Dominica extends tax relief amid Middle East conflict

Dominica Prime Minister Roosevelt Skerrit says the ongoing conflict in the Middle East involving the United States, Israel, and Iran is already pushing up the cost of food, fuel, and essential goods for small, import-dependent countries like Dominica.

Addressing Parliament on Friday, Skerrit said the “grave and unfolding conflict,” though geographically distant, is having immediate economic consequences for Caribbean nations.

“Global oil prices have surged, supply chains have been disrupted, and the cost of transporting goods has risen sharply. These pressures are now being felt across economies large and small, with inflationary effects reaching even the most vulnerable countries,” he told legislators.

Skerrit made the remarks as his administration secured parliamentary approval to extend key fiscal measures aimed at easing the rising cost of living. The government will extend the waiver of Value Added Tax (VAT) and import duties on a range of essential goods until July 2026.

“For small, import-dependent states such as Dominica, these external shocks translate directly into higher prices for food, fuel, and other essential goods,” Skerrit said. “We are, in many ways, innocent bystanders affected by a conflict not of our making — but we must not be passive in protecting our citizens from its consequences.”

He said the relief measures come at a time when families are struggling to meet the rising cost of necessities.

“Global forces threaten to erode the purchasing power of our citizens, so the government is taking decisive action to stabilize the cost of living for all citizens,” Skerrit said, adding that the administration is acting “with urgency and empathy.”

Skerrit also addressed criticism from opposition forces referencing the March 2026 International Monetary Fund Article IV report on Dominica’s fiscal performance.

According to the IMF, Dominica’s real gross domestic product grew by 4.5 percent last year, up from 3.5 percent in 2024, driven largely by strong tourism performance and targeted development investments. Inflation also eased, averaging 2.3 percent in 2025, while the current account deficit remained elevated due primarily to construction-related imports.

The IMF projects real GDP growth to average about 3 percent in 2026–27, supported by continued infrastructure investments, before slowing to around 2 percent as major construction projects wind down.

However, the report noted that risks remain elevated, including spillovers from the Middle East conflict, geopolitical tensions, uncertainty surrounding Citizenship by Investment (CBI) inflows, and the ongoing threat of natural disasters.

Skerrit said that despite these risks, Dominica has made progress in strengthening its fiscal position. He noted that the country has moved from significant primary deficits in recent years to a primary surplus of 0.7 percent of GDP, or approximately $14.7 million, according to the IMF.

The IMF has recommended that Dominica achieve a primary surplus of 3.4 percent of GDP by 2027–28 to help reduce debt, strengthen fiscal resilience, and build financial buffers against disasters.

Skerrit acknowledged that balancing fiscal discipline with social support measures presents challenges, particularly as the government seeks to support vulnerable households while maintaining economic stability.

“Measures such as VAT and duty waivers on essential goods are designed to ease the cost-of-living burden and protect citizens during periods of economic stress,” he said, noting that while the measures reduce government revenue in the short term, they provide critical relief to households.

Skerrit emphasized that the initiative is aimed at protecting ordinary citizens.

“This cost-of-living relief initiative before us today is about people — the single mother trying to put food on the table, the elderly pensioner managing a fixed income, and the working family whose wages have not kept pace with global price shocks,” he said.

“This government cannot control wars abroad, nor can we dictate global commodity prices. But we can control how we respond. And our response will always be guided by one principle — to look out for our people, especially in times of hardship.”