The International Monetary Fund (IMF) noted on Friday that the COVID-19 pandemic and import price increases due to the war in Ukraine had severely affected Saint Lucia.
According to an IMF release, after a collapse in 2020, tourist arrivals have rebounded significantly in 2021–22.
But the release, after the IMF Executive Board concluded Article IV consultation with Saint Lucia, observed that recovery remains incomplete.
“The public balance sheet remains under considerable strain, with a sizeable fiscal deficit and a significant increase in public debt since 2019,” it noted.
According to the IMF, inflation has picked up with the surge in commodity prices—somewhat mitigated by price controls and energy subsidies.
The IMF also disclosed that the financial sector has remained stable, but nonperforming loans have risen during the pandemic.
It said output is projected to gradually recover to the pre-pandemic level by 2024, slowed by the impacts of the war in Ukraine and the tightening of global financial conditions.
In addition, the international financing institution explained that weak balance sheets and higher input costs and supply constrain public and private investments.
It said inflation is projected to rise to 6.4 percent in 2022.
“The fiscal outlook is challenging due to high public debt and large refinancing needs which lead to financing constraints. Without additional policy measures, public debt is projected to stabilize around 90 percent of GDP in the medium term, limiting the space for public infrastructure and social investments,” the world body stated.
Nevertheless, it said the current account deficit is projected to narrow gradually with tourism recovery.
The IMF Directors concurred that, in the near-term, fiscal policy should focus on protecting the most vulnerable from food and fuel price increases.
Given financing constraints, they encouraged the authorities to prioritize spending and increase global energy prices’ pass-through while supporting vulnerable households with targeted transfers, the IMF release stated.