St Vincent and the Grenadines announces fiscal adjustment programme
St Vincent and the Grenadines has announced a homegrown fiscal adjustment programme following the 2026 International Monetary Fund (IMF) Article IV consultation, as the government moves to stabilise public finances, reduce debt, and restore fiscal credibility. Prime Minister and Minister of Finance Godwin Friday said the country could no longer maintain its current fiscal path, with public debt reaching 113% of GDP in 2025 and projected to rise to 145% by 2031 if policies remain unchanged.
“We understand that we cannot continue on the course that we have been going for the past several years and expect that somehow the challenges will resolve themselves,” Friday said.
The government is targeting a primary surplus of 3% of GDP by 2029 and intends to realign the country with the Eastern Caribbean Currency Union benchmark of 60% debt-to-GDP. Friday said the programme would be nationally owned, not externally imposed.
“We will implement, we will develop, devise, of course, with your technical assistance, as we have said, you have offered, our homegrown economic stabilisation programme that will ensure that we have national ownership of the recovery journey on which we are embarking,” he said. The IMF warned that vulnerabilities remain significant, citing wide fiscal deficits, rising debt, and external imbalances. “Wide fiscal deficits, high and rising public debt, and large external imbalances underscore the need for decisive policy action,” said Sergei Antoshin, who led the IMF mission.
The 2026 budget estimates a deficit of 19% of GDP, though the IMF projects a lower deficit of 12%, assuming capital expenditure falls below budgeted levels. Public debt has risen by 45 percentage points of GDP since 2019, with about half of that increase occurring over the past two years. Friday said the adjustment would protect vulnerable households. “We have to ensure that whatever we do with respect to adjusting to these developments, that those persons, the most vulnerable, are given the greatest level of protection,” he affirmed.
The reform agenda includes expenditure reviews, stronger fiscal rules, debt management reforms, improved tax administration, and structural measures to support growth. The government also plans to reduce bureaucracy, accelerate company incorporation to five days, reform statutory enterprises, and support private investment in agriculture, tourism, and the blue economy.
A key revenue proposal is a Citizenship by Investment programme, though the IMF cautioned that it carries reputational, legal, financial, and fiscal risks. “CBI revenue should be used solely for debt reduction,” advised Antoshin. Energy reform is another pillar, with the government seeking to accelerate solar energy adoption to reduce reliance on imported petroleum. Labour market reform is also planned to address youth unemployment, estimated at around 19%, while reducing the need to import labour for local projects.
Opposition Leader Ralph Gonsalves, who was Prime Minister from 2001 to 2025, rejected the IMF’s approach, warning that the proposed adjustment would damage the economy. “Austerity is a wrong and dangerous idea for St Vincent and the Grenadines,” he warned. Gonsalves defended borrowing under his administration as “good debt”, pointing to major infrastructure investments including the Argyle International Airport, seaport, schools, sea defences, bridges, and sporting facilities. He said the country’s debt was largely concessional and linked to productive assets. The country’s national debt was reported at around US$1.30bn, but Gonsalves said that some US$778mn to US$852mn, was external debt, with just US$370mn, in domestic debt. He also cited the airport’s original US$278mn cost, now reduced to roughly US$63mn. Other projects included the recently commissioned US$259mn port and US$14.8mn each for sea defences and the Arnos Vale sporting facility.
Despite the criticism, Friday said the government would proceed with a transparent, rules-based strategy. “We’re prepared to do what is necessary here in a way that is going to set our country on a path towards fiscal responsibility, but also one that generates growth,” he declared.
Source: Caribbean Insight