IMF Executive Board Concludes 2024 Article IV Consultation with Dominica
IMF News, June 27, 2024
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Bibliographic details
- Published: June 27, 2024
Overview
- On May 31, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Dominica.
- Press Release No. 24/247; date on page: June 27, 2024.
Recent economic performance
- Real GDP growth:
- 2022: 5.6 percent
- 2023 (estimated): 4.7 percent
- Returned to pre-pandemic output levels.
- Drivers:
- Rebound in tourism.
- Public investment.
- Buoyant Citizenship by Investment (CBI) revenues.
- Inflation:
- 2022 peak: 9¾ percent
- End-2023: 2¼ percent
- Decline largely due to softening world commodity prices.
Fiscal and external positions
- Fiscal balances and public debt:
- Fiscal primary balance improved by 1.3 percentage points to a deficit of 4¼ percent of GDP in FY2022/23.
- Public debt remains elevated above 100 percent of GDP despite steady decline from pandemic peak.
- Current account:
- Widened to 33.7 percent of GDP in 2023
- Widening driven by higher imports for strategic infrastructure projects outweighing tourism receipts.
- Financing composition highlights:
- CBI revenues large contributor to non-tax revenue and overall fiscal receipts.
Financial system
- Stability:
- Financial system remains stable.
- Banks are well-capitalized and liquid.
- Vulnerabilities:
- Non-performing loans are elevated.
- Provisioning has fallen below the Eastern Caribbean Central Bank’s (ECCB’s) regional prudential requirement.
- Recapitalization of credit unions is continuing.
- Credit to the private sector has lagged nominal GDP growth.
- Bank exposure to the public sector has decreased but remains elevated.
Outlook and risks
- Outlook:
- Positive, premised on continued tourism recovery and implementation of economic modernization and resilience agenda.
- Transition to local geothermal energy production and expanded airport and hotel capacity expected to sustain activity, reduce fossil fuel dependency, and boost tourism.
- Current account deficit expected to narrow as tourism exports expand and import growth slows with completion of large infrastructure projects.
- Public debt expected to decline gradually with prudent fiscal management but remains vulnerable to shocks.
- Risks:
- External shocks.
- Natural disasters.
- Volatile Citizenship by Investment (CBI) revenues.
- Downside tilt to risks.
Executive Board assessment and policy recommendations
- General view:
- Directors agreed with staff appraisal and welcomed full recovery to pre-pandemic levels.
- Noted high fiscal and external imbalances and downside risks.
- Recovery seen as an opportunity to rebuild buffers and advance reforms for sustainable and resilient growth.
- Fiscal policy recommendations:
- Pursue more ambitious fiscal consolidation to meet the fiscal rule, self-insure against disaster risks, and reduce debt vulnerabilities.
- Broaden non-CBI revenue base by:
- Streamlining tax incentives.
- Reintroducing the VAT applied to the electricity price fuel surcharge.
- Equalizing diesel and gasoline excise rates.
- Strengthening tax administration and compliance management.
- Removing the stamp duty on outbound money transfers.
- Rationalize inefficient spending while prioritizing critical public investments with economic returns.
- Encourage tariff adjustments on key public services to reduce fiscal costs of state-owned enterprises.
- Continue financing strategy that prioritizes non debt creating flows.
- Social protection and pensions:
- Protect the most vulnerable by enhancing efficiency and sustainability of social protection, including better targeting social assistance programs.
- Reform pension scheme to ensure long-term sustainability amid rising demographic pressures.
- Financial sector governance:
- Strengthen financial system oversight and reduce balance sheet vulnerabilities, particularly for credit unions.
- Grant statutory independence to the Financial Services Unit to improve effectiveness and support risk-based supervision of non-bank financial institutions.
- Address structural impediments to financial intermediation.
- Strengthen CBI program frameworks and address remaining AML/CFT deficiencies.
- Structural and institutional reforms:
- Support modernization and climate adaptation agenda, including Climate Resilience and Recovery Plan.
- Continue transition to renewables and reforms to improve business environment and address labor market frictions.
- Improve statistical compilation, tax administration, and public financial management frameworks—including CBI reporting systems.
