Barbados Secures $112 Million for Balance of Payments from IMF, Recognized for Economic Management | Update on IMF Agreement and Growth

Barbados is set to receive a further $112 million for its balance of payments from the International Monetary Fund, after winning approval for its economic management.

The government and IMF staff reached an agreement on Tuesday on the third review of the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) arrangements, ahead of a final decision by the executive board next month.

IMF mission leader Michael Perks said the completion of the reviews would release around $38 million under the EFF and $74 milion under the RSF.

The IMF team visited Bridgetown for nine days to discuss the implementation of Barbados’ Economic Recovery and Transformation (BERT 2022) plan, supported by the fund under the EFF, and reform measures under the RSF arrangement.

The mission complimented the country on real gross domestic product (GDP) returning to pre-pandemic levels. “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,” Perks said.

But he noted that while inflation has moderated with easing international food prices, this was “somewhat offset by higher prices of certain domestic crops due to adverse weather conditions and higher domestic demand”.

The current account deficit narrowed to nine per cent of GDP in 2023, from 11 per cent in 2022, while international reserves rose to $1.6 billion at the end of March, covering about seven months of imports.

Perks cautioned that risks could arise from an abrupt tourism slowdown in key source countries, intensified regional conflicts in Ukraine and the Middle East leading to higher commodity prices and inflation, further increases in external financing costs, or natural disasters.

The IMF team gave Barbados a passing grade for progress on the BERT programme. “All quantitative targets for end-March 2024 under the EFF were met. The primary fiscal balance recorded a surplus of 3.7 per cent of GDP in FY2023/24, up from 2.5 per cent in FY2022/23,” Perks said.

For FY2024/25, the government budget targets a four per cent primary surplus, in line with programme goals. “The authorities remain firmly committed to gradually reducing public debt to 60 per cent of GDP by FY2035/36. Important structural reforms are being implemented,” the IMF staff said.

Barbados has met IMF benchmarks to reform state-owned enterprises, amend the public pension scheme, reform tax and customs exemption regimes, enhance public procurement and financial management frameworks, and strengthen anti-money laundering and counter-terrorist financing controls to exit the Financial Action Task Force (FATF) “grey list” earlier this year.

The reform programme also envisages steps to boost growth and the business environment. The authorities are advancing their climate policy agenda with support from the RSF. The IMF noted that a new Stormwater Management Act has been tabled in Parliament to improve flood resilience, while an Energy Efficiency and Conservation Policy Framework covering government agencies and public lighting has been approved.

Efforts are progressing to “green the economy and move away from fossil fuels”, with steps towards increasing private investment in battery storage to integrate renewable energy sources and ensure stable electricity supply, said the Fund.

The Fund official also highlighted ongoing climate financing efforts including a new debt-for-climate swap aiming to generate savings to finance loans from the Inter-American Development Bank and Green Climate Fund for upfront green investment, and preparation of legislation to enable the government’s capital contribution for the Blue Green Bank that was announced in the Budget speech.

emmanueljoseph@barbadostoday.bb