The International Monetary Fund has advised Grenada to restore its core fiscal rule by 2027 to maintain debt sustainability, following the country’s temporary suspension of the measure this year to finance recovery efforts from Hurricane Beryl. In its annual Article IV economic assessment concluded Wednesday, the IMF justified the temporary pause as necessary for post-disaster reconstruction, which resulted in an estimated 2025 primary deficit of 3.2% of GDP.
The IMF’s Executive Board supported staff recommendations that returning to fiscal rules is crucial for preserving fiscal discipline and ensuring sustainable debt management. Grenada’s fiscal framework requires a central government primary balance floor of 1.5% of GDP—a surplus level the IMF anticipates will be achieved in 2027. This return to fiscal rigor is projected to establish a firm downward trajectory for public debt, with a key debt target of 60% of GDP now expected by 2033.
Alongside its call for fiscal consolidation, the IMF commended Grenada’s economic resilience, noting real GDP growth accelerated to 4.4% for 2025 driven by robust investment and construction activity, while inflation eased to 0.3%. The report acknowledged that prudent savings from substantial revenues generated through Grenada’s Citizenship-by-Investment program provided a critical financial buffer during the crisis period.
Looking forward, the IMF projects growth will gradually moderate from current levels to an estimated potential rate of 2.7% by 2029 as the stimulus from large-scale public investment diminishes. The assessment identified significant external sector challenges, with Grenada’s 2024 position assessed as “weaker than the level implied by medium-term fundamentals.” A substantial current account deficit, estimated at 17.5% of GDP for 2025, is expected to persist due to high construction-related imports.
The report highlighted Grenada’s heightened vulnerability to natural disasters and its dependence on tourism and imports as principal downside risks. The IMF recommended careful management of ambitious public investment projects to prevent cost overruns and emphasized the need for close monitoring of vulnerabilities within the non-bank financial sector.
To foster durable growth, the fund proposed policies strengthening domestic economic foundations beyond foreign investment-driven tourism. These include enhancing local business linkages to the tourism sector, reducing trade friction, and investing in human capital development. The assessment also identified significant data deficiencies in key economic statistics as an impediment to effective policy-making, urging Grenada to prioritize improvements in its statistical capacity.