Caribbean & Central America - July 2024

Fiscal adjustment and debt reduction should be top priorities for the government, according to an International Monetary Fund (IMF) mission led by David Moore, which visited Antigua & Barbuda on 17-21 June.

The mission commented that GDP growth in the small Caribbean country – which has a population of nearly 100,000 - has been encouraging. GDP (half of which is tourism-based) grew by 4.2% in 2023 and is set to expand by 5.8% this year, lifted by the Small Islands Developing States Conference (SIDS4) and Antigua & Barbuda’s role co-hosting the T20 Cricket World Cup. Inflation peaked at 6.0% in April, up from 3.3% at the end of last year.

A large part of the IMF press release issued at the end of the mission’s visit deals with the debt problem. The Fund says that the high public debt burden “poses ongoing challenges”. The debt-to-GDP ratio has actually improved from around 100% in 2020 to 76% in 2023, but this is partly due to a revision of GDP statistics: arrears are substantial, and cash constraints continue to be necessary. The mission welcomes the 2024 budget as an important step to build stronger fiscal buffers. The budget includes a range of measures which will improve the fiscal balance by 0.5 percentage points of GDP. One of them is an increase in the ABST sales tax, which goes up to 17% from 15% previously. The base of the tax is also widened; excise taxes on alcohol, tobacco and cannabis products are increased; and property taxes on luxury homes go up.

Bank credit and NPLs

The IMF mission to Antigua & Barbuda notes that bank credit to the private sector rose by 7% last year after contracting in both 2021and 2022. Non-performing loans (NPLs) for banks and credit unions remain “modestly above the prudential level of 5%”. The IMF calls for stronger regulation of credit unions.