability reinforcements:
    - participating in the ECCU’s regional initiative to establish common minimum NBFI regulatory standards;
    - ensuring the FSU is adequately resourced for monitoring asset quality (especially for restructured loans and forbearance measures);
    - conducting regular audits and on-site examinations (notably for larger CUs);
    - strengthening governance via enhanced "fit and proper" criteria for board members.

### AML/CFT and correspondent banking relationships (CBRs)
- Meaningful progress made to strengthen AML/CFT frameworks, crucial to safeguard CBRs amidst ongoing CBI scrutiny.
- Actions taken in response to the 2023 CFATF Mutual Evaluation Report include sectoral risk assessments of:
  - legal persons and arrangements;
  - proliferation and terrorism financing;
  - non-profit organizations;
  - virtual asset service providers (VASPs);
  - the CBI program.
- Legislative and institutional developments:
  - Enactment of Virtual Asset Business Regulations and sector-wide VASP Guidelines in 2024.
  - Proposed legislative amendments on targeted financial sanctions and mechanisms to manage beneficial ownership information are being finalized.
  - Additional staffing at the FSU and Financial Intelligence Unit (FIU); establishment of a CBI application due diligence unit within the FIU.
  - Dominica adopted the Six Principles for CBI programs agreed regionally in 2023.
  - Ongoing reforms include legislation on proliferation financing and crypto assets, and shifting the National Implementation Action Plan to a risk-based framework.
- Authorities note Dominica is rated as compliant or largely compliant across 80 percent of CFATF metrics and reaffirm commitment to achieving full CFATF compliance by end-2026; CBRs remain stable.

### Structural constraints on intermediation and access to finance
- Longstanding structural challenges constrain financial intermediation and hinder productivity and growth.
- Paradox: ample bank liquidity alongside limited access to finance by businesses explained by:
  - limited credit information;
  - outdated collateral laws;
  - inefficient foreclosure and insolvency frameworks.
- ECCU-wide empirical analysis:
  - Dominica has a negative credit gap of (5¾ ppt below trend).
  - NPLs, particularly at smaller institutions, hinder credit growth.
  - Access to financing is cited as the top impediment to firm-level productivity.
- Firms and access statistics:
  - In Dominica, 60 percent of firms report access to finance as major or severe obstacle while firms able to access funding are unable tap instruments amenable to investment.
- Policy priorities to improve intermediation and access:
  - participating in the regional credit bureau scheme;
  - modernizing collateral, foreclosure, and insolvency laws;
  - streamlining loan documentation;
  - facilitating MSME access to the Eastern Caribbean Partial Credit Guarantee Corporation and the new CARICOM-led Credit Guarantee Scheme.

### Supervisory and regional considerations
- ECCB has taken steps to address most of the 2021 safeguards assessment’s recommendations; pending recommendation concerns further strengthening ECCB’s operational autonomy and aligning its Agreement Act with leading practices.
- Next full safeguards assessment due later in 2025.
- Authorities’ actions and views:
  - World Bank-supported Asset Quality Review (AQR) of the CU sector underway, with assessments of the largest CUs expected by end-2025.
  - AQR findings will inform FSU modernization: transition to risk-based capital standards, update regulatory thresholds, standardize provisioning frameworks, bolster enforcement tools consistent with IFRS 9 principles, and enhance administrative intervention powers.
  - Authorities broadly agreed with staff’s recommended policies to enhance financial intermediation, emphasizing supply-side and demand-side constraints and support for MSMEs (AID Bank focus).

### Unpacking the long-term growth puzzle—structural reforms to boost resilient growth
- Dominica has exhibited a trend slowdown in growth; average growth has lagged peers, hindering convergence.
- Estimated potential growth deterioration to near zero is more acute in Dominica.
- Drivers of slowdown:
  - falling contributions from major factors of production;
  - declining total factor productivity (TFP), which was negative in the decade preceding the pandemic.
- Natural disaster impact:
  - Negative TFP growth during the last decade is mostly linked to extreme climate shocks during the second half of the 2010s, notably Hurricane Maria (category 5) in 2017, which alone caused an estimated loss and damage totaling 226 percent of GDP.
  - A natural disaster event is estimated to weigh on growth by 2½ ppts on average.

### Human capital
- Improving labor market outcomes and alleviating skills gaps are priorities.
- Structural frictions—particularly education and training mismatches relative to economic needs—impede labor outcomes and growth.
- Policy recommendations:
  - Enhance vocational training and accreditation frameworks;
  - Modernize education systems;
  - Recalibrate the NEP to alleviate skill deficiencies through targeted and time-bound training.
- Gender and participation impacts:
  - Closing the labor force participation gender gap—which has narrowed to around 6.5 percent in recent years—could raise GDP by nearly 6 percent, adding an average annual growth impulse of roughly 0.6 percent over the next decade.
  - Policies should prioritize addressing barriers such as childcare costs, flexible work arrangements, and discrimination.

### Physical capital and strategic investments
- Efficient and resilient investment needed to enhance productive capital stock.
- Development strategy priorities:
  - Harnessing geothermal energy transition (GET) opportunities:
    - GET could lower fuel imports and electricity costs and raise growth potential via competitiveness channels.
    - Full benefits depend on completing both project phases.
    - Phase I involves a powerplant build and partial transmission network upgrade to supply the Southern capital area (roughly half of the country) with geothermal energy (on track for end-2025).
    - Phase II is the remaining build-out of the network to the entire country via Northern transmission lines; Phase II financing remains pending.
    - Anticipated decrease in electricity prices from a partial reduction in fuel surcharges once Phase I is operational is uncertain given the ongoing electricity tariff review.
  - Safeguarding and optimizing the CBI funding model:
    - Preserving the CBI regime is vital for strategic development financing.
    - Actions taken include: adopting agreed governance principles; strengthening enforcement through enhanced passport recall powers; modifying agent eligibility criteria; enhancing vetting procedures (FIU due diligence unit); joining regional initiative to harmonize pricing, strengthen information exchange, and introduce regulatory oversight of CBI regimes within the ECCU.
    - Further improvements could include enhancing transparency in reporting and strengthening accountability frameworks of CBI-financed investments.
    - Elaborating strategic guidelines for allocation of CBI inflows among development, debt reduction, and contingent savings is a priority.

### Total Factor Productivity (TFP) and business environment reforms
- Addressing structural bottlenecks to innovation and allocative efficiency requires multipronged reforms.
- ECCU firm-level analysis finds sizable TFP losses from:
  - high cost of finance;
  - burdensome tax administration;
  - inefficient licensing processes.
- Staff estimates:
  - Resolving these issues could raise productivity by nearly 47 percent, which would help raise GDP per capita by a similar magnitude and reduce the gap vis-à-vis the U.S. by around 10 ppts.
- Policy priorities:
  - Improve financial intermediation (see Section B);
  - Transition to a digital platform for government services;
  - Streamline bureaucratic processes, especially tax administration and business registration, licensing, and permitting.
- Authorities have prioritized digitalization and made significant progress implementing the National Digital Transformation Strategy.

### Box 1 — Dominica’s Digitalization Agenda (summary)
- Digital technologies can boost productivity, efficiency, and reduce informality.
- Dominica launched National Digital Transformation Strategy (2020–26).
- Progress under World Bank-funded Caribbean Digital Transformation Project: over 250 government services now available online (registration, permitting, border and customs controls).
- Ongoing initiatives: digital health information system; digital ticketing infrastructure for tourism sites; upgrading government services to support digital payments; creating a universal identifier (U-ID) to reduce duplication and strengthen eligibility verification.
- Demand- and supply-side policy lenses:
  - Demand: improve digital literacy and absorptive capacity. Sixteen digital hubs across Dominica provide digital training to the general public.
  - Supply: build digitally skilled workforce by aligning school curricula and vocational programs with evolving labor market needs (technicians, digital marketing professionals).

*Source: IMF staff report excerpt.*

### 25.      The authorities welcomed staff’s long-term growth analysis and broadly concurred

### The authorities welcomed staff’s long-term growth analysis and broadly concurred

### Long-term growth, flagship projects, and structural reforms
- Authorities welcomed staff’s long-term growth analysis and broadly concurred with identified structural impediments that weigh on growth potential.
- Ongoing flagship development projects are expected to provide a structural boost to growth, but reforms to address persistent bottlenecks to efficiency and innovation remain a priority.
- Key reform priorities identified by authorities:
  - Revamp education and vocational training systems to better align curricula and certification frameworks with economic needs.
  - Secure financing for Phase II of the GET to meet expected energy demand from the new international airport and hotel developments.
  - Prioritize digitalization as a core productivity pillar: expand e-government services, support innovation hubs to develop skills, improve digital literacy, and help overcome access to credit constraints.
  - Expand point-of-sale infrastructure at tourism sites and launch an online tax filing platform.
  - Request broadening of the Caribbean Digital Transformation Project work program to support these initiatives.

### Institutional strengthening (surveillance, economic planning, and policy execution)
- Institutional weaknesses and capacity constraints:
  - Underdeveloped institutional frameworks and limited technical capacity complicate policy formulation, monitoring, and execution.
  - Institutional deficiencies are most prominent in statistical compilation and PFM.
  - Under-resourcing and limited absorptive capacity in the statistical agency have impeded timely updates and regular reporting of key indicators.
  - Fiscal management is hindered by underdeveloped cash flow processes (resulting in a reliance on costly bank overdraft facilities), fragmented reporting and data sharing systems (notably for CBI-related flows), and institutional gaps such as the absence of processes integrating the fiscal framework with the budget.
- Recommended actions:
  - Strengthen statistical compilation, medium-term budgeting, fiscal reporting, and Treasury operations.
  - Explore regional data collection approaches to optimize limited resources.
  - Implement pending recommendations to enhance Treasury processes, including regular cash forecast reporting and the adoption of modern IT and accounting systems.
  - Reconfigure budget processes to support fiscal rule implementation by FY2026/27 by:
    - framing the budget around a three-year fiscal framework aligned to the fiscal rule and rationalized by supporting policies; and
    - introducing a mid-term budget review process to assess outturns against targets and outline corrective measures as needed.
  - Staff encouraged the authorities to request IMF support and to build on the IMF’s ongoing capacity development program with Dominica to bolster statistical and PFM capacity.

### Authorities’ views
- The authorities welcomed the proposed engagement strategy and emphasized the importance of sustained, well-targeted capacity development (CD) support.
- They agreed that underdeveloped institutional frameworks and limited technical capacity are obstacles to development and resilience objectives.
- The authorities endorsed the Fund’s continued focus on fiscal sustainability, financial stability, financial intermediation, and inclusive growth.
- CD priorities identified by the authorities: strengthening statistical capacity and PFM.
- Support welcomed:
  - Fund support for the GDP rebasing exercise.
  - Collaboration with regional partners on a long overdue labor force survey.
- On PFM, authorities noted progress in strengthening oversight of public entities and are exploring options to regularize internal CBI reporting processes to facilitate monitoring and the compilation of balance of payments flows.
- While recognizing the need to enhance budget processes ahead of the fiscal rule’s operationalization in FY2026/27, the authorities stressed that simplifying the corporate income tax framework is a more immediate priority to reduce administrative costs, boost compliance, and support primary balance targets.

