The International Monetary Fund has issued a cautious assessment of Dominica’s economic trajectory, acknowledging robust post-pandemic recovery while warning of significant fiscal vulnerabilities that require immediate policy adjustments. Following its 2026 Article IV consultation concluded March 26, an IMF delegation led by Christopher Faircloth reported the island nation achieved 4.5% real GDP growth in 2025, building upon the previous year’s 3.5% expansion.
This economic acceleration stems primarily from a tourism sector now operating 36% above pre-pandemic levels and sustained public infrastructure investments. Inflation moderated to 2.3%, yet the current account deficit persisted at an elevated 38% of GDP, largely driven by substantial construction-related imports.
The IMF identified concerning fiscal trends, with infrastructure projects including climate-resilient roads and geothermal transmission lines pushing the primary fiscal deficit to 4.5% of GDP. Public debt, while reduced from its pandemic peak of 118%, remains critically high at 103% of GDP—significantly exceeding the regional benchmark of 60%.
The Fund emphasized that Dominica’s current fiscal approach fails to comply with its own Fiscal Rule, which mandates maintaining a minimum 2% primary surplus until debt falls below 60% of GDP. Concurrently, the nation’s Disaster Resilience Strategy requires accumulating financial buffers equivalent to 12% of GDP.
To address these challenges, the IMF recommends EC$60 million in additional fiscal consolidation over the next two years, with half this adjustment required in FY2026/27. Key recommendations include reducing dependence on Citizenship by Investment revenues, enhancing tax administration efficiency, and safeguarding social programs while maintaining growth-oriented investments.
Financial sector vulnerabilities present additional concerns. While banks maintain adequate liquidity and capitalization, high non-performing loans and substantial sovereign exposures remain problematic. Credit unions—now accounting for 53% of private-sector credit—face even greater risks due to insufficient capital buffers and outdated regulatory frameworks.
The IMF advocates stricter enforcement of provisioning regulations, completion of ongoing asset-quality reviews, and full engagement with regional regulatory initiatives.
Structural reforms identified as critical include modernizing customs procedures through a unified digital platform, strengthening digital infrastructure and vocational training programs, streamlining business processes, enhancing legal frameworks, and improving governance protocols within the CBI program.
The IMF further stressed the urgency of modernizing public financial management, establishing the long-delayed Fiscal Responsibility Committee, and upgrading statistical systems to support evidence-based policymaking.
Economic projections indicate growth moderation to 3% through 2026-2027, potentially declining to approximately 2% as major construction projects conclude. While public debt is forecast to decrease to 70% of GDP by 2035, the IMF continues to classify Dominica as facing high debt distress risk.
Downside risks include geopolitical tensions, volatility in CBI revenue streams, and the nation’s acute susceptibility to natural disasters. The IMF delegation acknowledged Dominican authorities for their cooperative engagement throughout the consultation process.