- Leverage IMF technical assistance to support reform efforts.
Key statistics (select figures from Table 1)
- Output and prices:
- Real GDP (annual percent change): 2019: 5.5; 2020: -16.6; 2021: 6.9; 2022: 5.6; 2023: 4.7; 2024 (proj.): 4.6; 2025: 4.3; 2026: 3.3; 2027: 2.9; 2028: 2.4; 2029: (not listed)
- Nominal GDP (annual percent change): 2019: 10.2; 2020: -17.5; 2021: 10.1; 2022: 9.4; 2023: 8.4; 2024: 7.5; 2025: 6.4; 2026: 5.3; 2027: 5.0; 2028: 4.4
- Consumer prices (period average): 2019: 1.5; 2020: -0.7; 2021: 1.6; 2022: 7.7; 2023: 3.5; 2024: 2.8; 2025: 2.1; 2026: 2.0
- Central government balances (in percent of GDP):
- Revenue: 2019: 39.6; 2020: 59.1; 2021: 58.8; 2022: 62.1; 2023: 43.5; 2024: 41.2; 2025: 40.3; 2026: 40.0; 2027: 39.9; 2028: 39.7
- Taxes: 2019: 24.1; 2020: 23.3; 2021: 22.3; 2022: 21.9; 2023: 22.1; 2024: 21.7; 2025: 21.5
- Non-tax revenue: 2019: 13.5; 2020: 33.3; 2021: 30.9; 2022: 38.2; 2023: 20.1; 2024: 17.6; 2025: 16.6
- Expenditure: 2019: 48.1; 2020: 66.6; 2021: 67.0; 2022: 69.3; 2023: 47.4; 2024: 44.6; 2025: 43.2; 2026: 42.7; 2027: 42.2; 2028: 41.8
- Capital expenditure: 2019: 9.8; 2020: 28.0; 2021: 26.8; 2022: 35.2; 2023: 13.6; 2024: 11.8; 2025: 11.2; 2026: 10.8; 2027: 10.7; 2028: 10.4; 2029: 9.9
- Primary balance: 2019: -6.1; 2020: -5.4; 2021: -5.6; 2022: -4.3; 2023: 0.4; 2024: 0.7; 2025: 0.8; 2026: 0.9; 2027: 1.1; 2028: 1.2
- Primary balance, excluding CBI: 2019: -18.2; 2020: -36.7; 2021: -34.8; 2022: -40.9; 2023: -17.6; 2024: -14.7; 2025: -13.7; 2026: -13.6; 2027: -13.4; 2028: -13.3; 2029: -13.0
- Overall balance: 2019: -8.6; 2020: -7.5; 2021: -8.2; 2022: -7.2; 2023: -3.8; 2024: -3.4; 2025: -2.9; 2026: -2.7; 2027: -2.2; 2028: -2.0; 2029: -1.5
- Central government debt (incl. guaranteed) 3/ (percent of GDP):
- 2019: 97.7; 2020: 112.5; 2021: 108.5; 2022: 103.3; 2023: 97.5; 2024: 98.8; 2025: 95.9; 2026: 93.8; 2027: 91.7; 2028: 89.6; 2029: 87.4
- External: 2019: 56.6; 2020: 70.9; 2021: 70.2; 2022: 65.8; 2023: 63.0; 2024: 68.1; 2025: 65.0; 2026: 66.4; 2027: 67.7; 2028: 68.8; 2029: (not listed)
- Domestic: 2019: 41.1; 2020: 41.6; 2021: 38.3; 2022: 37.4; 2023: 34.5; 2024: 30.7; 2025: 27.5; 2026: 24.7; 2027: 22.0; 2028: 18.6
- Money and credit:
- Broad money (M2) annual percent change: 2019: -8.5; 2020: -9.9; 2021: -1.3; 2022: -0.4
- Credit to the private sector (annual percent change): 2019: -6.0; 2020: -0.3; 2021: 2.7; 2022: -3.6; 2023: 4.0; 2024: 5.4; 2025: 7.1; 2026: 6.5
- External sector and balances:
- Current account balance (percent of GDP): 2019: -38.1; 2020: -37.4; 2021: -32.9; 2022: -26.7; 2023: -33.7; 2024: -21.7; 2025: -19.8; 2026: -17.7; 2027: -15.8