### Staff appraisal: outlook, fiscal strategy, and financial-sector priorities
- Growth outlook and risks:
  - Real GDP growth is projected to average 3½ percent over the next three years, underpinned by ongoing investment in flagship infrastructure projects to boost tourism capacity and transition to lower-cost geothermal energy.
  - The heavy import-related content of these projects has eroded the external position—which is assessed to be substantially weaker than implied by medium-term fundamentals and desirable policy settings—but gradual improvements are expected as major capital outlays wind down and fiscal consolidation intensifies.
  - Risks are elevated, reflecting Dominica’s vulnerability to ND shocks and amid the evolving trade policy and geopolitical environment.
- Fiscal consolidation and debt targets:
  - More ambitious fiscal consolidation than what is envisaged under the authorities’ current policies is needed to reduce economic imbalances and mitigate disaster risks while helping to reinforce prospects for resilient growth.
  - The overall risk of debt distress is high.
  - It is critical to rebuild fiscal buffers by achieving and maintaining a primary surplus of 3½ percent of GDP from 2026 onward to:
    - (i) reduce public debt below 60 percent of GDP by 2035; and
    - (ii) adequately capitalize the VRF to mitigate disaster risks.
  - Fiscal strategy should focus on broadening the revenue base, optimizing expenditures to preserve space for macrocritical investment, and enhancing the targeting and sustainability of social protection programs.
- Financial-sector priorities:
  - For banks: enforce provisioning and NPL standards, manage loan loss allowances, facilitate disposal of impaired assets, and closely monitor sovereign and foreign investment exposures.
  - For credit unions: modernize the regulatory regime by reinforcing the FSU’s operational independence, enhancing risk-based supervision, updating regulatory thresholds, strengthening provisioning and loan management frameworks, and bolstering enforcement tools.
- Structural and institutional reforms:
  - Continued structural reforms are essential for resilient and sustainable growth, including modernizing collateral, foreclosure, and bankruptcy frameworks.
  - Eliminate gaps in education and training relative to economic needs.
  - Foster innovation and allocative efficiency through digitalization and streamlining administrative processes for tax compliance, business registration, and permitting.
  - Strengthen AML/CFT legislation and procedures in line with CFATF recommendations to protect CBRs.
  - Progress on regional coordination across CBI programs to improve due diligence and transparency is welcome; proactive engagement to address evolving concerns around Dominica’s CBI regime remains critical.
  - Priorities for sustained engagement include targeted measures to strengthen statistical capacity and improve PFM across fiscal reporting, treasury operations, public investment management, and budget processes.

*Source: IMF staff report excerpt.*

### 34.      It is recommended that the next Article IV consultation takes place on the standard

### It is recommended that the next Article IV consultation takes place on the standard 12-month cycle.

### Real sector developments
- Leading drivers of 2023 growth: wholesale/retail trade and tourism.
- Total tourist arrivals have fully recovered relative to 2019, but the increased share of cruise arrivals has potential long-term implications given larger multipliers from stayover tourism.
- Main drivers in 2024: wholesale/retail trade, tourism, public services, and construction.
- Price dynamics:
  - Pick-up in prices from end-2022 offset by a softening in global commodity prices.
  - CPI inflation components shown (period average and end of period) with headline, food, fuels, and core inflation series.
- Regional comparison:
  - Dominica’s growth aligns with the ECCU average.
  - Inflation is also in line with the regional average.
- 2023 real GDP growth contributions by sector (Percent): Agriculture, livestock, and fishing (-0.2); Other sectors (0.5); Manufacturing (0.0); Construction (0.2); Housing, real estate, finance, and trade (1.6); Key tourism-related industries (1.4); Public administration and public services (0.1); Taxes net of subsidies (1.1); Aggregate shown as 4.7 (chart context).
- Tourist Arrivals (Base 2019 YTD Arrivals = 100) series shown for Stay Over, Cruise, Total across 2019M9–2024M12.

### External sector developments
- Real Effective Exchange Rate (REER) stabilized in 2024 following increased volatility during 2020-23.
- External position improved modestly in 2024, primarily due to a stable goods and services trade balance combined with higher nominal GDP.
- Large infrastructure projects continued to spur a high level of imported goods, while exports remained lackluster across major categories.
- Citizenship-by-Investment (CBI) flows remain the main source of external financing; public external debt ratio broadly stable but elevated since the pandemic.
- Nominal and Real Effective Exchange Rates index (January 2005 = 100) series for Dominica REER, Dominica NEER, United States REER shown for 2008–2024.
- Current Account decomposition (In Percent of GDP) and Current Account Deficit and Financing (In Percent of GDP) series displayed for 2012–2024 with financing components: Commercial banks, Foreign direct investment, Capital Transfers, Other (Includes Errors and Omissions).
- External Debt: Public sector and private sector series (In Percent of GDP, Left; Millions USD, Right) from 2004–2024.
- Goods import and export composition by major components presented with 2024 including three quarters of actual data and full year projected based on historical performance.

### Fiscal sector developments
- Despite sustained modest improvements to the fiscal balance, the public debt ratio remains elevated and is one of the highest among peers, well above the ECCU regional target of 60 percent of GDP.
- CBI flows have exceeded tax revenue in the last four fiscal years, and are volatile and uncertain.
- CBI-supported flows have supported a marked increase in capital spending relative to recurrent expenditures.
- More than 40 percent of domestic public debt (15 percent of total public debt) is held by the systemically important National Bank of Dominica.
- Debt of SOEs declined since the pandemic benefiting from a largely shock-free environment.
- Public debt and fiscal primary balance (In Percent of GDP, Fiscal Year) series and comparisons with EM peers shown; EM General Government Balance and Debt, 2023 (In Percent of GDP).
- Composition of Public Sector Debt, 2023 (In Percent of Total Debt): World Bank 26%; Caribbean Development Bank 16%; Other Multilateral 4%; Bilateral 14%; Other external 5%; Dominica Social Security 8%; National Bank of Dominica 15%; Other domestic 12%.
- Capital vs current expenditure trends: Capital expenditure increased markedly in recent years relative to current primary expenditure.
- Table 1 highlights selected economic and demographic indicators:
  - Area (sq. km.) 754; Population (2023) Total 73,040; Annual rate of growth (percent) 0.4; Life expectancy at birth (years, 2022) 73; Infant mortality (per thousand live births, 2022) 31; Adult literacy rate (percent, 2016) 94; Unemployment rate (2016) 23.
  - Gross Domestic Product (2023) Millions of E.C. dollars 1,766; Millions of U.S. dollars 654; U.S. dollars per capita 8,954.
- Fiscal projections and aggregates (selected, in percent of GDP unless otherwise specified):
  - Revenue series: 59.1 (2020); 58.8 (2021); 62.3 (2022); 59.1 (2023); 54.5 (2024); 47.5 (2025); 38.4 (2026); 37.8 (2027); 37.6 (2028); 37.5 (2029); 37.2 (2030).
  - Taxes (percent of GDP): 23.3 (2020); 22.3 (2021); 22.4 (2022); 21.5 (2023); 21.5 (2024); 20.9 (2025); 19.7 (2026); 19.1 (2027); 18.9 (2028); 18.8 (2029); 18.5 (2030).
  - Citizenship-by-Investment (percent of GDP): 23.2 (2020); 30.2 (2021); 33.1 (2022); 34.8 (2023); 31.5 (2024); 26.7 (2025); 19.5 (2026); 15.7 (2027); 15.7 (2028); 15.7 (2029); 15.7 (2030).
  - Primary balance (excl. CBI, percent of GDP): -36.7 (2020); -34.8 (2021); -41.0 (2022); -35.0 (2023); -29.9 (2024); -23.3 (2025); -15.0 (2026); -14.7 (2027); -14.5 (2028); -14.2 (2029); -13.7 (2030).
  - Overall balance (percent of GDP): -7.5 (2020); -8.2 (2021); -7.2 (2022); -4.5 (2023); -2.9 (2024); -2.7 (2025); -2.2 (2026); -1.6 (2027); -1.3 (2028); -1.0 (2029); -0.6 (2030).
  - Central government debt (incl. guaranteed, percent of GDP): 112.5 (2020); 108.5 (2021); 104.3 (2022); 99.8 (2023); 100.6 (2024); 96.9 (2025); 94.1 (2026); 91.5 (2027); 89.0 (2028); 86.4 (2029); 83.4 (2030).
- Table 3a (Statement of Operations of the Central Government) shows detailed fiscal flows in millions of Eastern Caribbean dollars including:
  - Revenue (EC$ millions): 845.2 (2020); 922.2 (2021); 1,060.2 (2022); 1,079.4 (2023); 1,064.4 (2024); 987.2 (2025); 840.6 (2026); 867.1 (2027); 903.1 (2028); 940.0 (2029); 974.8 (2030).
  - Citizenship-by-Investment, fiscal year (U.S. million dollars): 165.9 (2020); 169.9 (2021); 231.6 (2022); 223.1 (2023); 216.9 (2024); 181.8 (2025); 127.0 (2026); 133.2 (2027); 139.3 (2028); 145.6 (2029); 152.0 (2030).
  - Net lending/borrowing (overall balance) series and public sector debt levels (EC$ millions) are presented with memorandum items.
- Primary balance and other fiscal ratios presented both in levels and percent-of-GDP formats (Table 3b).

### Banking sector developments
- Commercial banks remain well capitalized and enjoy a high degree of liquidity, but profitability has been volatile.
- Asset quality is slowly improving, but the NPL ratio remains elevated and exceeds prudential guidelines.
- Credit growth to the economy has been lackluster, buoyed by lending to the government.
- Foreign assets show a modest increasing trend.
- Select banking system aggregates (end-period, in millions of Eastern Caribbean dollars):
  - Net foreign assets: 963 (2020); 971 (2021); 925 (2022); 949 (2023); 944 (2024); projected 964 (2025) … 1,093 (2030).
  - Central Bank net foreign assets: 447 (2020); 446 (2021); 492 (2022); 443 (2023); 454 (2024); 486 (2025); 519 (2026); 551 (2027); 584 (2028); 617 (2029); 652 (2030).
  - Commercial Banks (net) net foreign assets: 516 (2020); 525 (2021); 433 (2022); 505 (2023); 489 (2024); 478 (2025); 469 (2026); 462 (2027); 455 (2028); 448 (2029); 441 (2030).
  - Money and quasi-money (M2): 1,389 (2020); 1,415 (2021); 1,397 (2022); 1,390 (2023); 1,449 (2024); projected 1,540 (2025); 1,627 (2026); 1,708 (2027); 1,790 (2028); 1,870 (2029); 1,954 (2030).
- Banking indicators:
  - Commercial Banks' regulatory capital/Risk-Weighted assets (percent) series for 2014–2024 shown; regulatory minimum indicated.
  - Liquid Assets to Liquid Liabilities (In Percent) DMAECCU series for 2014–2024.
  - Profitability metrics: ROE, ROA, and NIM series and volatility across 2014–2024.
  - Non-Performing Loans (Commercial Banks; Percent of Total Loans): series for Foreign Incorporated, Locally Incorporated, Total, Regulatory Target across 2014–2024.
  - Commercial Banks Credit by Economic Activity (Percent, Contribution to growth) with sectors including Construction & Land development, Real estate activity, Distributive trade, Transport, Others, Public Administration for quarterly series 2017Q4–2024Q4.
  - Net Foreign Assets of Commercial Banks (EC$ Millions) assets, liabilities, net across 2014–2024.

