Mission Concluding Statement 

Washington, DC: Sint Maarten’s economy expanded by 3.3 percent in 2024, supported by strong tourism activity. Stayover tourism grew remarkably despite a short-lived setback caused by the electricity crisis, while cruise tourism continued to underperform relative to peers. Tourism-related transportation services and construction, including of the new airport, further fueled economic activity. Inflation increased to 3.6 percent in 2024 from 2.1 percent in 2023, mainly driven by an increase in tourism-related transportation costs. The labor market recovery, however, remained slow with formal employment still below pre-pandemic levels suggesting elevated informal job creation. Credit growth remained subdued reflecting leakages due to cross-border banking with institutions on the French side and challenges in access to credit, notably for SMEs. The current account deficit narrowed significantly on the back of strong tourism receipts, coming close to balance in 2024 for the first time since 2018. 

The policy agenda is advancing, as the authorities took swift steps towards solving the energy crisis and reached major milestones in hurricane-related reconstruction. Steps to solve immediate bottlenecks in electricity generation were taken swiftly, putting the energy sector on a stronger footing in the near term. The authorities also achieved a consecutive primary fiscal surplus in 2024 despite a moderate increase in capital spending, as revenues broadly held up and under-execution of goods and services and investment persisted. Operations of Sint Maarten’s Trust Fund, established after Hurricane Irma in 2017 in cooperation with the World Bank, reached an important milestone with the inauguration of the new airport in 2024. The landspakket, a structural reform package agreed with the Netherlands in 2020, continues to guide structural reforms. Significant progress was made in improving the business climate, most notably by initiating the digitalization and centralization of licensing and business permitting procedures by the Ministry of Tourism, Economic Affairs, Transport and Telecommunication, as well as in advancing plans for business incubators and enhancing access to finance for entrepreneurs. 

Outlook and Risks 

Growth is projected to remain robust in the near term as tourism capacity expands before moderating to around 2 percent in the medium term. Stayover tourism will continue to drive growth in 2025 to 3.0 percent thanks to new airlifts and strong arrivals in the first quarter. Further expansion in hotel capacity will add to the island’s potential to sustain growth, partially counterbalancing the headwinds from slowing global demand. Unwinding Trust Fund reconstruction activity is expected to be gradually replaced by private real estate and government infrastructure investments, as major hotel construction projects – delayed mainly due to a backlog in building permits – would start in the second half of 2025. However, uncertainty persists around the central government’s capacity to execute infrastructure investments, notably after the Trust Fund’s closure in 2028. Over the medium term, growth is expected to gradually converge to 2 percent as tourism is approaching the island’s carrying capacity. Inflation would remain broadly contained, at 3.3 percent in 2025, including the expected impact of tariffs on import prices, tapering off to 2 percent in the medium term. The central government primary balance is expected to deteriorate temporarily on account of investments in public buildings and energy infrastructure, only partially offset by a new tourist levy, but remains guided by the fiscal rule. Social insurance funds, notably health insurance schemes, would continue running sizable deficits absent significant reforms, while future operating costs of the new hospital and mental health facility, currently under construction, will likely exert upward pressures on expenditures. The current account balance is envisaged to gradually converge to a surplus of around 4 percent of GDP in the medium term.   

Risks to the outlook are tilted to the downside. External risks include trade policy and investment shocks, which could induce higher inflation and lower external demand, adversely impacting tourism arrivals. Domestic downside risks include lower-than-expected execution of investment along with extreme climate events which could pose severe risks for the island’s infrastructure. On the upside, a faster-than-expected clearance of the permits backlog would unleash construction of private real estate developments. Buffers include access to favorable refinancing conditions on the Dutch capital market, subject to compliance with the fiscal rule, which grants the island substantial fiscal space, notably for capital and emergency spending. 

Securing Medium-term Fiscal Sustainability 

Despite the island’s high income per capita, Sint Maarten is lagging behind its high-income peers in terms of social development indicators. Sint Maarten has relatively high inequality, lower life expectancy, and higher adolescent fertility rate than countries with comparable income levels. Taking into account important constraints common across small island states, further policy steps could usefully be targeted at reducing inequality and recalibrating public health investment. Shaping fiscal policies in an equitable manner should therefore be an integral objective of both expenditure and tax policy. 