- Exports of goods and services (percent of GDP): 2019: 33.1; 2020: 19.6; 2021: 21.2; 2022: 28.1; 2023: 33.9; 2024: 36.3; 2025: 36.7; 2026: 38.8
- Imports of goods and services (percent of GDP) 4/: 2019: 71.0; 2020: 60.0; 2021: 56.5; 2022: 57.8; 2023: 62.9; 2024: 57.9; 2025: 58.4; 2026: 56.7; 2027: 55.5; 2028: 54.6; 2029: 54.1
- Capital and financial account (positive sign means inflow) 5/: 2019: 30.2; 2020: 27.0; 2021: 33.8; 2022: 20.8; 2023: 18.9; 2024: 16.9; 2025: 15.0; 2026: 12.6
- FDI (percent of GDP): 2019: 10.3; 2020: 4.8; 2021: 4.5
- Capital grants (percent of GDP): 2019: 23.0; 2020: 29.1; 2021: 21.6; 2022: 9.0; 2023: 6.7; 2024: 8.9
- Citizenship By Investment (percent of GDP): 2019: 23.2; 2020: 33.0; 2021: 26.9; 2022: 14.9; 2023: 14.4; 2024: 14.5
- Other (incl. errors and omissions): 2019: -15.5; 2020: -33.8; 2021: -30.6; 2022: -23.3; 2023: -8.4; 2024: -11.4; 2025: -11.2; 2026: -10.7; 2027: -12.9; 2028: -15.4
- External debt (gross) 6/ (percent of GDP): 2019: 90.2; 2020: 108.0; 2021: 87.3; 2022: 97.3; 2023: 92.6; 2024: 97.9; 2025: 91.6; 2026: 92.2; 2027: 91.1; 2028: 88.4; 2029: 83.7
- Saving-Investment Balance (percent of GDP):
- Saving: 2019: 10.6; 2020: -6.6; 2021: -5.5; 2022: -4.8; 2023: -3.2; 2024: -1.6; 2025: 0.6; 2026: 0.3
- Investment: 2019: 23.5; 2020: 24.0; 2021: 35.3; 2022: 37.2; 2023: 27.1; 2024: 16.1; 2025: 14.2; 2026: 14.0
- Public investment (percent of GDP): 2019: 17.0; 2020: 21.0; 2021: 32.2; 2022: 25.1; 2023: 12.5; 2024: 12.0; 2025: 11.7; 2026: 11.5; 2027: 11.1
- Memorandum items:
- Nominal GDP (EC$ millions): 2019: 1,651; 2020: 1,361; 2021: 1,499; 2022: 1,640; 2023: 1,777; 2024: 1,911; 2025: 2034; 2026: 2142; 2027: 2249; 2028: 2361; 2029: 2466
- Nominal GDP, fiscal year (EC$ millions): 2019: 1,506; 2020: 1,430; 2021: 1,570; 2022: 1,709; 2023: 1,844; 2024: 1,972; 2025: 2088; 2026: 2196; 2027: 2305; 2028: 2413; 2029: 2523
- Net imputed international reserves end-year (millions of U.S. dollars): 2019: 166.2; 2020: 165.6; 2021: 165.2; 2022: 182.3; 2023: 164.2; 2024: 169.7; 2025: 180.0; 2026: 191.7; 2027: 203.4; 2028: 216.1; 2029: 228.4
- Months of imports of goods and services: 2019: 6.6; 2020: 6.3; 2021: 6.2; 2022: 4.9; 2023: 5.1
- Holdings of SDRs (millions of SDRs): 2019: 0.2; 2020: 9.6; 2021: 8.0; 2022: 7.9
Procedures and next steps
- It is expected that the next Article IV consultation with Dominica will be held on the standard 12-month cycle.
IMF Executive Board Concludes 2024 Article IV Consultation with Dominica (Press Release No. 24/247).