As the oil boom waned, former prime minister George Chambers admonished citizens, “Fete over, back to work” at the end of the 1982 carnival season. It was an urgent call to boost productivity and economic output to counter the looming downturn. The economic policy framework did not change, and the sharp fall in energy prices resulted in a depression and a prolonged period of austerity.
A 2014 decline in energy prices, coupled with a decline in natural gas production, plunged the country into a depression that dragged on until 2022. Only after the post-COVID-19 recovery and the outbreak of war in Ukraine did energy prices surge, prompting positive but still weak economic growth. It is now urgent that the current administration—just like the previous one—put the country firmly onto a sustainable growth path.
The latest IMF Article IV consultation statement, released the week before Carnival, might have been overlooked. It confirmed 0.8 per cent GDP growth in 2025 and a slightly lower 0.7 per cent in 2026. Growth is projected to rebound to 2.5 per cent in 2027 and 3.9 per cent in 2028, mainly due to energy sector recovery, though notable warnings are attached.
To be clear, the economy is performing neither better nor worse under the current Finance Minister, Davendranath Tancoo, than it did under his predecessor. The policy weaknesses remain unchanged. Reflecting this, the 2026 IMF report reiterates its recommendations, emphasising the need for a new approach and structural changes. For example, it again calls for improved quality, timeliness and coverage of macroeconomic statistics. An efficient administration requires quality data and strong institutions.
It repeatedly calls for a more flexible foreign exchange rate system, and, in the same vein, recommends reducing public debt and narrowing the interest rate differential with the United States to make local assets more attractive and to encourage capital inflows. It also indicated that the current macroeconomic policy mix conflicts with the de facto stabilised exchange rate arrangement, arguing that foreign exchange reserves will continue to decline amid persistent shortages unless policies change. Additionally, it noted that ongoing fiscal deficits fuel foreign exchange demand. The Central Bank Governor suggested a similar interest rate measure last year.
Allowing for public-sector wage agreements, current hires and projected energy prices, the report forecasts a fiscal deficit of five per cent —more than double the budget speech figure based on current wage settlements and new hiring. Although the financial sector is stable and well capitalised, the report warns that ongoing government borrowing could expose it to sovereign risk. Reflecting this concern, S&P made a similar call earlier this month, revising its banking industry risk trend from stable to negative.
The report noted that the declining labour participation rate negatively affects productivity, competitiveness and government revenue, and called for measures to reverse this trend.
Alongside these warnings, like many previous reports, this one calls for greater diversification and less dependence on the energy sector. It welcomed the emphasis on private capital and the approach outlined in the ‘Revitalisation Blueprint.’ Other positives noted include progress in addressing Anti-Money Laundering and Counter-Financing of Terrorism challenges, as well as improvements at the Ministry of Legal Affairs’ Companies Registry. The report was also positive about changes aimed at improving the National Insurance system.
However, the existence of multiple expressions of interest in response to project proposals, or the recent oversubscription of the USD $1 billion bond issue, are merely encouraging signals. The IMF report’s key takeaway is that the Government must urgently implement decisive reforms to overhaul conflicting economic policies to open the pathway to economic sustainability.
