St. Lucia; Debt Sustainability Analysis

This paper presents a debt sustainability analysis for St. Lucia. The medium-term scenario prepared by the IMF staff assumes continued fiscal consolidation and thus is compatible with sustainable debt levels even in the presence of adverse economic shocks. Stress tests show that stabilizing the debt/GDP ratio for the public sector at around the levels prevailing in 2002/03 would allow the absorption of economic shocks without generating unstable debt dynamics. Most temporary shocks would, however, shift the debt ratio upward, and further adjustment would be necessary to restore the preshock level.