### Credit union developments
- Credit union assets are growing but NPLs (delinquent over 12 months) remain persistently elevated and unevenly distributed; the majority of credit unions exceed the regulatory threshold.
- Loans and deposits as percent of total assets are stable, but aggregate capital remains weak and unevenly distributed; half of credit unions exhibit low capital adequacy.
- Deposits and liquidity declined in recent quarters but remain generally high; profitability has stabilized in recent years below pre-shock norms.
- Indicators:
  - Assets Growth and NPL Ratio (Percent, Percent of Gross Loans) quarterly series 2017Q4–2024Q4.
  - NPLs to Total Loans for Major Credit Unions (Percent) series showing individual CU performance.
  - Institutional Capital, Loans, and Deposits of Credit Unions (Percent of Total Assets) and Total Capital/Total Assets for individual CUs showing many below minimum capital requirement.
  - Liquid Assets (RHS, In Percent of Total Assets) and Deposits/Loans (Percent) series 2014Q4–2024Q4.
  - Return on Assets and Return on Equity (Percent; moving quarterly total) series, with ROE and ROA levels showing stabilization below pre-shock levels.

### Balance of payments and external projections
- Table 2 (Balance of Payments, 2020–30) key figures (in millions of U.S. dollars and percent of GDP):
  - Current account balance (US$ millions): -186.4 (2020); -186.1 (2021); -163.7 (2022); -223.6 (2023); -225.0 (2024); -227.6 (2025); -182.7 (2026); -141.7 (2027); -122.8 (2028); -129.5 (2029); -126.1 (2030).
  - Exports of goods and services (US$ millions): 100.9 (2020); 117.7 (2021); 173.9 (2022); 188.8 (2023); 222.1 (2024); 261.7 (2025); 267.9 (2026); 281.6 (2027); 311.2 (2028); 326.3 (2029); 343.9 (2030).
  - Imports of goods and services (US$ millions): 302.3 (2020); 317.2 (2021); 354.3 (2022); 417.2 (2023); 456.8 (2024); 497.5 (2025); 459.5 (2026); 432.7 (2027); 443.5 (2028); 465.5 (2029); 479.7 (2030).
  - Capital account and capital transfers dominated by Citizenship By Investment (US$ millions): 116.7 (2020); 167.9 (2021); 200.7 (2022); 227.3 (2023); 220.0 (2024); 199.4 (2025); 154.4 (2026); 130.1 (2027); 136.3 (2028); 142.5 (2029); 148.8 (2030).
  - Financial account (US$ millions): -66.8 (2020); 6.1 (2021); -45.8 (2022); -37.9 (2023); -81.4 (2024); -59.6 (2025); -71.9 (2026); -76.7 (2027); -56.5 (2028); -37.8 (2029); 0.5 (2030).
  - Net imputed international reserves (Millions of U.S. dollars): 165.6 (2020); 165.2 (2021); 182.3 (2022); 164.2 (2023); 168.3 (2024); 179.8 (2025); 192.2 (2026); 203.9 (2027); 216.3 (2028); 228.6 (2029); 241.7 (2030).
  - Months of imports of goods and services: 6.6 (2020); 6.2 (2021); 6.2 (2022); 4.7 (2023); 4.4 (2024); 4.3 (2025); 5.0 (2026); 5.7 (2027); 5.9 (2028); 5.9 (2029); 6.0 (2030).
  - Gross external debt (percent of GDP): 107.6 (2020); 87.5 (2021); 100.2 (2022); 86.9 (2023); 89.7 (2024); 82.1 (2025); 83.5 (2026); 83.1 (2027); 83.5 (2028); 84.3 (2029); 83.1 (2030).

### Selected financial stability indicators (2014–24)
- Commercial banks (Table 5a highlights):
  - Regulatory capital ratio series (2014–2024) and Nonperforming loans to total gross loans reported at 8.78 (2014) rising to 40.93 (2015) etc., with most recent values showing improvement (12.54 in 2024).
  - Return on Assets and Return on Equity series show volatility; Return on Assets 0.91 (2014) … 0.50 (2024); Return on Equity 8.71 (2014) … 5.0 (2024) contextually.
  - Liquid Assets to Total Assets series and other liquidity metrics shown across years.
- Credit unions (Table 5b highlights):
  - Regulatory capital ratio and liquidity measures series for 2014–2024 with notable variability.
  - NPLs to total gross loans for credit unions remained elevated across recent years (e.g., 11.8–15.7 range for different years and institutions).
  - Returns and interest margin indicators show recovery but uneven performance across institutions.

*Source: IMF staff compilation and Dominica authorities (figures, tables, and projections as presented).*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### Overall Assessment
- Dominica’s external position in 2024 is estimated to be substantially weaker than the level implied by medium-term fundamentals and desirable policies.
- The current account (CA) deficit is estimated to have narrowed to 32.2 percent of GDP in 2024 from 34.2 percent in the previous year.
- The improvement is primarily due to a stable goods and services trade balance combined with a higher nominal GDP; net income and net current transfers also increased slightly.
- While external imbalances are expected to decline over the medium term, vulnerability to natural disasters and high dependency on commodity imports raise external sustainability risks.
- The proposed mix of fiscal consolidation and competitiveness-enhancing structural reforms is critical to strengthen resilience to shocks and bring the external sector back to balance.

### Potential Policy Responses
- Pursue fiscal consolidation in line with the ECCU’s regional debt target and Dominica’s national fiscal rule.
- Earmark CBI revenue to high-quality resilience building projects, increase allocation to the government’s self-insurance fund (VRF), and allocate more to external debt amortization.
- Implement reforms to raise productivity growth, improve competitiveness, broaden the export base, and advance the transition to renewable energy generation to reduce reliance on imported fossil fuels.

### Foreign Assets and Liabilities: Position and Trajectory
- Net international investment position (IIP) was estimated to have remained mostly stable in 2024 as the CA deficit was largely financed with CBI revenues.
- Asset composition in 2024:
  - 49.6 percent of assets held by deposit-taking institutions other than the central bank (either in the form of currency and deposits or equity and fund shares).
  - Currency and deposits: 50.2 percent of total assets.
  - Equity and fund shares: 5.5 percent of total assets.
  - Reserve assets: 17.9 percent of total assets.
- Liability composition in 2024:
  - Nearly half of obligations pertain to FDI (close to 88 percent of GDP).
  - One-third are general government loans and debt securities.
- Assessment:
  - Large share of FDI and concessional (long maturity) loans to the general government mitigate potential risks.
  - Near-term public external debt service at 4-5 percent of GDP.
  - Minimum change in the NIIP in 2023-24 does not constitute a significant concern for external debt sustainability.
  - Expected improvement in the current account over the medium term is expected to stabilize the NIIP.
- Key 2024 figures (Percent of GDP):
  - NIIP: -69.6
  - Gross Assets: 107.4
  - Debt Assets: 82.2
  - Gross Liab.: -177.0
  - Debt Liab.: -91.1

### Current Account
- Background and recent evolution:
  - 2024 estimated CA deficit: 32.2 percent of GDP (from 34.2 percent in 2023).
  - Improvement driven primarily by stable goods and services trade balance and higher nominal GDP; net income and net current transfers increased modestly.
  - Services trade: improvement from higher tourism exports nearly offset by a deteriorating goods trade balance reflecting higher imports related to large infrastructure projects.
- Outlook:
  - Current account adjustment expected to continue in 2025 and beyond as:
    - Tourism exports strengthen (including from expansion in capacity).
    - Public investment related imports normalize from earlier peaks.
    - Fuel imports for electricity generation decline after the geothermal powerplant comes into production in 2026.
- Assessment and model results:
  - Dominica has shown persistently large CA deficits since hurricane Maria (2017) due to curtailed tourism activity and reconstruction/resilience efforts.
  - According to the CA model, the norm corresponds to a deficit of 16.3 percent of GDP, implying a CA gap relative to actual in excess of 16.1 percent of GDP.
  - Policy contributions to the gap pertain mostly to external factors (such as increased fiscal deficit and public health spending from trading partners).
  - Although Dominica’s fiscal position is weaker than its desirable medium-term level, similar gaps in the rest of the world balanced out the effect on the CA in 2024.
  - The CA gap is projected to shrink over the medium term, partly reflecting reduced fuel imports as geothermal energy production comes onstream.
  - A higher current account is necessary to stabilize Dominica’s NIIP (-69.6 percent of GDP as of 2024) and meet external debt service payments.

- EBA-lite Model Results, 2024 (in percent of GDP):
  - CA-Actual: -32.2
  - Cyclical contributions (from model): (-)0.2
  - Adjusted CA: -32.5
  - CA Norm (from model): -16.3
  - Adjusted CA Norm: -16.3
  - CA Gap: -16.10.0
    - o/w Relative policy gap: 0.0
  - Elasticity: -0.3
  - REER Gap (in percent): 54.00.0
  - Notes:
    - 1/ Based on the EBA-lite 3.0 methodology.
    - 2/ Cyclically adjusted, including multilateral consistency adjustments.

### Real Exchange Rate
- Background:
  - REER depreciated by roughly 3 percent during 2020-21, followed by an appreciation of similar magnitude over 2022-23, reflecting non-synchronized inflation cycles under the currency peg.
  - Since 2024, the REER has been relatively stable, depreciating by less than 1 percent compared to end-2023, and is expected to end the year at a level close to end-2019.
  - The Eastern Caribbean dollar is pegged to the U.S. dollar.
- Assessment:
  - CA model approach implies a substantial (54.0 percent) overvaluation of the REER.
  - IREER model indicates neither over- nor undervaluation.
  - Divergence partly explained by CA model not accounting for temporary elevated import flows associated with large CBI-financed disaster reconstruction and strategic infrastructure investments (including geothermal transition and international airport construction), which are expected to improve external balances over the long term.
  - Other competitiveness measures do not suggest a large misalignment:
    - Price indicators, goods terms of trade, and the evolution of Dominica’s real exchange rate against key trading partners have remained relatively stable over the past decade.
    - Tourism recovery: total tourism arrivals have recovered beyond pre-pandemic levels in 2024:
      - Cruise arrivals: 124 percent of pre-pandemic levels in 2024.
      - Stayover arrivals: 89 percent of pre-pandemic levels in 2024.
    - Structural constraints such as reduced airlift capacity may explain stayover shortfall.
  - Elevated input prices such as electricity and labor costs reflect longstanding competitiveness challenges; ongoing energy transition reform is expected to partially alleviate these.

### Capital and Financial Accounts: Flows and Policy Measures
- Background:
  - Historically reliant on FDI and, more recently, CBI revenues to finance external deficits.
  - FDI averaged 7.3 percent of GDP since hurricane Maria (7.0 percent of GDP in 2024).
  - CBI revenues have been consistently above 11.8 percent of GDP during the same period, rising to around 30 percent of GDP during 2021-24.
- Assessment:
  - FDI and concessional lending to the government are likely to remain stable sources of external financing.
  - CBI revenue could prove volatile.
  - If CBI continues to be earmarked to public investment (with a large import component), a fall in CBI could be partially mitigated by resulting lower imports.
  - Public investment could strengthen the external balance through improved tourism capacity and lower energy imports.
  - Lower-than-expected CBI flows could jeopardize completion of key projects and weaken the external balance.

