Dominica CBI Revenues at 37% of GDP: IMF Warns of “Over-Reliance”

The International Monetary Fund’s (IMF) 2024 Article IV Consultation Report highlights Dominica’s Citizenship-by-Investment (CBI) program as a crucial economic driver while urging strategic reforms to ensure long-term stability.

CBI revenue reached an unprecedented 37% of the country’s GDP in FY2022/23, marking a substantial increase of more than seven percentage points from the previous year. By calculating the average GDP of the FY2022/23, we can assume that Dominica’s CBI program brought in about US$232 million in revenue.

This surge in CBI inflows played a pivotal role in Dominica’s post-pandemic recovery, contributing to real GDP growth of 5.6% in 2022 and an estimated 4.7% in 2023.

The IMF, however, notes that the current account deficit widened to 33.7% of GDP in 2023, as higher imports related to CBI-funded infrastructure projects influenced the balance.

The IMF’s analysis emphasizes the CBI program’s role in funding the Climate Resilience and Recovery Plan (CRRP) which builds resilience against natural disasters—a critical concern given Dominica’s vulnerability to hurricanes and other climate-related events.

The CBI program has also helped fund major infrastructure projects, including a geothermal energy plant, a new international airport, and climate-resilient housing initiatives.

The report emphasizes the need to “reduce over-reliance” on the CBI program, noting that the primary fiscal balance remains in deficit when excluding CBI funds. To diversify the economy, it recommends developing other sectors, such as agriculture, manufacturing, and information technology.

It also crucially recommends strengthening program governance. It underscores the importance of ensuring “the CBI program operates with high standards of transparency and integrity.” To this end, it suggests implementing regular public reporting on CBI revenues, expenditures, and program performance, a matter that Dominica has neglected in recent years, resulting its program being one of the most opaque according to IMI’s CBI Transperancy Index.

The IMF advocates for implementing fiscal reforms, recommending “pursuing ambitious fiscal consolidation and prudent debt management strategies” to complement the benefits derived from the CBI program.

Looking ahead, the IMF projects CBI revenue to remain significant but declining in the medium term. The program will likely continue to support key areas of the economy as the government earmarks funds “essential to public investment, debt amortization, and the accumulation of savings.”

It warns, however, that “weaker than projected revenues from the CBI program” could become a considerable risk for the country.

Potential factors that can lead to declining CBI revenues, according to the report, include global policy changes, increased scrutiny of CBI programs, and competition from other countries.