The Citizenship by Investment program for St. Kitts and Nevis has had a considerable, positive impact on the country’s economy; according to the International Monetary Fund. It has contributed to GDP growth and reduced the country’s debt. Now, the challenge is for St. Kitts and Nevis to maintain the interest in the program that has been such a positive driver on its economy.
The International Monetary Fund Praises St. Kitts & Nevis’s Economic Development
St. Kitts and Nevis successfully exited the International Monetary Fund’s (IMF) Post-Program Monitoring Framework in October 2015, a requirement for countries that borrow money from the International Monetary Fund. To successfully exit the program, St. Kitts had to prove that is economy had shown improvement; that it was on stable footing. The IMF found that St. Kitts had favorable macroeconomic performance and a broadly stable financial system, and country’s economy continued its strong growth at around 5%. The International Monetary Fund attributed this strong growth due to surging inflows from the country’s Citizenship by Investment (CBI) program, with large CBI inflows in the 2013-2015 period, although the IMF noted a slowdown in 2015.
Money obtained from the economic citizenship program resulted in increased construction, and spending in other categories and this helped St. Kitts economy post significant growth, but with the slowdown of CBI inflow starting in mid-2015 there are concerns that the CBI inflow will not continue to support the same level of investment inflows.
The IMF has cautioned, that when looking at forward economic expectations for the Kittitian economy, the performance will depend on developments in the citizenship program, with the country’s future growth highly dependent on CBI inflows. The IMF forecasts St. Kitts growth will moderate to 3.5% in 2016 and then will average 3% in the following years as construction activities stemming from CBI-related spending taper off, while CBI applicants normalize following the past increase in interest.
The decline in new CBI applications in mid-2015 was due to a few factors, including: the negative impact of the loss of visa-free access to Canada and the US FinCEN advisory, which led to a temporary uncertainty regarding the reputation of the citizenship program, increased competition from other programs, such as the Maltese Individual Investor Programme introduced in 2014 and the Vanuatu Economic Rehabilitation Program which started in 2015. For those reasons the country is advised to continue to work on its CBI program, and make it more attractive in the face of increased competition from other programs.
The Economic Future of St. Kitts & Nevis
But, even if the CBI investment inflows slow, they already had a positive impact on the economy. The cash inflows increased spending on infrastructure, and improved the country’s finances. According to the International Monetary Fund, St. Kitts debt-to-GDP ratio continued its downward trajectory in the 2013-2015 period at it is expected to reach the East Caribbean Currency Union’s 60% target in 2017, before its peers, a major positive development for the country’s economy. The citizenship program in St. Kitts & Nevis brought several hundreds of million US$ foreign direct investments into the luxury tourism industry which has been established during the last decade. The islands of St. Kitts & Nevis have already seen a huge increase of tourists to the country and this should continue during the next decades.