### FX Intervention and Reserves Level
- Background:
  - Dominica’s reserve position estimated to have remained broadly stable in 2024, increasing marginally in nominal terms from US$164.2 in 2023 to US$168.3 in 2024.
  - As a member of the Eastern Caribbean Currency Union, Dominica is under a quasi-currency board arrangement.
  - Foreign assets and liabilities of the Eastern Caribbean Central Bank (ECCB) cannot be directly assigned to an individual country; imputed reserves method is used as a proxy for net foreign assets held at the ECCB.
  - The 2024 SDR allocation to Dominica of 11.5 million SDRs (about US$15.1 million) has been kept at the ECCB as a liquidity buffer.
- Assessment:
  - Estimated imputed reserves cover 4.4 months of imports and 31.4 percent of broad money in 2024.
  - These ratios exceed typical benchmarks of 3 months of imports and 20 percent of broad money.
- Notes:
  - According to the ECCB by-laws, imputed reserves of each ECCB member are calculated as the difference between the member’s reserve money and net domestic assets. The ECCB has the mandate to maintain a foreign exchange cover of 60 percent of total demand liabilities.
  - Information on short term debt and other liabilities is unavailable and consequently assessments against other reserve adequacy metrics such as the IMF’s composite Assessment Reserve Adequacy (ARA) metric cannot be computed.

*Source: Annex I. External Sector Assessment (1dmaea2025001-print-pdf).*

### Annex III. Risk Assessment Matrix

### Annex III. Risk Assessment Matrix

### Conjunctural Risks — Global/External Risks
- Trade policy and investment shocks  
  - Relative Likelihood: High  
  - Impact: Medium. ST/MT  
  - Economic effects: Renewed inflationary pressures, lower real incomes, slower economic growth.  
  - Policy response: Strengthen the social safety net. Diversify tourism revenues. Accelerate the geothermal energy transition. Increase the linkage between tourism and other sectors. Monitor financial risks closely, including risks to FDI and CBI, in coordination with the ECCB. Policies to offset the cost-of-living impact should be temporary and targeted to the most vulnerable.
- Sovereign debt distress  
  - Relative Likelihood: High  
  - Impact: High. ST/MT  
  - Economic effects: Less concessional financing, capital outflow, putting pressure on budget financing.  
  - Policy response: Strengthen the fiscal framework to rebuild buffers and communicate credible medium-term fiscal plans.
- Tighter financial conditions and systemic instability  
  - Relative Likelihood: Medium  
  - Impact: Medium. ST/MT  
  - Economic effects: Increasing NPLs and reducing liquidity in the financial system. Potential market losses on overseas investments and disruptions to FDI inflows.  
  - Policy response: Intensify supervision of financial institutions and tighten regulations. Monitor financial risks closely, in coordination with the ECCB.
- Regional conflicts  
  - Relative Likelihood: Medium  
  - Impact: High. ST/MT  
  - Economic effects: Renewed inflationary pressures, lower real incomes, slower economic growth.  
  - Policy response: Strengthen the social safety net. Diversify tourism revenues. Accelerate green energy transition. Increase the linkage between tourism and other sectors. Monitor financial risks closely, including risks to FDI and CBI, in coordination with the ECCB.
- Commodity price volatility  
  - Relative Likelihood: Medium  
  - Impact: Medium. ST/MT  
  - Economic effects: Renewed inflationary pressures, lower real incomes, dampening demand, and worsening fiscal and external imbalances.  
  - Policy response: Strengthen the social safety net to better support the vulnerable, allow pass-through of international prices to domestic prices and avoid broad-based measures to mitigate fiscal risks and cushion the economic impact. Accelerate transition to renewable energy.
- Global growth acceleration (positive shock)  
  - Relative Likelihood: Low  
  - Impact: Medium. ST/MT  
  - Economic effects: Increase tourism activity, faster growth, higher inflation.  
  - Policy response: Monitor potential overheating and inflation.

### Structural Risks
- Deepening geoeconomic fragmentation  
  - Relative Likelihood: High  
  - Impact: Medium. ST/MT  
  - Economic effects: Reduced exports, higher import costs.  
  - Policy response: Boost efforts to increase employment and productivity, broaden export base, foster regional integration/collaboration, and strengthen economic competitiveness.
- Cyberthreats  
  - Relative Likelihood: High  
  - Impact: Medium. ST  
  - Policy response: Enhance digital security in public and private platforms.
- Climate change  
  - Relative Likelihood: Medium  
  - Impact: High. ST/MT  
  - Economic effects: Reduced growth and worsened fiscal and external positions, with disproportionate impact on the most vulnerable.  
  - Policy response: Accelerate transition to renewable energy to improve resilience. Design fiscal frameworks that internalize exposure to natural disasters and climate risk. Adopt national adaptation plans for investment in structural and financial resilience, build capacity to access climate finance. Strengthen data collection and monitoring of private insurance costs. Strengthen the social safety net to better support the vulnerable. Safeguard critical investment financing flows such as CBI revenues and ensure the completion of key projects.
- Social discontent  
  - Relative Likelihood: Medium  
  - Impact: Medium. MT  
  - Policy response: Strengthen the social safety net to better support the vulnerable. Adopt measures to assist job search and upskill workers and improve labor mobility.

### Domestic Risks
- Fiscal under-performance and lower CBI revenues  
  - Relative Likelihood: Medium  
  - Impact: High. ST/MT  
  - Economic effects: Disrupt fiscal consolidation and growth prospects to the detriment of fiscal sustainability.  
  - Policy response: Mobilize revenue from alternative sources and improve expenditure efficiency. Strengthen the fiscal framework to rebuild buffers. Strengthen governance frameworks to protect the integrity of the CBI program.
- Delays in infrastructure investment  
  - Relative Likelihood: Medium  
  - Impact: High. ST/MT  
  - Economic effects: Reduced tourism and fiscal revenues. Reduced long-run potential growth.  
  - Policy response: Improve PFM and contain growth of current expenditures. Strengthen fiscal frameworks while protecting space for growth-supporting investment. Safeguard critical investment financing flows such as CBI revenues.
- Rising domestic arrears  
  - Relative Likelihood: High  
  - Impact: High. ST/MT  
  - Policy response: Improve cash and debt management.
- Deterioration in CU asset quality and/or disruption of correspondent bank relationships  
  - Relative Likelihood: Medium  
  - Impact: Medium. ST  
  - Economic effects: Restrain private credit growth and undermine financial stability.  
  - Policy response: Monitor asset quality and ensure adequate loan loss provisioning and advance financial reform agenda.
- Delays in enacting social security system reforms  
  - Relative Likelihood: Medium  
  - Impact: Medium. MT/LT  
  - Policy response: Advance pension system reform to buttress its sustainability.

---

### Annex IV — Economic Adjustment Under a Strengthened Consolidation Scenario (key points)
- Fiscal adjustment context and targets  
  - 2024 Article IV consultation identified a fiscal adjustment gap of 3 percent of GDP.  
  - The gap is estimated to have widened slightly to 3½ percent of GDP.  
  - Staff active scenario: target a 3½ percent primary surplus from FY2026.  
  - Estimated EC$75 in additional adjustment measures to be phased in during the coming two years. (Footnote: The EC$75mn in additional adjustment is EC$10mn (or ½ percent of GDP) higher than recommended during the 2024 AIV consultation.)
- Composition of illustrative adjustment  
  - Expand the revenue base by EC$25 million and reduce expenditures by EC$50 million over two years.
  - Fiscal multiplier and growth impact: expected to be muted (0.1 ppt lower relative to the baseline during 2026-27) because the strategy: (i) preserves major infrastructure investments that drive growth under the baseline; and (ii) dedicates additional fiscal savings to faster clearance of arrears to domestic suppliers.
- Debt and reserve outcomes under the active scenario  
  - Public debt projected to decline to 59.8 percent of GDP by 2035, compared to 67.1 percent under the baseline scenario.  
  - Consolidation plan fully capitalizes the VRF to the targeted 12 percent of GDP by 2032 as opposed to remaining fixed at 1 percent of GDP under the baseline.  
  - Current account (CA) anticipated to improve by around 1.5 percent of GDP on average over the medium-term relative to the baseline, with faster convergence to the estimated norm by one year (2027).

### Annex IV — Macroeconomic Outlook (selected series; Percent of GDP or rates as reported)
- Real GDP (1/ At market prices): 4/3.5, 4.2, 3.3, 2.9, 2.7, 2.4, 2.5 (years correspond to 2024–2030 as in table header)
- Inflation (end of period): 2.1, 3.1, 2.3, 2.0, 2.0, 2.0, 2.0
- Primary fiscal balance: 0.1, 0.4, 0.7, 1.0, 1.2, 1.5, 2.0
- Overall fiscal balance 2/: -4.4, -4.2, -3.7, -3.1, -2.8, -2.5, -2.1
- Overall fiscal balance, excl. CBI 2/: -32.9, -26.3, -17.8, -17.3, -17.0, -16.7, -16.2
- Public Capital Expenditure 2/: 27.0, 20.2, 10.8, 9.8, 9.4, 8.9, 8.2
- Public debt 2/ 3/: 100.6, 96.9, 94.1, 91.5, 89.0, 86.4, 83.4
- Current account balance: -32.2, -30.4, -23.1, -17.1, -14.1, -14.3, -13.3
- Credit to the private sector growth 4/: -1.5, 1.2, 3.7, 5.0, 6.9, 6.6, 4.5

Notes included in source table:
- 1/ At market prices.  
- 2/ Data for fiscal years from July to June.  
- 3/ Includes estimated commitments under the Petrocaribe arrangement with Venezuela.  
- 4/ Annual percent change.  
- Debt projections in charts: Debt excludes PetroCaribe obligations but includes domestic arrears.

### Annex V — Potential Growth and Productivity: Trends and Prospects (key findings)
- Long-term trend: Dominica’s potential growth estimated to have dropped from 5 percent in the 1980s to nearly zero in the decade leading up to COVID-19.
- Main driver of decline: Weakening in total factor productivity (TFP) contribution, which accounts for 75 percent of the total estimated decline in potential growth.
- Other contributors: Slower growth in physical capital (around 20 percent of the decline) and human capital (around 16 percent of the decline).
- Firm-level diagnostic: Challenges accessing finance, workforce skill shortages, and burdensome administrative processes are primary obstacles to productivity; resolving these could boost average firm-level productivity by 44 percent.
- Methodological note (Box 1): Potential output estimation adjusts physical capital stock and measured output for natural disaster (ND) impacts using ARIMA models, perpetual inventory for capital, TFP calculation, and Hodrick–Prescott filter to obtain potential TFP; labor measured as human capital augmented population with human capital derived from average schooling (parameters 휗휗= 0.32 and 휔휔= 0.58).

*Source: Annex III. Risk Assessment Matrix (1dmaea2025001-print-pdf) and accompanying Annex IV and Annex V content provided in the supplied document.*

### 4. Firm-level analysis can provide insights on these underlying trends. The analysis draws

### 1dmaea2025001-print-pdf - 4. Firm-level analysis can provide insights on these underlying trends. The analysis draws

### Firm-level dataset and TFP estimation
- Dataset: ‘Innovation, Firm Performance, and Gender (IFPG)’ survey—conducted in 2020 across 1,979 firms throughout 13 Caribbean countries.
- Sample in Dominica: 137 firms, representing 45 percent of manufacturing firms and 9 percent of service firms.
- Firm coverage: dataset broadly groups firms into manufacturing and services and offers information on firms’ balance sheets, statements of income, and firm-level performance.
- TFP estimation: TFP is estimated using the factor share approach, which equates an input’s cost share to its respective output elasticity under the assumptions of cost minimization by firms, perfect competition, and constant returns to scale.
- Data cleaning and limitations: firms excluded if they have missing values or if they fall within the top and bottom 2 percent of productivity to address outliers; lack of panel data and limited availability of certain variables hinder the use of other elaborate TFP measures; sectors in the survey are broadly defined and do not allow for analysis into narrowly defined industries.

