Barbados to receive more IMF support

A delegation from the International Monetary Fund, IMF, ended a nine-day visit to Barbados on Tuesday, having reached a staff-level agreement with Bridgetown on the completion of the third review of the Extended Fund Facility and the Resilience and Sustainability Facility arrangements with the fund.

The IMF’s executive board is expected to consider both reviews in June.

The IMF mission has determined that Barbados’ economy has recovered to pre-pandemic levels, with 12 consecutive quarters of growth, driven by a rebound in tourism and related sectors.

It said implementation of the ambitious home-grown Barbados Economic Reform and Transformation programme, referred to as BERT 2022, continues to be strong.

“The authorities remain committed to maintaining fiscal consolidation and debt sustainability, while advancing structural reforms to achieve more inclusive and sustainable growth and increase resilience to climate change,” said Michael Perks, who led the May13-21 mission.

Rebound in tourism

Perks said a successful review by the IMF executive board would trigger US$19 million of funding under the EFF arrangement and US$37 million under the RSF arrangement for Barbados.

“The economy grew strongly in 2023 and continues to expand in 2024, driven by the rebound in tourism and related activities. Real gross domestic product has recovered to pre-pandemic levels, with tourist arrivals in the first quarter surpassing the 2017-19 average,” the IMF staff team reported.

Perks said that although inflation has moderated with the easing of international food prices, this was somewhat offset by the higher prices of certain domestic crops, due to adverse weather conditions and higher domestic demand.

Barbados’ current account deficit narrowed to nine per cent of GDP in 2023, down from 11 per cent in 2022. International reserves rose to US$1.6 billion at March 2024, covering about seven months of imports.

But Perks said that risks to the outlook could arise from an abrupt slowdown in key source countries for tourism, an intensification of regional conflicts leading to higher commodity prices and inflation, a further increase in external financing costs, or natural disasters.

“Barbados continues making good progress in implementing its home-grown BERT 2022 plan. All quantitative targets for end-March 2024 under the EFF were met,” the fund said.

Debt target

The country’s primary surplus rose from 2.5 per cent to 3.7 per cent of GDP in the past fiscal year. Perks added that Barbados was now working towards a primary surplus of four per cent in the current year ending March 2025, and had set its sights on reducing the country’s debt ratio to 60 per cent of GDP by FY2036.

“Important structural reforms are being implemented. The authorities have met structural benchmarks to reform state-owned enterprises, amend the public pension scheme, reform the tax and customs exemption regimes, enhance the public procurement framework, and strengthen public financial management,” said the IMF official.

“Meanwhile, significant progress has been made in strengthening the AML/CFT framework, enabling Barbados to exit the Financial Action Task Force grey list earlier this year,” Perks added.

Barbados’ continuing economic reform programme contemplates further steps to strengthen growth and the business environment, while advancing its ambitious climate policy agenda.

A new Storm Water Management Act to improve flood resilience has been tabled in Parliament for debate. An energy efficiency and conservation policy, covering all government agencies and public lighting, has been approved by Cabinet.

And: “Efforts to green the economy and move away from fossil fuels are progressing,” Perks added.

“The authorities are taking steps towards increasing private investment in battery storage to further integrate renewable energy sources into the energy matrix and ensure a stable supply of electricity,” he said.

– CMC