Selected revenue measures would improve efficiency and equity of the tax system and create space for priority spending supporting Sint Maarten’s social development goals. The planned tourism levy and dividend tax, both to become effective in 2026, are welcome steps towards lifting the island’s relatively low tax revenues compared with peers, while earmarking of new revenue sources should be avoided. Additional measures that can further improve revenue collection include: (i) taxing casinos’ turnover and winnings – those receipts could also help finance the planned gaming authority, a welcome step to improve monitoring of the sector; (ii) tapping the sizable revenue potential from short-term rentals via improved measures to boost compliance – the draft law obliging online platforms to withhold the room tax or share information with the tax authority is an important milestone in this regard; and (iii) continuing reforms in tax administration to digitize government systems, including by expediting the introduction of new software by the tax authority. The latter would also help boost compliance and promote the broadening of the tax base. Considerations to introducing a bank transaction tax should be carefully weighed given the highly distortionary and regressive nature of such tax.   

Recent steps towards stabilizing healthcare and pension funds are welcome but reforms are needed to put health insurance on a sustainable footing and mitigate fiscal risks. Over the past decade, healthcare funds’ mounting deficits have been consuming half of the Sociale Ziektekosten Verzekering (SZV)’s reserves (about 10 percent of GDP), in addition to being cross-financed by the old-age pension fund’s (AOV) surpluses. The authorities’ reform plans to rebalance the funds and introduce a general health insurance scheme are welcome and should be expedited, covering: (i) rationalizing benefits, extending the use of generics, and putting greater emphasis on preventive care; (ii) increasing collection efforts and compliance, and clearing backlogs in medical expenses; (iii) strengthening controls over medical referrals abroad (as already started); and (iv) exploring possible re-prioritization of treatments and adhering to efficient treatment protocols. Including self-employed and informal migrant workers would further strengthen collection. A medium-term cost management plan for operational costs of the currently constructed hospital and mental health facility could build on lessons learnt from medical centers in peer countries.  

Strengthening medium-term planning and budgeting would help detect fiscal risks and facilitate knowledge transfer from the Trust Fund. Efforts to introduce medium-term forecasts in the 2023 and 2024 budgets are welcome and should be continued in the current drafting of the 2026 budget. However, similar to 2024 the 2025 budget is facing severe delays, already affecting spending execution. Strengthening public financial management, given constrained capacity in line ministries, would include preparing a medium-term expenditure framework and regular statement of contingent liabilities, as well as making public wage structures more flexible and competitive to better attract high-skilled talent. Capacity constraints are particularly salient regarding planning and execution of investments, possibly impacting potential growth over the medium term. In the coming years, it will be essential to leverage Trust Fund expertise before its departure to create a centralized planning unit which could build up and coordinate an investment project pipeline and promote execution, while considering outsourcing selected activities to private sector business partners. 

Reforms to Boost Potential Growth 

To continue leading the Caribbean stayover market, Sint Maarten needs to expand high value-added tourism services, invest in ailing infrastructure, and expedite permitting. Recently added flight capacity is bound to further strengthen the island’s performance in the stayover arrivals market relative to the Caribbean and expand Sint Maarten’s position as a regional hub. However, corresponding enhancements in road, waste, and electricity infrastructure are needed to absorb tourism inflows. Moreover, as tourism density is among the highest in the Caribbean, carrying capacity constraints could become binding in the near term, highlighting the need to shift strategies from increasing quantity towards increasing value added to boost growth. This includes, for instance, facilitating the market entry and access to credit of businesses that offer services to improve tourist experiences. Also, higher-end construction of new and upgrades of existing hotels were recently delayed given significant backlog in permitting, partly reflecting staffing constraints. Modernizing the building permit process, including leveraging technology, digitalization and outsourcing, is essential to accelerate construction activity, unlock investment, and support long-term growth. 

Achieving a sustainable supply in the electricity sector requires continued reforms under a holistic approach. Since 2017, Sint Maarten has faced severe consecutive shocks that imperiled electricity provision. Efforts from both the government and the electricity company (GEBE) have stabilized the situation and plans were developed to achieve financial stability and prevent future disruptions. Reforms are needed to increase electricity supply in line with demand; empower the Bureau Telecommunicatie & Post (BTP) to become an independent regulator to update electricity tariffs; gradually transition towards renewable energy; and strengthen GEBE’s governance. These objectives could be achieved by rethinking terms and conditions of GEBE’s concession, including allowing for feed-in tariffs to stimulate decentralized solar production and promote competition.  

Policies should continue prioritizing private sector job creation, expanding formal labor supply, and investing in skills development to enhance productivity. To improve formal employment growth and alleviate wage pressures that are not stemming from productivity increases but labor shortages, consideration could be given to expedite issuances of work and residency permits for foreign labor. Given that nearly 90 percent of the formal workforce is employed in the private sector, further boosting productivity in this segment will be critical for broad-based formal labor market recovery. Targeted investments in workforce skills and training, particularly in high-growth and service-oriented industries, could help sustain wage growth and support formal job creation in the post-pandemic economy. 

The IMF mission would like to thank the authorities for their cooperation and the candid and constructive discussions that took place during June 11-18, 2025.