IMF welcomes tax revenue improvements in the twin island nation

The International Monetary Fund (IMF) has welcomed recent improvements in Antigua and Barbuda’s tax revenue collection, noting that further domestic revenue mobilization will be needed in the medium term to ensure fiscal sustainability.

The IMF Executive Board concluded its 2025 Article IV consultation with Antigua and Barbuda on March 13, and endorsed the staff appraisal ‘without a meeting on a lapse-of-time basis.’

According to the IMF, Antigua and Barbuda’s tax revenues remain below the authorities’ fiscal resilience guideline targets and are relatively low compared to peer country standards.

While the 2024 Budget measures have started to close the gap, the Fund indicated more will be needed in the medium term.

“To mobilize revenue without recourse to a personal income tax or higher ABST rates, near-term priorities could include tighter control of tax exemptions, transitioning to HS2022 classification in Customs, and modernizing the framework for property taxation,” the IMF stated in its report.

The Fund recommended intensifying efforts to introduce a single window system at Customs and to operationalize systems to allow e-filing, e-payment and e-registration of taxes.

It also suggested introducing a large taxpayer unit as well as modernized IT systems to strengthen tax administration.

The IMF reported that Antigua and Barbuda’s post-pandemic economic expansion is continuing, with real output estimated to have surpassed pre-pandemic levels in 2024.

Growth was estimated at 4.3 percent, driven by strong tourism and one-off events, including the 4th International Conference on Small Island Developing States and the T20 Cricket World Cup.

As the recovery matures, the IMF projects economic growth to moderate from 3 percent in 2025, to 2.5 percent over the medium term.

Inflation was elevated in 2024 at 6.4 percent, reflecting contributions from specific items, notably communication, as well as increases in indirect taxes.

However, inflation is expected to decrease to 3.5 percent in 2025 and 2.4 percent in 2026.

The recovery in nominal GDP, along with improved fiscal balances, brought down the public debt from around 100 percent of GDP in 2020 to 67 percent in 2024.

The fiscal primary balance improved to 4.6 percent in 2024, aided by indirect tax increases, a broader economic recovery, and one-off factors, including nearly 2 percent of GDP from an asset forfeiture and unusually low capital spending.

Despite these improvements, the IMF cautioned that gross financing needs are projected to remain around 10 percent of GDP in the medium term.

The Fund stated that substantial domestic and external arrears, albeit with domestic arrears uncertain in size, have limited financing options.

“Addressing external and domestic arrears is key to broadening financing options,” the IMF stressed. “While the fall in nominal debt in 2024 is welcome, outstanding arrears to domestic suppliers and to the Paris Club remain obstacles to debt sustainability and constrain Antigua and Barbuda’s potential access to external and domestic financing.”

According to Eastern Caribbean Central Bank’s preliminary estimates used by the IMF in its report, the current account deficit narrowed to 7 percent of GDP in 2024, reflecting both a higher service trade balance—mainly tourism receipts—and a smaller goods deficit due to a contraction in imports.

Foreign direct investment inflows remained resilient to tightening global financial conditions and continued to support ongoing hotel construction.

The IMF assessed the financial sector to be broadly stable, with credit growth recovering and non-performing loans approaching prudential levels.

The launch of the regional credit bureau was hailed as a method to promote faster access to credit while maintaining lending standards, according to the Fund.

The Board noted that the ECCB-led climate risk initiatives and the regional partial credit guarantee scheme should boost credit quality and financial intermediation.

It recommended a more risk-based supervisory framework for credit unions, with enhanced monitoring of asset quality and credit forbearance measures.

On social protection, the IMF suggested better targeted social assistance would enhance inclusion while curbing inefficiencies.

“The current framework of social protection is fragmented across sectors and ministries. Staff sees scope to streamline these social programs to reduce overlap and tailor social assistance to the most vulnerable households,” the report stated.

The Fund also encouraged the development of a centralized information system or unified database to maintain accurate records of all beneficiaries, track support received and identify gaps or duplications in coverage.

Regarding business environment reforms, the IMF found potential for large aggregate productivity gains from the reallocation of resources between firms.

The Fund indicated there is scope to address obstacles that firms report in areas such as workforce education, access to finance, and customs and trade regulations.

The IMF welcomed the operationalization of the Fiscal Responsibility Oversight Committee (FROC) and encouraged publication of FROC reports once further experience has been gained.

It recommended parliamentary endorsement of the Fiscal Resilience Guidelines and the medium-term fiscal framework.

According to the IMF, the downside risks to Antigua and Barbuda’s economic outlook included elevated uncertainty about the global outlook, a deepening of geoeconomic fragmentation, commodity price volatility, climate-related vulnerabilities and capacity constraints in the construction sector.

Upside risks stem from stronger demand for tourism, improved air connectivity, new cruise port facilities, hosting of special events such as major conferences, and the intensification of productivity-enhancing structural reforms, which could support higher medium- and long-term growth.