• CBI revenues are in decline among major Caribbean players amid geopolitical uncertainties.
  • Such programs are essential for economic development, but are strongly reliant on foreign investment.
  • IMF calls for greater economic diversification measures to negate risks, large-scale projects, including special economic zones, could play a major role in attracting FDI.

Citizenship-By-Investment (CBI) has been a staple of investment revenue for Caribbean nations ever since the first program was introduced by Saint Kitts and Nevis (SKN) in 1984. Now however, more than 40 years on, a recent IMF report has raised the alarm at declining CBI revenues across the region, a trend which could have major negative ramifications.

According to the IMF’s report, CBI revenue averages 6.5% of GDP for the five Eastern Caribbean nations with these programs. In 2023 alone, CBI income amounted to almost a third of total non-grant revenue. This revenue stream is crucial for investment projects, including infrastructure reforms necessary for wider economic growth, particularly during a period of economic instability.

Such instability can in part explain the recent struggles of CBI’s pioneer, Saint Kitts and Nevis, which in 2024 saw GDP growth of only 1.5%, down from 4.3% in 2023. This was to a large degree driven by a sharp reduction in CBI inflows and comes as the nation tries to adopt new strategies, including accepting cryptocurrency, to reverse the situation.

Per the report, SKN’s 2024 CBI revenue dropped almost 60%, widening the country’s 2024 fiscal deficit to 11% of GDP.

CBI has traditionally accounted for a majority of SKN’s government revenue, averaging between 60 and 70%. Only a portion of this is allocated to the smaller island of Nevis.

In May, an IMF report focusing on SKN highlighted that uncertainty and volatility around CBI revenue combined with a potential further decline in such revenue “would pressure fiscal accounts,” increasing financial instability.

As a result of reduced revenue, vital projects designed to enhance development risk being delayed. This direction of travel is unsustainable and risks undoing significant government-led reforms spanning education, infrastructure development and tourism.

SKN is not alone in needing a major CBI reset.

Grenada, for instance, saw just 420 total CBI applications in 2024 compared with almost 2,300 in 2023. In Dominica, CBI revenue in 2024 reached an unprecedented 37% of the country’s GDP, leading the IMF to issue caution around an overreliance on this revenue stream.

Among other recommendations, the Washington-based institution has noted the importance of fostering private sector-led growth and pursuing economic diversification measures to reduce overreliance on CBI revenue.

With Caribbean economies reliant on tourism, continued investment in this sector will be essential for long-term growth. The region’s economies must, however, also enhance their efforts to attract overseas investment in other sectors or in sectors which directly support tourism. One way in which they can do this is through establishing large-scale projects such as special economic zones (SEZs).

In much the same way that the region pioneered CBI, SEZs may be another avenue Caribbean governments explore to shore up economic resilience. These are not new, as seen with Jamaica’s Kingston Free Zone, which dates back to 1976. However, they can be brought into the 21st century and expanded with sustainability at their core, aligning with government goals.

These zones are proven in their ability to attract major revenue and to create a significant number of local jobs. Cuba’s Mariel Special Development Zone for instance draws in almost USD $500 million of foreign investment annually and has created over 8,500 jobs within the zone.

SEZs operating in the region must align with the sustainable development goals of individual states. Crucially, they will be able to operate within existing CBI frameworks, meaning that they can help revitalize these revenue streams.

With leading CBI programs seemingly faltering amid global economic uncertainties, it is incumbent on governments to pursue large-scale, innovative strategies to enhance foreign investment which should, in turn, increase CBI revenues once more. This revenue will in turn be distributed among local residents, ensuring a sustainable and resilient financial future.