The International Monetary Fund (IMF) Monday said that the Eastern Caribbean Currency Union (ECCU) continues to provide a strong anchor for macroeconomic stability in a shock-prone region.
The independent member countries of the ECCU are Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.
An IMF delegation has ended a visit to the sub-region, indicating that the post-pandemic growth has been supported by tourism and construction, while inflation has moderated in line with global trends.
‘Over the medium term, ECCU economies are expected to converge toward modest pre-pandemic average growth, with downside risks dominating amid elevated global uncertainty,’ the delegation said, adding that to manage these risks while supporting resilient long-term growth and safeguarding the quasi-currency board, policies should prioritise stronger fiscal sustainability and accountability aligned with the regional debt target, alongside measures to strengthen financial system resilience and intermediation.
It said structural reforms should focus on improving trade connectivity and competitiveness, addressing skills mismatches, enhancing regional frameworks to scale up transformative capital investment, and strengthening regional data provision to support evidence-based policymaking.
According to the IMF delegation, the ECCU region has sustained a robust post-pandemic expansion.
It said strong tourism arrivals and ongoing infrastructure investment supported regional growth at an estimated three per cent in 2025. Inflation further moderated in line with global fuel and food trends, with so far limited direct impact from shifts in United States trade policies. Fiscal outcomes, however, have lagged economic performance. With union-wide public debt reduction stalling, partially reflecting the impact of recurring external shocks, several members are increasingly at risk of not meeting the 60 per cent of gross domestic product regional public debt target by 2035.
The IMF said that the financial system remains broadly stable, but there are legacy bank balance-sheet weaknesses, and vulnerabilities in the nonbank sector, where supervision remains fragmented.
‘The ECCU’s external position is assessed as weaker than the level implied by fundamentals and desirable policies, while financing of persistently elevated current account deficits remains heavily dependent on continued foreign direct investment inflows,’ the IMF said, adding ‘nonetheless, the ECCB’s reserve position has remained stable and the currency-backing ratio high, supporting confidence in the union’.
It said looking ahead, economic momentum is expected to moderate, with risks tilted to the downside.
With tourism operating near full capacity, average regional growth is expected to slow to around 2.5 per cent over the medium term amid persistent productivity constraints, adverse demographic trends, and limited fiscal space for public investment.
‘The outlook is subject to sizeable downside risks as evolving trade and travel barriers and ongoing geopolitical tensions amplify the region’s long-standing vulnerabilities, notably its heavy dependence on tourism and imports, exposure to natural disasters, persistently high public debt, and reliance on uncertain Citizenship-by-Investment (CBI) inflows,’ it added.
The IMF said that uneven progress in debt reduction underscores the need to strengthen union-wide institutional mechanisms to reinforce fiscal sustainability and resilience.
It said ECCU-wide attainment of the 60 per cent of GDP regional debt target remains elusive and increasingly at risk by the 2035 target date.
‘While this partly stems from the region’s high exposure to recurrent external shocks and sizeable social and development investment needs, it also reflects that most ECCU members have not yet operationalized national fiscal frameworks that effectively align their annual budgets with the regional debt target.
‘A union-wide, time-bound commitment to implementing such rules-based frameworks, grounded in harmonized design principles, would strengthen fiscal discipline, support sustained debt reduction, and better equip the union to navigate future shocks.’
The IMF said that this should be complemented by more robust peer reviews of members’ fiscal performance and debt reduction strategies at the ECCB Monetary Council, strengthened public accountability through the establishment of independent oversight committees, a clearer specification of the public debt target perimeter, and collaborative efforts to address data gaps and strengthen technical capacity underpinning macro-fiscal projections.
It said that deeper policy coordination would help preserve space for priority investment amid ongoing debt reduction and recurrent shock-related spending pressures.
Priorities include scaling back costly tax exemptions, especially in tourism, and strengthening social safety nets to reduce reliance on distortionary, untargeted fiscal responses to shocks. The effectiveness of the layered post-disaster financing frameworks after Hurricane Beryl in 2024 offers important lessons to strengthen the union’s collective fiscal resilience to natural disasters.
In the longer term, further centralisation of fiscal accountability, funding and risk-contingency mechanisms would future proof the union’s resilience and development prospects.
‘Over time, as sovereign funding structures mature and impose greater market discipline on public finances-including through a transition toward market-based debt issuance-moving to a centralized fiscal oversight and accountability framework would help underpin confidence.
‘This could open avenues for pooled financing to help overcome constraints stemming from members’ small scale and high vulnerability to shocks, including in rebuilding access to international capital markets. Similarly, a regional stabilisation fund could reinforce national contingency frameworks and safeguard fiscal continuity in periods of stress,’ the IMF added.