- Removal of 6.5 percent service charge on all price-controlled food items effective June 1, 2025
- Airport Service Charges for Caribbean travel will be reduced by 50 percent from June 1 to December 31, 2025
- Removal of 5 percent VAT on a number of food items and to change the status of exempt food items to zero-rated, July 2025
- On May 1, 2025, the price of fuel was capped at $16.00 per gallon until January 1, 2026.
By Caribbean News Global 
CASTRIES, St Lucia, (CNG Business) – Saint Lucia cannot control the cost of imported goods, says prime minister and minister for finance Philip J. Pierre, and as a price-reducing measure, the government will remove the import duties if any and 6.5 percent service charge on all price-controlled food items effective June 1, 2025.
In addition, Airport Service Charges for Caribbean travel will be reduced by 50 percent from June 1 to December 31, 2025, in the first instance.
Furthermore, in consultation with the private sector, the government has decided to remove VAT 12.5 percent on several food items and to change the status of exempt food items to zero-rated. A full list will be prepared and published by July 2025.
Historic imperatives
Between June 1 to August 31, 2022, the Pierre administration applied a similar policy and removed the service charge on imported products to fight unprecedented global inflation.
The once-championed VAT implementation was a necessity in some circles and oppressive to others, have unmasked their shields, in an attempt to cushion peace and security, and economic volatility.
Making a U-turn on a policy is as embarrassing as eating a humble pie. As with recent history, the current public outcry about increasing food prices at the supermarkets and in every sector of the economy has reached a boiling point. Worse still, the rising energy costs threaten energy and food security. Freight operators and truckers cannot count on the government’s statutory body for operational efficiency at the air and sea ports.
As with previous reductions in VAT that were quantified and made a huge political issue, on this occasion, the revenue shortfall is yet to be acknowledged and quantified. However, cost may not be a factor with the government, currently rolling in Citizenship by Investment (CIP) revenue, grants and loans at their disposal.
The price of gas in Saint Lucia is the highest in the OECS, at XCD 16.00 per gallon. On May 1, 2025, the price of fuel was capped at $16.00 per gallon until January 1, 2026.
“The price of OPEC basket of 12 crudes stood at $63,78 a barrel on Tuesday, compared with $64,07 the previous day, according to OPEC Secretariat calculations,” Vienna, Austria, 28 May 2025.
Reacting to public backlash is the claim that imported inflation and external factors contribute to inflation, while beneficial providers come out on top.
“In the Year of Infrastructure, last year, which was supported by “the government’s removal of VAT on key construction inputs including steel, cement, wood and galvanize, preliminary data suggests that the construction sector expanded by 22.4 percent in 2024 in line with a rise in construction imports. Consistent with this, credit for construction and renovations increased by 15.6 percent. The construction sector’s contribution to real GDP was 5.4 percent,” prime minister Pierre said, delivering the 2025 budget address.
The policy to reverse 6.5 percent service charge and 12.5 percent VAT policy is happening at a time when the economy of Saint Lucia is said to be growing and expanding.
“ This is now the fourth year of sustained economic growth. Unemployment dropped to 10.6 percent in 2024 and reached single digits in the first quarter of this year, the lowest level on record. The debt-to-GDP ratio for 2024 was 73.5 percent, in the absence of rebasing. Our fiscal position remains strong with our country recording its third consecutive year of a primary surplus, a further measure of the robust nature of our economy,” the prime minister announced in his budget address in April 2025.
“The Saint Lucia economy remains strong and trending in the right direction. Last year, the economy grew by 4.7 percent and is projected to grow by 4 percent next year, after adjustments for inflation.”
“The fiscal position of the government improved in 2024. The overall deficit was 1.8 percent of GDP, decreasing from 3.2 percent in the previous year. The primary surplus was 1.4 percent of GDP compared to 0.2 percent in the previous year. The current balance moved from a deficit of XCD 3.5 million in 2023 to a surplus of XCD 27.5 million in 2024.” ~ Budget Address 2025.
According to a recent IMF – CARTAC Technical Assistance Report: St Lucia Expenditure-Based Gross Domestic Product [Sept 2-13, 2024], section 7, “The Central Statistics Office (CSO) in Saint Lucia is planning to conduct a Household Budget Survey (HBS) in 2025, which will support the compilation of supply and use tables (SUT) in 2026 and the rebasing of GDP. Section 8 reads: “To support progress in the above work areas, the mission proposed the following priority recommendations needed to improve estimates of GDP.”
“There is always a revision of the estimates from time to time. [We] are not as sophisticated as the developed economies that have comprehensive data collection databases that capture the best estimates,” said a government economist.
The paralysis
An online news website headlined: “Stats office struggles to keep up,” stated: “Efforts to modernise Saint Lucia’s economic data collection are being advanced — but they are running up against two major obstacles: low response rates from businesses and a chronic shortage of technical personnel.”
Ahead of the cost of living and the reversal of 6.5 percent service charge and 12.5 percent VAT, Donald Trump tariffs may have a stranglehold on future government revenue, economic expansion, growth, investments and reduced hiring. These are certain to impact Saint Lucia in the third quarter of 2025, in time for an active hurricane season and back-to-school shopping; the making of a perfect storm for price increases. And while trade tensions continue to impact global trade and disrupt supply chains, uncertainty is the predictable decimal.
The cost of living index in Saint Lucia, including the layout of the areas of economic expansion and growth for better utilization and resource allocation, are however, lacking along with the comparison that reflects a positive economic change in the landscape of Saint Lucia and most importantly, the quality of life.
The other consideration is the disposable income in the pockets of the average Saint Lucian family of four attempting to live on XCD 3,500, much less XCD 6.50 an hour/ XCD 1,126.00 per month, as mandated by the government.
ECLAC has downwardly revised growth projections for Latin America and the Caribbean in 2025. Saint Lucia’s GDP growth forecast, revised in April 2025, is 2.0 percent.
Perspective
The government of Saint Lucia has little option but to act with urgency and precision to help businesses improve in technology and innovation, thereby improving productivity by at least 10 percent. Government, on the other hand, must cut its operational costs, facilitate access to entrepreneurial capital, build infrastructure, upskill the labour force in priority areas, establish relationships in new source markets, improve tax reform and efficiency at ports of entry, [customs, immigration, inland revenue and national security].
Key to averting further severe downward growth projections is to improve competitiveness, expedite project implementation and prioritise infrastructure projects. Establishing a level of certainty is paramount, making the country an attractive place to vacation, invest and do business.
Uplifting communities across Saint Lucia to make a meaningful impact in a fertile tropical land mass can be achieved by ensuring actual food surplus, not statistical primary surplus, while the food import bill continues to increase astronomically and external debt totalling XCD 5.1 billion.
What’s at stake is how policy must adapt to deliver the clarity needed to avoid losing ground in global shifts and shaping footholds in the arena of strategic competition.
As the economic landscape continues to transform, policymakers must connect in discourse and deep policy implementation for the foreseeable future. They should not be hampered by measly thinking, but with insights that move the pendulum beyond the elements of the politics of now, and the doctrine that prioritises shallow political exploits.
The post PM Pierre reverses service charge and VAT amid economic buoyancy appeared first on Caribbean News Global.
