ANTIGUA | IMF Outlines Economic Resilience Amid Antigua and Barbuda's Lingering Challenges

WASHINGTON DC, March 17, 2025 -  Economic Affairs Correspondent - According to the International Monetary Fund's latest assessment, Antigua and Barbuda has engineered a remarkable post-pandemic recovery  moving from the brink of fiscal collapse to cautious optimism that has finally pushed economic output beyond pre-pandemic levels.

However, the island nation's progress remains hostage to substantial debt arrears and climate vulnerabilities, 

The IMF Executive Board concluded its 2025 Article IV consultation with the Caribbean nation on March 13, endorsing staff appraisals that paint a picture of an economy riding the wave of tourism resurgence while navigating treacherous fiscal waters.

The twin-island state posted an impressive 4.3 percent growth in 2024, fueled by a robust tourism sector and high-profile events including the 4th International Conference on Small Island Developing States and the T20 Cricket World Cup.

This economic momentum has helped slash public debt from a precarious 100 percent of GDP in 2020 to a more manageable 67 percent last year.

Behind these encouraging figures lurks a more complex reality. Inflation remained elevated throughout 2024, primarily driven by communication costs and increases in indirect taxes.

Meanwhile, both domestic and external arrears—with domestic arrears of uncertain magnitude—continue to constrain the government's financing options despite improved fiscal balances.

The primary balance saw a significant improvement to 4.6 percent in 2024, bolstered by indirect tax increases, broader economic recovery, and unexpected windfalls.

These included an asset forfeiture that contributed nearly 2 percent of GDP and unusually low capital spending. Looking ahead, the 2025 Budget anticipates stronger tax revenues and higher capital expenditures.

On the external front, preliminary estimates from the Eastern Caribbean Central Bank indicate a narrowing current account deficit of 7 percent of GDP in 2024. This improvement reflects both higher service trade balance—primarily from tourism receipts—and a reduced goods deficit due to contracting imports.

Foreign direct investment has shown remarkable resilience despite tightening global financial conditions, continuing to support ongoing hotel construction projects.

The IMF's assessment strikes a note of cautious optimism tempered by clear warnings. While acknowledging the economic expansion, the Fund projects growth to moderate from 3 percent in 2025 to 2.5 percent over the medium term.

The external position remains "moderately weaker than the level implied by medium-term fundamentals and desirable policies."

Risk factors tilting to the downside include global economic uncertainty, deepening geoeconomic fragmentation, commodity price volatility, climate vulnerabilities, and construction sector capacity constraints.

On the brighter side, potential upside risks stem from stronger tourism demand, improved air connectivity, new cruise port facilities, special events, and productivity-enhancing reforms.

The Fund identifies several critical priorities for sustainable growth. Chief among these is addressing arrears to both domestic suppliers and the Paris Club, which remain significant obstacles to debt sustainability and constrain access to financing.

This challenge is particularly acute given the additional investment needs for climate adaptation and resilience-building.

Despite recent improvements, tax revenues remain below the authorities' fiscal resilience targets and lag behind peer countries. The IMF recommends tighter control of tax exemptions, modernizing property taxation frameworks, and strengthening tax administration through a large taxpayer unit and updated IT systems.

Social assistance programs require better targeting to enhance inclusion while reducing inefficiencies. The current fragmented framework spans multiple sectors and ministries, creating overlap and inefficiencies.

The Fund encourages development of a centralized information system to track beneficiaries, support received, and identify coverage gaps.

On the financial front, the sector appears broadly stable with recovering credit growth and non-performing loans approaching prudential levels. Regional initiatives including a credit bureau, climate risk assessment, and a partial credit guarantee scheme should boost credit quality and financial intermediation.

The IMF's final recommendation focuses on business environment reforms to unlock potential growth by improving resource allocation between firms. Analysis revealed significant potential for productivity gains and identified obstacles in workforce education, financing access, and customs regulations.

As Antigua and Barbuda continues its economic balancing act, the path forward requires navigating between addressing immediate fiscal challenges and investing in long-term resilience—a delicate dance for a small island nation vulnerable to both economic and climate shocks.

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