IMF reaches staff-level agreement on EFF and RSF with Barbados

BRIDGETOWN, Barbados – At the request of the government of Barbados, an International Monetary Fund (IMF) team led by Michael Perks visited Barbados during May 13-21, 2024 to discuss the implementation of Barbados’ Economic Recovery and Transformation (BERT 2022) plan, supported by the IMF under the Extended Fund Facility (EFF) , and the implementation of reform measures under the Resilience and Sustainability Facility (RSF) arrangement.

To summarize the mission’s findings, Perks made the following statement:

“Following productive discussions, the IMF team and the Barbadian authorities reached staff-level agreement on the completion of the third reviews under the EFF and RSF arrangements. The agreement is subject to approval by the IMF executive board, which is expected to consider the reviews in June. The completion of the reviews will make available SDR 14.175 million (about US$19 million) under the EFF arrangement and SDR 28.35 million (about US$37 million) under the RSF arrangement.

“The economy grew strongly in 2023 and continues to expand in 2024, driven by the rebound in tourism and related activities. Real GDP has recovered to pre-pandemic levels with tourist arrivals in the first quarter surpassing the 2017-19 average. 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. The current account deficit narrowed to 9 percent of GDP in 2023 (from 11 percent in 2022). International reserves rose to US$1.6 billion at end-March 2024, covering about seven months of imports. 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, and/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 primary fiscal balance recorded a surplus of 3.7 percent of GDP in FY2023/24, up from 2.5 percent of GDP in FY 2022/23. For FY2024/25, the authorities’ budget targets a primary surplus of 4 percent of GDP, in line with program targets. The authorities remain firmly committed to gradually reducing public debt to 60 percent of GDP by FY2035/36.

“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. Meanwhile, significant progress has been made in strengthening the AML/CFT framework, enabling Barbados to exit the Financial Action Task Force (FATF) grey list earlier this year. The authorities’ economic reform program also contemplates further steps to strengthen growth and the business environment.

“The Barbadian authorities are continuing to advance their ambitious climate policy agenda, supported by the RSF arrangement. To improve flood resilience, the authorities have tabled in parliament a new Stormwater Management Act. An Energy Efficiency and Conservation Policy Framework, covering all government agencies and public lighting, has also been approved by cabinet. Efforts to green the economy and move away from fossil fuels are progressing. 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. Ongoing efforts to mobilize climate financing include a new debt-for-climate swap, aiming to generate savings that will finance new loans from the IDB and Green Climate Fund for upfront green investment, and the preparation of legislation to enable the government’s capital contribution for the Blue Green Bank.

“The team would like to thank the authorities and other counterparts for their hospitality and the constructive and candid policy dialogue.”

IMF Communications Department