### Firm-level findings: misallocation and potential TFP gains
- Misallocation measured using the Hsieh and Klenow (2009) approach as dispersion in the marginal revenue products of capital and labor between firms.
- Potential TFP gain in Dominica from eliminating resource misallocations: 45 percent (placing Dominica in the lower mid-range among the ECCU countries, between 34 percent and 65 percent).
- Macroeconomic implication (back-of-the-envelope): addressing this misallocation in Dominica could narrow its GDP per capita gap with the U.S. by around 10 ppts.
- Assumptions for the back-of-the-envelope calculation: gains in labor productivity are the same as the gains in TFP and labor participation does not change.

### Structural bottlenecks identified by firms in Dominica
- Top five obstacles (of 18 examined) reported by firms in Dominica:
  - insufficient access to finance (20 percent)
  - an inadequately educated workforce (15 percent)
  - burdensome customs and trade regulations (12 percent)
  - limited access to land for expansion/relocation (11 percent)
  - cumbersome tax rates (10 percent)
- Underlying issues behind obstacles:
  - Access to finance: persistent weaknesses in the banking system, de-risking trend, underdeveloped financial infrastructure (e.g., absence of credit bureaus and outdated collateral and insolvency frameworks).
  - Workforce quality: weaknesses/gaps in local education and training frameworks, skills mismatches (personal/soft skills and shortage of qualified professionals), and emigration pressures contributing to a perceived shortfall of “in-demand” labor skills in Dominica.

### Cross-Caribbean regression results and quantified impacts of removing obstacles
- Method: regressions of firm TFP on dummy variables equal to one if firms report ‘Major’ or ‘Very severe’ obstacles (zero if ‘No’, ‘Minor’, or ‘Moderate’), including firm controls and industry/country fixed effects.
- Estimated productivity increases from removing specific obstacles (In Percent):
  - Cost of finance: 11.4
  - Tax administration: 9.9
  - Business license and permits: 8.5
  - Inadequately educated workforce: 5.2
  - Access to land for expansion/relocation: 3.7
  - Access to finance: 2.6
  - Customs and trade regulations: 1.6
  - Tax rates: 1.2
- Aggregate potential: if the main eight obstacles (primary contributors to TFP and the leading obstacles faced by Dominican firms) were addressed, TFP for firms in Dominica could potentially increase by up to 44 percent.

### Policy priorities to strengthen productivity and human capital
- Workforce quality
  - Enhance quality of education and vocational training, including leveraging digitalization and artificial intelligence.
  - Modernize curricula to better align with evolving economic needs.
- Access to finance and financial infrastructure
  - Strengthen the soundness of the banking system.
  - Develop financial infrastructure, including legislative reforms on regulation of the credit unions.
- Customs, tax administration and trade facilitation
  - Improve customs and tax administration and trade facilitation via ongoing digitalization of government services.
- Additional cross-cutting priorities: addressing skills mismatches, curbing emigration pressures, and improving credit information and insolvency frameworks.

### Annex VI — Overview of the gender landscape in Dominica (key findings)
- Aggregate estimate: closing the gender gap in labor force participation could contribute to an output gain of nearly 6 percent in Dominica (Staff estimate using IMF’s Output Gains Toolkit).
- Progress and gaps:
  - Adolescent birth rates declined from over 120 per 1,000 women aged 15-19 in 1960 to 34 per 1,000 as of 2022.
  - Gross school enrollment rates are similar for boys and girls.
  - Political representation: as of February 2024, 37.5 percent of seats in parliament were held by women.
  - Legal equality score: World Bank’s Women, Business, and the Law Report (2024) ranks Dominica’s legal rights index at 55 in 2024 (out of 100), compared to worldwide average of 64, LAC region 69, Caribbean 61.
  - Identified legal gaps: prohibiting hiring discrimination based on gender, marital or parental status, and protecting rights to request flexible work arrangements.
- Labor force participation and wages:
  - 2011 Labor Force Survey: female unemployment rate 10.1 percent vs. male 12.5 percent; female labor force participation 56.3 percent vs. male 75 percent (an 18.7 percentage point gap).
  - Staff estimates suggest the gender gap in labor force participation narrowed to around 6.5 percentage points in 2024 (method: assume post-2012 employment by gender grows at same rate as gender-specific active insured population reported by Social Security and unemployment rates constant).
  - Women in managerial positions: 48.4 percent of managerial positions held by women (UN Women Data Hub).
  - Female average annual wage relative to men: fell from 97.9 percent in 2013 to 88.6 percent in 2023 (Social Security data).
  - Pension coverage: all men above statutory pensionable age receive a pension, while only 85.3 percent of women do.
- Barriers and policy considerations to boost female labor participation and outcomes:
  - Address childcare costs and availability; authorities developing early childhood education support via Build Back Better project funded by Global Affairs Canada.
  - Promote flexible work arrangements (remote work, part-time, flexible hours); leverage Dominica Work Online Program.
  - Strengthen legal protections: explicitly prohibit discrimination in employment based on gender, marital or parental status, and age; promote workplace equality and safety.
  - Invest in education and skills training, create opportunities for women in technical fields; example: DOMLEC program to reduce gender gap in technical jobs through education and training.
  - Support entrepreneurship and ease structural credit constraints for women-owned microbusinesses (many home-based and uninsured and vulnerable to natural disaster shocks); promote resources, training, and mentorship for women entrepreneurs.
- Data constraints: most recent Labor Force Survey from 2011; Social Security active insured population used for updated estimates; need for more timely and granular labor market data.

*IMF staff calculations and analysis based on IFPG survey and related data.*

### 10. The lack of gender-specific data constrains policy development. As an important

### 10. The lack of gender-specific data constrains policy development. As an important starting point, policies should strive to improve the quality and availability of gender-disaggregated data, which is critical for making informed policy decisions.

### Key findings on gender and data gaps
- Dominica has one of the lowest availabilities of key gender-disaggregated data among the Caribbean and Latin American countries.
- The absence of timely labor force data in Dominica seriously constrains evidence-based labor market policy recommendations.
- Data on gender-based violence is lacking.
- Alleviating capacity and resource constraints within the Central Statistical Office (CSO) in staffing and funding, and addressing bottlenecks in data sharing within the government, are necessary steps.
- Greater use of synergies in regional data collection and processing could help address persistent resource and capacity gaps.

### Policy recommendations related to gender data
- Improve the quality and availability of gender-disaggregated data as a priority starting point for policy development.
- Strengthen CSO staffing and funding to alleviate capacity constraints.
- Remove internal government bottlenecks to data sharing to enable timely cross-sectoral analysis.
- Leverage regional data collection and processing synergies to mitigate resource and capacity limitations.

### Small State Engagement Strategy (SSES) — strategic priorities and constraints
- SSES objective: three-year plan to help Dominica address economic imbalances and achieve development, climate resilience, and risk management goals.
- Medium-term policy frameworks and aims:
  - National Resilience Development Strategy (NRDS): sustainable, inclusive, and resilient development; strategic infrastructure and social investments; green energy transition (GET).
  - Disaster Resilience Strategy (DRS): financial resilience via a multi-layered insurance strategy, including emergency contingency funds.
  - DRS together with the National Fiscal Rule (NFR) form key pillars of Dominica’s fiscal framework.
- Key implementation challenges:
  - Strategic priorities lack a unifying operational framework with linking institutional processes.
  - Resource constraints and institutional gaps complicate implementation.
  - Underdeveloped institutions and limited technical capacity, including weaknesses in statistical compilation and PFM processes, frustrate policy formulation, monitoring, and implementation.
- IMF engagement approach:
  - Leverage surveillance and capacity building (CD) as core instruments.
  - Align AIV consultations with the budget cycle.
  - Tailor CD to statistics, PFM processes, and risk management; coordinate with CARTAC.
  - Lending is not planned; IMF will provide guidance if disaster shocks occur.

### IMF focal areas under the SSES
- Fiscal and Debt Sustainability:
  - Priority to rebuild fiscal buffers to comply with Dominica’s fiscal framework and reduce debt vulnerabilities while preserving critical social and infrastructure investment.
  - Key priorities: boost domestic revenue (reduce leakage, improve tax administration), cut inefficient spending, enhance PFM operations, manage fiscal risks (e.g., pensions).
  - Strengthen: (i) budget, cash management, and reporting processes; (ii) treasury operations; (iii) public investment management.
- Financial Stability and Intermediation:
  - Close regulatory gaps and strengthen supervision to address balance sheet weaknesses.
  - Engage regionally with the ECCB to strengthen banking sector supervision; enhance risk-based oversight of nonbanks and modernize enforcement mechanisms.
- Climate Resilience:
  - Minimize fallout from NDs by elaborating comprehensive risk management strategies, building resilient infrastructure, and facilitating the GET.
  - Prioritize disaster risk management and climate financing in surveillance; support green budgeting and enhanced procurement and PSIP processes.
- Strong and Inclusive Growth:
  - Surveillance to explore structural growth constraints and policy responses.
  - Priority deliverables: assessments on (i) growth accounting and firm-level allocative efficiencies; (ii) the financial intermediation/growth nexus; (iii) gender-based labor market frictions; and (iv) efficiencies from digitalization.
- Partnerships:
  - Sustain collaborations with the World Bank (WB), IADB, and Caribbean Development Bank to promote economic stability, climate resilience, and the GET.
  - Continue joint work with the WB on debt sustainability and tax and social policies.

### Data adequacy and quality — main issues
- Real Sector:
  - GDP data are not reported quarterly; annual figures subject to significant delays.
  - CPI basket and weights are outdated.
  - Technical complications from a software upgrade temporarily suspended CPI production; suspension recently lifted.
  - Compilation of labor force information has been suspended and an updated census is overdue.
- Fiscal Sector:
  - Coverage and granularity of government financial statistics deemed adequate overall.
  - Data reported monthly across almost all fiscal metrics but prone to inconsistencies and large revisions.
  - Scope to improve reporting of CBI-related flows; information dissemination is irregular and lagged.
  - Publicly accessible debt information is hard to find systematically, complicating internal verification.
- External Sector:
  - Capital account and financial account flows do not adequately capture CBI, obscuring financing dynamics.
  - ECCB relies on cash-based fiscal data on CBI flows to estimate external sector flows, which are subject to estimation and classification risks.
- Monetary and Financial Sectors:
  - Historical data adequate for surveillance; provision of information for credit unions (CUs) has improved.
- Use of alternative estimates:
  - Public debt information used in the Article IV consultation includes debt to Venezuela under the PetroCaribe facility estimated as 51.7 million US dollars, 7.7 percent of GDP as of FY2023/24; this differs from official statistics due to disputed debt relief claims.
- Other data gaps:
  - GDP expenditure components, labor market data, climate data, details on CBI revenue including number of passports issued and origin country of passport holders.

