The International Monetary Fund (IMF) has warned tourism activity will remain subdued across the Eastern Caribbean Currency Union (ECCU) as the COVID-19 crisis has hit hard over the subregion.

“The near-term policy imperative is to protect lives and livelihoods and limit potential scarring, while ensuring medium-term debt sustainability with strengthened fiscal frameworks and maintaining financial system stability, with a view to safeguarding the quasi-currency board system,” said the Washington-based financial institution in a concluding statement of the 2020 discussion on common policies of member countries in the ECCU.

“Once the post-pandemic recovery takes hold, policies should focus on resuming fiscal consolidation, further strengthening the financial system, and accelerating other structural reforms to make the economy more competitive and resilient,” it added.

The IMF said the COVID-19 pandemic has taken a heavy toll on the ECCU economy, stating that tourism receipts “have dried up as visitor arrivals have come to a halt.”

It estimated that gross domestic product (GDP) has contracted by 16 per cent in 2020, with negative inflation and stagnant credit growth.

“With sizable revenue losses and spending pressures, aimed at limiting the socio-economic impact of the pandemic, fiscal positions have deteriorated significantly, raising public debt sharply,” the IMF said.

“The current account deficit is estimated to have widened sharply due to the decline in tourism exports,” it continued.

Nonetheless, it said the Eastern Caribbean Central Bank’s (ECCB) foreign asset position has “held up relatively well”, partly reflecting increased official financing.