June 23, 2025
The Executive Board of the International Monetary Fund (IMF) has concluded the fifth and final reviews of the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) arrangements with Barbados. With the completion of these reviews, the authorities are now able to draw the equivalent of SDR 14.175 million (approximately US$19 million) under the EFF arrangement and SDR 28.35 million (approximately US$39 million) under the RSF arrangement. This brings total disbursements to SDR 85.05 million (about US$116 million) under the EFF and SDR 141.75 million (about US$193 million) under the RSF. The authorities have agreed to publish the staff report prepared for these reviews.
Economic activity in 2024 remained robust, with estimated growth of 4 percent, driven by tourism, construction, and business services. Inflation eased to an average of 1.4 percent, reflecting lower global commodity prices and reduced costs for domestic goods and services. The external position also improved, with the current account deficit narrowing to 4.5 percent of GDP. This was supported by strong tourism receipts, falling import prices, and one-off current transfers. Gross international reserves stood at US$1.6 billion as of end-2024, providing over seven months of import cover and continued strong support for the exchange rate peg.
The near-term outlook is stable. Growth is projected at 2.7 percent in 2025, supported by tourism-related construction and government investment. Inflation is expected to rise due to increasing costs of non-fuel imports and some domestic agricultural products. However, risks to the outlook continue to lean to the downside, given the uncertain global economic environment and Barbados’ ongoing vulnerability to external shocks and natural disasters.
Program performance has remained strong. All quantitative performance criteria and indicative targets were met. The authorities exceeded the primary fiscal surplus target for FY2024/25 and are aiming for a surplus of 4.4 percent of GDP in FY2025/26. Public debt has declined to below 105 percent of GDP, and the authorities remain committed to reducing it to 60 percent of GDP by FY2035/36.
The authorities met all EFF structural benchmarks for the review. These included completing a human resource needs assessment at the Barbados Customs and Excise Department, preparing a public-private partnership (PPP) framework, and developing a daily liquidity forecasting framework. Both reform measures under the RSF fifth review were also implemented. Key steps to integrate climate considerations into public financial management have been completed. These include the development of project appraisal guidelines, enhanced fiscal risk analysis, and the preparation of the PPP framework. The Central Bank of Barbados has also incorporated physical climate risk analysis into its bank stress testing.
Following the Executive Board discussion on Barbados, Bo Li, Deputy Managing Director and Acting Chair, issued the following statement:
“The implementation of Barbados’ homegrown Economic Recovery and Transformation program has remained strong, supported by the Extended Fund Facility and the Resilience and Sustainability Facility arrangements. The completion of the fifth and final reviews marks the successful conclusion of the Fund arrangements.
“While the outlook is stable, risks remain tilted to the downside due to the uncertain global economic environment and Barbados’ vulnerability to shocks and natural disasters. The authorities remain firmly committed to maintaining macroeconomic stability and advancing structural reforms to enhance growth potential and resilience.
“Maintaining strong fiscal surpluses will be essential to achieving the public debt target of 60 percent of GDP by FY2035/36. The authorities’ focus on strengthening revenue mobilization and improving public financial management is appropriate. These efforts are key to preserving fiscal sustainability and creating space for public investment. Finalizing the ambitious reform agenda for state-owned enterprises remains a priority, and steps are being taken to mobilize external financing.
“The exchange rate peg continues to serve as a critical anchor for macroeconomic stability, supported by ample international reserves. Measures to strengthen the monetary policy framework and financial safety nets are progressing. Efforts to modernize the local payments system are also advancing, with a goal of transitioning to digital payments by 2026.
“Reforms aimed at improving the business environment and boosting growth potential are vital. Key initiatives include the digitalization of government services and investments in skills and education. The authorities’ commitment to enhancing macroeconomic resilience to natural disasters and supporting the transition to renewable energy is commendable.”
Source: (Caribbean News Global)
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