### Changes since the last Article IV consultation and corrective actions
- Changes:
  - Authorities completed GDP rebasing until 2022; 2023 rebasing ongoing. A fully rebased series not expected until the 2026 AIV cycle.
  - Progress to resume CPI release after suspension in February 2021 due to system failures; CPI compilation has resumed up to end-2024.
  - CPI+ software procured but remains at implementation stage; CSO addressed missing items from pandemic-related supply chain disruptions.
  - CARTAC CD ongoing to support CPI reporting and completion of GDP rebasing.
  - CD mission on external sector statistics in July 2024 prioritized improving CBI-related flow reporting and addressing Visitor Exit Survey gaps.
  - Authorities have started to provide non-performing loan information for CUs with delinquency over three months in addition to over twelve months.
  - Authorities exploring mechanisms to improve dissemination of CBI investment flows to the CBI unit to improve transparency and reporting.
- Corrective actions and CD priorities:
  - Ongoing CARTAC support for CPI compilation and reporting.
  - GDP compilation and rebasing, updating the Supply-Use Table (SUT) and operationalizing a Tourism Satellite Account framework.
  - Operational support to implement Balance of Payments recommendations.
  - Engagement to resume preparation of labor force/employment statistics.
  - Advocate transparency standards for CBI revenues: publish CBI revenues and expenditure breakdowns and the number and national origin of applications in the pipeline and passports issued.

### Data adequacy assessment highlights
- The data provided to the Fund has some shortcomings that somewhat hamper surveillance; some sectors have serious shortcomings that significantly hamper surveillance.
- Granularity and frequency/timeliness issues are noted across several data categories (National Accounts, Prices, Government Finance Statistics, External Sector Statistics, Monetary and Financial Statistics, Inter-sectoral Consistency).
- Table of Common Indicators Required for Surveillance: snapshot as of April 28, 2025 (detailed cell entries omitted here but documented in the assessment).

### Debt sustainability — summary findings and risks
- Dominica’s debt is sustainable, but the country remains at overall high risk of debt distress with elevated levels of public and external debt.
- Risk of external debt distress has been lowered from high to moderate relative to the 2024 assessment.
- Public debt dynamics:
  - Public debt peaked at 112.5 percent of GDP in 2020.
  - Public debt declined to 99.8 percent of GDP in FY2023/24.
  - Baseline assumes public debt continues to fall over the medium and long run, but current policies are insufficient to meet the regional debt target of 60 percent of GDP by 2035.
  - The present value of the public debt-to-GDP ratio remains above the benchmark for a protracted period, signaling persistent risks.
- Policy and reform priorities to strengthen sustainability:
  - Implement fiscal consolidation consistent with the national fiscal rule.
  - Ensure savings under dedicated risk management funds—Vulnerability Risk and Resilience Fund (VRF) and Debt Repayment Fund (DRF)—are implemented to put debt on a sustainable path.
  - Reforms to expand tourism capacity and reduce energy imports, including ensuring proper earmarking of Citizenship-by-investment (CBI) inflows.
- Main downside risks to the debt outlook:
  - Slower global growth and tourism spillovers.
  - Further natural disaster shocks.
  - Weaker than anticipated revenues from the CBI program.
- Technical and classification notes:
  - Dominica’s score in the Composite indicator (CI) is 3.01 which implies a medium debt carrying capacity (source: October 2024 WEO and 2023 CPIA data).
  - Joint Bank-Fund Debt Sustainability Analysis: Risk of external debt distress — Moderate; Overall risk of debt distress — High; Granularity in the risk rating — Sustainable; Application of judgement — No.
  - DSA date: May 22, 2025.

### Public debt coverage and reporting improvements
- Public sector debt includes central government direct and guaranteed debt of both external and domestic debt.
- Central government direct debt accounts for about 84 percent of total public debt.
- Guaranteed debts are directed to State Owned Enterprises (SOEs), including borrowing under the Petrocaribe arrangement with Venezuela.
- Public and Publicly Guaranteed (PPG) external debt is mostly owed to multilateral creditors.
- National Bank of Dominica (NBD) and Dominica Social Security (DSS) are main domestic creditors.
- No borrowing by local/state governments and no borrowing by the central bank on behalf of the government.
- SOE non-guaranteed debts (mostly domestic) are not included in public debt stock but expected to be small relative to the guaranteed stock; other SOEs not permitted to borrow externally without government guarantees.
- Ongoing improvements:
  - Finalizing a new Medium-Term Debt Strategy (MTDS) and an Annual Borrowing Plan (ABP) for Cabinet approval.
  - Annual Debt Portfolio Review (DPR), including loan guarantees under the 2019 DPR; submitting the DPR to Parliament and publishing on the Ministry of Finance website in line with IDA’s Sustainable Development Finance Policy (SDFP) and Development Policy Financing (DPF) incentives.
- Specific debated liability:
  - Debt to Venezuela under PetroCaribe estimated as 51.7 million US dollars, 7.7 percent of GDP as of FY2023/24; authorities contend debt relief was granted but details not yet shared with the Fund and issue is under review.

*Source: STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITY ANALYSIS (selected sections).*

### 2. The stock of government arrears is excluded from the official definition of debt but

### 2. The stock of government arrears is excluded from the official definition of debt but

### Government arrears and contingent liabilities
- Government arrears (unpaid checks) were 3.5 percent of GDP as of February 2025 and are largely owed to domestic suppliers.
- Unpaid cheques have been decreasing through FY2024/25 and trending down more broadly in recent years, but the arrears stock remains non-negligible and presents additional risks for debt and cash flow management.
- Risks from arrears:
  - They increase the overall envelope of government debt obligations.
  - Arrears clearance may involve recourse to expensive bank overdraft facilities, which can increase pressure on debt dynamics.
- Contingent Liability stress test calibration:
  - No Public-Private Partnerships in Dominica; no related contingent liability included.
  - Financial market contingent liability shock calibrated at 7 percent of GDP (higher than the 5 percent of GDP default) to account for potentially higher fiscal costs of strengthening financial sector balance sheets in the event of a natural disaster (ND), given undercapitalization of non-bank financial institutions and elevated non-performing loans.

### Background on public debt trends
- Public debt trajectory:
  - Public debt rose from an average of 70 percent of GDP in 2014–15 to 112.5 percent of GDP by 2020, reflecting Tropical storm Erika (2015), hurricane Maria (2017), and the COVID-19 pandemic.
  - By FY2023/24, public debt declined to 99.8 percent of GDP.
- Gross external debt:
  - Total public external debt was 64.2 percent of GDP in FY2023/24.
  - PPG external debt rose to 70.9 percent of GDP in 2020, contributing to a peak in total external debt at 105.8 percent of GDP.
  - Public external debt declined by more than 6 percent of GDP by FY2023/24.
- Private external debt declined by 13 percent of GDP to 22 percent of GDP in FY2023/24 compared to FY2020/21.

### Debt composition and creditors
- Two thirds of Dominica’s public debt is external; 92.4 percent of external public debt is owed to official bilateral and multilateral creditors.
- Creditor composition highlights:
  - World Bank: 40 percent of the total external public debt stock.
  - Venezuela’s Petrocaribe: outstanding debt estimated at 7.7 percent of the total debt stock as of FY2023/24 (estimated borrowing under Petrocaribe based on original loan terms; authorities contend to have been granted debt relief by Venezuela, including cancellation of debt service payments from 2018).
  - Other creditors include Government of China and the French Development Agency.
- Domestic financing:
  - Comes primarily through direct credit from the National Bank of Dominica (NBD) and local debt holders, mainly the Dominica Social Security (DSS).
  - Domestic debt accounted for around 34 percent of total public sector debt as of June 2024.
  - Recent years show a decline in reliance on domestic debt after large direct borrowing from the NBD in FY2017/18 and heavy use of the overdraft facility in FY2018/19.

### Macro forecasts and DSA baseline assumptions
- Growth:
  - Annual real growth projected to average 3½ during 2025-27, supported by flagship infrastructure and geothermal transition.
  - Long-term growth projected to converge to 2 percent.
  - Historical and recent outturns: Real GDP grew 4.7 percent in 2023 and 3.5 percent in 2024.
- Inflation:
  - Peaked at 7 percent in 2023; fell to 2.1 percent (eop) in 2024 and projected to converge to 2.1 percent over the medium term (text states convergence at this level and elsewhere references 2.0 percent long-run; table shows inflation projections by year).
- Fiscal position:
  - Primary balance improved by 2.3 percentage points to a deficit of 2 percent of GDP in FY2023/24.
  - Modest revenue measures (excise increases Sep 2024 and Jan 2025) and spending restraint expected to support gradual improvement to a 2 percent of GDP surplus by 2030.
- CBI revenue:
  - Projected to moderate from recent highs in excess of 30 percent of GDP to around 15¾ percent of GDP from 2026.
  - Table entries: CBI revenue 2023: 33.0; 2024: 30.0; 2025: 23.6; 2026: 15.7; 2027: 15.7; 2028: 15.7 (2025 Article IV column also shows alternate values including 18.0, 15.4, 14.5, 14.5, 14.5, 14.5).
- Grants:
  - Projected at 2 percent of GDP, in line with the historical average excluding pandemic and ND years.
- Balance of payments:
  - Current account deficit narrowed in 2024 by 2 ppts to 32.2 percent of GDP.
  - CA is expected to steadily improve and return to its norm by 2028.
- Financing and external support assumptions:
  - Dominica negotiated a US$41 million loan from the Saudi Development Fund (SDF) on concessional terms (2 percent interest rate, 28 years maturity, 8 years grace) — disbursement plan unclear and not included in the framework.
  - Government secured US$20 million from the Caribbean Development Bank (CDB) and SDR$18.5 million from the World Bank, both included in the framework with expectation of full disbursement in FY2024/25.
  - Official external financing projected at 9 and 6 percent of GDP in the medium term (2025–26) and long term, respectively.
  - Baseline assumes partial use of deposits.
  - DSA assumes authorities opt not to draw on their SDR allocation.

### Debt dynamics, financing needs, and realism tools
- Drivers of debt dynamics:
  - Back-to-back natural disasters and the pandemic produced higher-than-expected primary deficits and GDP contractions, raising the debt/GDP ratio.
  - Newly agreed loans from CDB and the World Bank create a small bump in debt-to-GDP in FY2024/25, returning to a downward trend thereafter under the baseline.
- Government financing needs and flows (selected table figures, fiscal years July–June):
  - Gross Financing needs by year (2024–2029): 51 50 45 42 44 46 (table header: 2024 2025 2026 2027 2028 2029).
  - Overall deficit (2024–2029): 21 21 18 14 12 10.
  - Primary deficit (2024–2029): -1 -3 -5 -9 -11 -14.
  - Interest (2024–2029): 22 23 23 22 22 24.
  - External debt (percent of financing mix column): 67 67 78 (table shows entries across rows).
  - Domestic debt (2024–2029): 16 17 17 16 15 16.
  - Principal repayments (2024–2029): 30 29 27 24 20 19.
  - External principal repayments (2024–2029): 19 17 14 13 13 12.
  - Domestic principal repayments (2024–2029): 11 13 13 11 8 7.
  - Other debt-creating flows (use of deposits): 1/-1 1 -4 -24 12 18 (Deposit stock: 117 610 224 0).
  - Gross financing sources (2024–2029): 51 50 45 42 44 46.
  - External financing (2024–2029): 45 44 42 42 44 46.
  - Multilateral financing (2024–2029): 45 44 42 42 44 46.
  - World Bank disbursements (2024–2029): 33 31 28 28 29 30.
  - CDB disbursements (2024–2029): 12 13 14 15 15 16.
  - Domestic financing (2024–2029): 6 6 3 0 0 0.
- DSA Realism Tools:
  - Results affected by substantial growth volatility from the pandemic.
  - Real GDP growth paths implied from various fiscal multipliers are similar to baseline projections.
  - Projected 3-year adjustment under the baseline is 2.5 percent of GDP.
  - The projected relation between public investment and real GDP growth differs substantially from historical relation due to NDs and the pandemic.

