On December 16, the Executive Board of the
International Monetary Fund (IMF) concluded the Article IV consultation
with Barbados. During the same meeting, the Board
also completed the second review of Barbados’ economic reform program
supported by an arrangement under the Extended Fund Facility (EFF); a
press release on the review was issued separately.
2019 Barbados continues its strong implementation of the comprehensive
Economic Recovery and Transformation (BERT) plan aimed at restoring
fiscal and debt sustainability, addressing falling reserves, and
increasing growth. The program seeks to protect vulnerable groups
through strengthened social safety nets.
During the first nine months of 2019, the economy contracted by 0.2
percent, in line with program projections. With the economy heavily
dependent on external demand for tourism services, the impact of the
fiscal adjustment on growth has been limited.
Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal. They
welcomed the authorities’ progress in implementing their ambitious
homegrown economic reform program. Directors agreed that program
implementation has been strong, with notable gains to restoring fiscal
sustainability, rebuilding reserves, and increasing growth. They
considered that domestic and external risks remain, including weaker
global growth, tighter global financial conditions, and vulnerability
to natural disasters.
Directors were encouraged by the authorities’ commitment to fiscal
discipline and emphasized the importance of achieving and maintaining
the targeted primary surplus of 6 percent of GDP. They considered that
the FY2019/20 budget provides a solid basis for reaching this target.
Directors welcomed tax reforms aimed at enhancing revenue and
considered that improvements in tax and customs administration are
essential to support medium‑term revenue. They supported the planned
adoption of a fiscal rule to sustain the adjustment effort over the
medium and long run. Directors also underscored that social spending
and an improved safety net to protect low‑income households are key
priorities for the program.
Directors emphasized that reforms to state‑owned enterprises (SOE) are
essential for achieving the primary surplus target and maintaining it
over the medium term. They supported the authorities’ plans to reduce
transfers to SOEs by a combination of stronger oversight, reduced
costs, revenue enhancement, and mergers and divestment. Reducing
transfers to SOEs will create fiscal space for investment in physical
and human capital.
Directors welcomed the debt restructuring agreement that the
authorities have reached with their commercial external creditors. This
agreement will help reduce uncertainty and improve prospects for
investment. They considered that the restructuring agreement will
facilitate reaching the medium‑ and long‑term debt anchors.
Directors encouraged steps to improve the governance framework of the
Central Bank of Barbados (CBB). They underscored the need to limit
monetary financing to the government, and strengthen the CBB’s mandate,
autonomy, and decision‑making structure. Efforts to strengthen the
AML/CFT regime were also encouraged.
Directors emphasized that strengthening disaster resilience is key to
boosting medium‑term economic prospects, particularly as
weather‑related events could have a major impact on the Barbados
economy. They welcomed the inclusion of natural disaster clauses into
new debt instruments, noting it will help strengthen Barbados’
protection against natural disasters.
Directors stressed the importance of structural reforms to strengthen
competitiveness and unlock Barbados’ growth potential. They encouraged
the authorities to continue ongoing efforts to improve the business
environment by streamlining regulations and addressing key obstacles to
growth. Deeper regional integration would also help increase Barbados’