### Scenario and stress tests
- Country classification:
  - Debt carrying capacity: Medium (based on Composite Index (CI) using CPIA and other factors).
  - External debt burden thresholds and benchmarks used: PV of debt in % of GDP 55; Exports 180; GDP 40; Debt service in % of Exports 15; Revenue 18 (as given in table).
- Standardized and contingent stress tests included:
  - Six standardized and contingent liability stress tests.
  - Financial market contingent liability set at 7 percent of GDP (above 5 percent default) to reflect ND-related risks to financial sector balance sheets.
  - Customized "Catastrophic Climate Event" scenario:
    - Assumes reoccurrence of a typical hurricane (such as Tropical Storm Erika) in the second half of FY2024/25.
    - Assumes declines in real GDP growth by 1.5 ppts, export growth by 3.5 ppts, and an increase in debt-to-GDP ratio by 10 ppts as a result of considerable rehabilitation expenditure.

*Source: IMF staff report text (Dominica DSA excerpt).*

### 15. Dominica is assessed at moderate risk of external debt distress. Since no indicators

### 15. Dominica is assessed at moderate risk of external debt distress. Since no indicators

### External debt risk assessment
- Dominica is assessed at moderate risk of external debt distress because no indicators breach the threshold under the baseline (Figure 1).
- PV of external public debt-to-GDP:
  - Stays below the threshold established for countries with “medium” debt carrying capacity by 2025 under the baseline.
  - Breaches the threshold by a large margin in the most extreme shock scenario (reduction in exports to one standard deviation below its historical average).
- PV of external public debt-to-exports:
  - Remains below the threshold throughout the baseline projection.
  - Goes well above the threshold under the most extreme export shock.
- Historical scenario:
  - Similar trajectory in debt-to-GDP in initial years but leads to higher debt accumulation in the medium term.
  - Debt-to-exports stays below the threshold until 2033 and exceeds the threshold thereafter.
- Conclusion: external debt distress risk decreased from high to moderate relative to the 2024 Article IV; only historical and catastrophic climate shock scenarios entail projected breaches of thresholds for some debt indicators.

### Debt service and residuals
- Debt service metrics under policy implementation:
  - Debt service-to-exports ratio remains below threshold from 2028 in all scenarios.
  - Debt service-to-revenue remains below the threshold for all shocks.
- Residuals:
  - High in the historical period, peak in 2021, and decline consistently through the projection period.
  - Residuals mostly explained by the use of government deposits derived from CBI revenues, which fall from 2024 onwards.
  - Other possible cause: data accuracy issues in the external accounts related to CBI flows.

### Overall public debt sustainability and projections
- Baseline assessment:
  - Under the baseline scenario, public debt is assessed as sustainable but remains at high risk of debt distress.
  - Baseline fiscal consolidation combined with sustained CBI inflows for growth-enhancing resilient public investment yield a declining public debt trajectory but do not achieve the regional debt target of 60 percent of GDP by 2035.
  - Key metrics of debt sustainability remain elevated over much of the horizon and are sensitive to stress scenarios.
- PPG debt:
  - PPG debt remains high and above the threshold under the baseline over the horizon.
  - PV of total public-sector debt-to-GDP ratio remains below the corresponding benchmark after 2025 under baseline assumptions.
  - The most extreme growth shock yields large breaches of the benchmark.
  - Debt service-to-revenue ratios increase steeply in the near-term due to slow recovery in tax revenue post-pandemic but decelerate afterwards.
- Domestic debt:
  - Domestic debt-to-GDP projected to decline below the threshold by 2029.
  - Domestic debt service-to-revenue ratio expected to fall significantly, converging to the threshold by 2032.
  - Net domestic debt issuance expected to be negative after 2025.

### Stress tests, mitigating factors, and risk drivers
- Stress tests omit mitigating factors that cannot be internalized within the standardized DSA framework:
  - Resilience to natural disasters (NDs): large investments in physical and social resiliency reduce rehabilitation and reconstruction spending after NDs and climate shocks, mitigating output and tax revenue declines.
  - Fiscal buffers: large government deposits from buoyant CBI revenues have financed fiscal deficits since 2015; planned accumulation of savings in the VRF and DRF will cushion catastrophic climate events and shocks.
  - Staff recommendation: reprioritize CBI revenues towards enhancing VRF contributions and paying down debt via the DRF to reduce borrowing needs after extreme climate shocks and lower outstanding debt.
- Non-resident deposits:
  - Deposits of Dominican expats amount to 12 percent as ratio of public external debt, reducing rollover risk of external debt and enhancing imputed international reserves under the regional currency board arrangement.
- Risk factors and vulnerabilities:
  - CBI inflow projections could underperform if travel restrictions reduce the value of holding a Dominican passport.
  - CBI has upside risks as evidenced by unprecedented inflows during 2020-24.
  - Slower expansion of stay-over tourism may weigh on GDP growth; however, Dominica’s reliance on tourism is lower relative to regional peers and growth assumptions primarily driven by high public investment (including an airport project).
  - Recurrent large climate events could severely damage infrastructure and trigger debt spikes.
  - Market risks are contained: nearly 90 percent of the debt portfolio consists of fixed interest debt; currency risks limited by the currency board arrangement and external debt being dominated by USD and EC dollar debt.

### Fiscal-financing and financial-stability concerns
- Increased reliance on domestic borrowing:
  - Higher-than-projected reliance on domestic debt during 2018–21 increased domestic debt service burdens.
  - Potential financial stability threat via the bank- and non-bank-sovereign nexus if shocks impair government debt servicing.
  - Domestic debt service spikes in 2022 but moderates thereafter.
  - Authorities should monitor financial stability of local bond holders, particularly DSS.
- Policy framework importance:
  - Execution of the fiscal framework (National Fiscal Rule and layered risk management under the DRS) and continued concessional multilateral/bilateral support are critical.
  - Planned VRF accumulation and DRF accelerated debt repayments with CBI revenues will enhance debt sustainability and resilience to NDs.

### Key statistics and projections (selected figures from the DSA tables)
- External debt (nominal), historical and selected projections (in percent of GDP): 2021: 86.7; 2022: 98.9; 2023: 86.1; 2024: 89.0; 2025: 81.6; 2026: 83.1; 2027: 82.7; 2028: 83.1; 2029: 84.0; 2034: 68.9; 2044: 40.9; 92.1; 79.8 (table rows include truncated series).
- Of which PPG (percent of GDP): 2021: 70.2; 2022: 66.7; 2023: 64.2; 2024: 69.3; 2025: 65.4; 2026: 66.7; 2027: 67.4; 2028: 68.2; 2029: 69.4; 2034: 55.9; 2044: 31.6; 61.6; 64.8.
- Change in external debt (percent): 2021: -19.1; 2022: 12.2; 2023: -12.8; 2024: 2.9; 2025: -7.4; 2026: 1.5; 2027: -0.3; 2028: 0.4; 2029: 0.9; 2034: -3.2; 2044: -2.1.
- Identified net debt-creating flows (percent): 2021: 18.2; 2022: 16.4; 2023: 19.5; 2024: 21.5; 2025: 20.6; 2026: 14.7; 2027: 9.0; 2028: 6.3; 2029: 6.7; 2034: 5.2; 2044: 6.2; 10.0; 9.5.
- Non-interest current account deficit (percent): 2021: 30.6; 2022: 24.5; 2023: 31.6; 2024: 29.8; 2025: 28.2; 2026: 21.3; 2027: 15.5; 2028: 12.6; 2029: 12.8; 2034: 11.1; 2044: 11.6; 23.1; 16.1.
- Exports (percent of GDP): 2021: 20.3; 2022: 27.6; 2023: 27.9; 2024: 30.7; 2025: 34.0; 2026: 33.1; 2027: 33.1; 2028: 35.0; 2029: 35.1; 2034: 35.2; 2044: 32.5.
- Net FDI (negative = inflow, percent of GDP): 2021: -4.5; 2022: -2.8; 2023: -7.0; 2024: -6.8; 2025: -5.4; 2026: -5.4; 2027: -5.4; 2028: -5.4; 2029: -5.4; 2034: -5.2; 2044: -6.1; 2024-44 series: -5.5.
- PV of PPG external debt-to-GDP ratio (selected): 2025: 25.3; 2026: 24.9; 2027: 25.5; 2028: 22.5; 2029: 22.5; 2034: 11.1.
- PV of PPG external debt-to-exports ratio (selected): 2025: 103.5; 2026: 87.0; 2027: 74.4; 2028: 76.2; 2029: 76.4; 2034: 63.9; 2044: 34.3.
- PPG debt service-to-exports ratio (selected): 2024: 21.5; 2025: 18.0; 2026: 17.6; 2027: 13.4; 2028: 10.4; 2029: 8.7; 2030: 7.9; 2031: 6.9; 2032: 6.3; 2033: 4.0; 2034: 4.4.
- PPG debt service-to-revenue ratio (selected): 2024: 8.2; 2025: 8.1; 2026: 8.7; 2027: 7.7; 2028: 7.6; 2029: 7.7; 2030: 7.1; 2031: 6.6; 2032: 6.1; 2033: 3.9; 2034: 4.1.
- Gross external financing need (Million of U.S. dollars, selected): 2021: 179.9; 2022: 170.6; 2023: 202.5; 2024: 199.0; 2025: 205.2; 2026: 155.8; 2027: 111.1; 2028: 89.0; 2029: 92.7; 2034: 84.8; 2044: 145.1.
- Real GDP growth (percent): 2021: 6.9; 2022: 5.6; 2023: 4.7; 2024: 3.5; 2025: 4.2; 2026: 3.3; 2027: 2.9; 2028: 2.7; 2029: 2.4; 2034: 2.0; 2044: 0.8; average/other: 2.8.
- Government revenues (excluding grants, percent of GDP): 2021: 53.2; 2022: 61.2; 2023: 56.6; 2024: 53.5; 2025: 46.5; 2026: 37.4; 2027: 36.8; 2028: 36.6; 2029: 36.5; 2034: 36.0; 2044: 34.9; 38.1; 38.9.
- Memorandum: PV of external debt (in Million of US dollars, selected): 50.9; 46.4; 41.6; 41.5; 40.6; 39.8; 40.1; 35.5; 20.5.
- Non-resident deposits: 12 percent as ratio of public external debt (text).

### Sensitivity analysis highlights (Table 7 excerpts)
- Baseline PPG external debt (percent of GDP) for 2024–2034: 27, 25, 25, 25, 26, 25, 25, 24, 23, 23 (truncated series shown).
- Alternative scenarios (A1, historical averages) show higher debt paths (e.g., 2024–2034 series includes values up to 67 in later years).
- Bound and tailored tests show sizable increases in debt under adverse shocks:
  - B1. Real GDP growth, B2. Primary balance, B3. Exports, B6. Combination of B1–B5 produce materially higher debt series in the sensitivity table.
- Threshold used in table: 40 (percent of GDP for the presented indicator) and other threshold lines (e.g., 180) for alternative metrics; baseline and scenario-specific indicator series are reported against these thresholds in the table.

*Source: IMF staff estimates and projections in the Dominica DSA chapter.*

### 2. Primary balance1310988776555

### 2. Primary balance

### Public sector debt levels and composition (Historical and projections)
- Public sector debt (percent of GDP): 2021: 108.5; 2022: 104.3; 2023: 99.8; 2024: 102.8; 2025: 96.8; 2026: 95.2; 2027: 92.6; 2028: 90.9; 2029: 88.0; 2030: 66.1; 2034: 44.9; 2044: 91.0; (table lists across 2021–44).
- Of which: external debt (percent of GDP): 2021: 70.2; 2022: 66.7; 2023: 64.2; 2024: 69.3; 2025: 65.4; 2026: 66.7; 2027: 67.4; 2028: 68.2; 2029: 69.4; 2030: 55.9; 2034: 31.6; 2044: 61.6.
- Change in public sector debt (percent of GDP): 2021: -4.0; 2022: -4.2; 2023: -4.5; 2024: 3.0; 2025: -6.0; 2026: -1.6; 2027: -2.6; 2028: -1.7; 2029: -2.9; 2030: -3.7; 2034: -0.9.

### Identified debt-creating flows and fiscal balances
- Identified debt-creating flows (percent of GDP): 2021: -4.4; 2022: -4.2; 2023: -5.0; 2024: -0.4; 2025: -2.7; 2026: -2.0; 2027: -2.1; 2028: -2.3; 2029: -2.4; 2030: -2.9; 2034: -1.2; 2044: -0.6; 2044 also lists -2.5 in table context.
- Primary deficit (percent of GDP): 2021: 5.6; 2022: 4.3; 2023: 2.0; 2024: -0.1; 2025: -0.4; 2026: -0.7; 2027: -1.0; 2028: -1.2; 2029: -1.5; 2030: -2.2; 2034: -2.2; 2044: 1.9; 2044 elsewhere: -1.4 (table shows different horizon values).
- Revenue and grants (percent of GDP): 2021: 58.8; 2022: 62.8; 2023: 60.1; 2024: 55.5; 2025: 48.5; 2026: 39.4; 2027: 38.8; 2028: 38.6; 2029: 38.5; 2030: 38.0; 2034: 36.9; 2044: 50.6; later value 40.9 appears in table.
- Grants (percent of GDP): 2021: 5.5; 2022: 1.5; 2023: 3.6; subsequent years: 2.0 (repeated for multiple years).
- Primary (noninterest) expenditure (percent of GDP): 2021: 64.4; 2022: 67.1; 2023: 62.1; 2024: 55.4; 2025: 48.2; 2026: 38.8; 2027: 37.8; 2028: 37.4; 2029: 37.0; 2030: 35.8; 2034: 34.7; 2044: 52.5; additional value 39.5 in table.

### Automatic debt dynamics and contributions
- Automatic debt dynamics (percent of GDP): 2021: -10.0; 2022: -8.5; 2023: -7.0; 2024: -0.3; 2025: -2.3; 2026: -1.3; 2027: -1.1; 2028: -1.1; 2029: -0.9; 2030: -0.6; 2034: 1.1.
- Contribution from average real interest rate (percent): 2021: -2.7; 2022: -2.8; 2023: -2.3; 2024: 3.1; 2025: 1.8; 2026: 1.8; 2027: 1.6; 2028: 1.3; 2029: 1.3; 2030: 1.0; 2034: 2.0.
- Contribution from real GDP growth (percent): 2021: -7.3; 2022: -5.7; 2023: -4.7; 2024: -3.4; 2025: -4.2; 2026: -3.1; 2027: -2.7; 2028: -2.5; 2029: -2.2; 2030: -1.6; 2034: -0.9.
- Contribution from real exchange rate depreciation: 0.0 across listed years.

### Residual and other flows
- Residual (percent of GDP): 2021: 0.4; 2022: 0.0; 2023: 0.6; 2024: 3.4; 2025: -3.3; 2026: 0.3; 2027: -0.5; 2028: 0.6; 2029: -0.5; 2030: -0.9; 2034: 0.3; 2044: 4.3; additional entry -0.6 appears.

### Sustainability indicators and financing metrics
- PV of public debt-to-GDP ratio (selected values): ......64.6; 60.2; 56.8; 53.6; 50.5; 47.5; 44.1; 32.7; 24.5 (table formatting indicates PV series across projection years).
- PV of public debt-to-revenue and grants ratio: ......107.4; 108.5; 117.1; 136.1; 130.1; 123.1; 114.5; 86.0; 66.3 (series across years).
- Debt service-to-revenue and grants ratio 3/: 8.6; 12.0; 11.0; 13.9; 17.5; 22.6; 20.3; 16.4; 14.3; 0.6; 30.0 (table lists across years).
- Gross financing need 4/ (percent of GDP): 10.7; 11.8; 8.6; 7.6; 8.1; 8.3; 6.9; 5.1; 4.0; -2.0; 8.9 (series).
- Gross financing need in billions of U.S. dollars: 61.9; 74.7; 58.1; 55.0; 62.6; 66.9; 58.2; 45.5; 36.9; -22.8; 156.8 (series).

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (percent): 2021: 6.9; 2022: 5.6; 2023: 4.7; 2024: 3.5; 2025: 4.2; 2026: 3.3; 2027: 2.9; 2028: 2.7; 2029: 2.4; 2030: 2.3; 2034: 2.0; 2044: 0.8; later 2.8 appears.
- Average nominal interest rate on external debt (percent): 2021: 1.5; 2022: 1.6; 2023: 1.7; 2024: 1.6; 2025: 1.5; 2026: 1.4; 2027: 1.4; 2028: 1.3; 2029: 1.2; 2030: 1.5; 2034: 0.9; 2044: 1.8; final 1.4 listed.
- Average real interest rate on domestic debt (percent): 2021: -2.6; 2022: -2.7; 2023: -2.3; 2024: 3.3; 2025: 5.0; 2026: 5.7; 2027: 5.4; 2028: 5.3; 2029: 5.6; 2030: 9.6; 2034: 18.2; later values -1.9 and 6.2 appear.
- Real exchange rate depreciation (percent): 2021: 1.9; 2022: 4.3; 2023: 1.2; subsequent years listed as dots (no change) and 0.4 noted.
- Inflation rate (GDP deflator, percent): 2021: 2.6; 2022: 2.8; 2023: 2.4; 2024: 3.3; 2025: 2.1; 2026: 2.0; 2027: 1.9; 2028: 1.8; 2029: 2.0; 2030: 2.0; 2034: 2.3; 2044: 2.5; additional 2.1 appears.
- Growth of real primary spending (percent): 2021: 6.5; 2022: 10.0; 2023: -3.1; 2024: -7.7; 2025: -9.4; 2026: -16.9; 2027: 0.3; 2028: 1.8; 2029: 1.2; 2030: 2.3; 2034: 1.6; 2044: 9.2; final -2.0 appears.
- Primary deficit that stabilizes the debt-to-GDP ratio 5/ (percent): 9.6; 8.5; 6.4; -3.1; 5.6; 1.0; 1.6; 0.5; 1.4; 1.5; -1.3; 8.2; 1.6 (series across years).

### Sensitivity analysis (Table 9) — public debt under alternative scenarios (percent of GDP)
- Baseline public debt (2024–34): 2024: 108; 2025: 117; 2026: 136; 2027: 130; 2028: 123; 2029: 115; 2030: 107; 2031: 101; 2032: 95; 2033: 90; 2034: 86.
- Alternative Scenario A1 (historical averages 2024–2034): 2024: 108; 2025: 124; 2026: 152; 2027: 149; 2028: 148; 2029: 145; 2030: 145; 2031: 144; 2032: 146; 2033: 148; 2034: 151.
- Alternative Scenario A2: 2024: 120; 2025: 129; 2026: 151; 2027: 145; 2028: 139; 2029: 131; 2030: 124; 2031: 118; 2032: 113; 2033: 110; 2034: 106.
- Bound test B1 (Real GDP growth): 2024: 108; 2025: 153; 2026: 235; 2027: 252; 2028: 266; 2029: 276; 2030: 289; 2031: 301; 2032: 314; 2033: 329; 2034: 344.
- Bound test B2 (Primary balance): 2024: 108; 2025: 136; 2026: 180; 2027: 171; 2028: 161; 2029: 151; 2030: 143; 2031: 135; 2032: 129; 2033: 124; 2034: 120.
- Bound test B5 (Depreciation): 2024: 108; 2025: 125; 2026: 137; 2027: 127; 2028: 114; 2029: 100; 2030: 88; 2031: 77; 2032: 69; 2033: 61; 2034: 54.
- Tailored tests (C1 Combined contingent liabilities): 2024: 108; 2025: 132; 2026: 152; 2027: 145; 2028: 137; 2029: 128; 2030: 121; 2031: 114; 2032: 108; 2033: 103; 2034: 99.
- TOTAL public debt benchmark (percent): 55 repeated across years (table shows TOTAL benchmark 55 for 2024–34).

### Sensitivity analysis — key indicator trajectories (selected)
- PV of Debt-to-GDP ratio under Baseline (2024–34): Baseline row earlier lists PV series; sensitivity figures highlight large increases under adverse shocks (e.g., B1 growth shock produces extreme outcomes).
- Debt service-to-revenue ratio under Baseline and scenarios (selected): Baseline: 14 in 2024; rises under scenarios—examples: B1 growth shock values show much larger increases (table columns show multiple series).
- Debt metrics are highly sensitive to shocks to Real GDP growth, Primary balance, and Exports (B1, B2, B3 produce the largest increases in public debt ratios).

### Stress tests and borrowing assumptions
- Tailored stress tests identified: Combined contingent liabilities; Natural disaster; Catastrophic Climate Event (historical scenario used); Commodity price and Market Financing stress tests labeled "n.a.".
- Thresholds and interactions: Threshold shown as 1.3% in some borrowing assumption tables; interactions: No and User defined indicated.
- Borrowing assumptions on additional financing needs resulting from stress tests: All additional financing needs generated by shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA; default terms of marginal debt are based on baseline 10-year projections.
- Shares of marginal debt and terms: Examples shown (Market financing n.a.; Avg. nominal interest rate on new borrowing in USD 5.0%; shares 33 and 9 in visualization), but table entries vary by scenario.

### Figures and diagnostics (drivers, realism, domestic debt)
- Figure diagnostics highlight drivers of debt dynamics: contributions from Price and exchange rate, Real GDP growth, Nominal interest rate, Current account + FDI, Change in PPG debt and Unexpected changes in debt (residuals).
- Realism tools: display projected public and private investment rates, contribution to growth under fiscal multipliers, and 3-year primary balance adjustment distributions; note: 3-year PB adjustment greater than 2.5 percentage points of GDP is in approx. top quartile.
- Domestic debt indicators (Figure 5): Domestic debt-to-GDP ratio path and domestic debt service to revenues incl. grants are charted across 2019–2033; net domestic debt issuance series plotted with values across years (exact chart values visualized in source).

### Institutional and contextual notes (selected)
- Sources: Country authorities; and staff estimates and projections.
- Definitions and notes:
  - 1/ Coverage of debt: The central government, government-guaranteed debt. Definition of external debt is Residency-based.
  - 2/ Variables in alternative scenario include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.
  - 3/ Other flows includes official and private transfers and FDI.
  - 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.
  - 5/ Primary deficit that stabilizes the debt-to-GDP ratio defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilize the debt ratio only in the year in question.
  - 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.

*Sources: Country authorities; and staff estimates and projections.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1dmaea2025001-print-pdf.pdf_