December 16, 2019

• The completion of the review enables an immediate disbursement equivalent to SDR 35 million (about US$48 million). A four-year extended arrangement under the EFF was approved on October 1, 2018.
• Program implementation is strong. All program targets for end-June and end-September 2019 have been met.
• Since May 2018, international reserves have increased from a low of US$220 million to more than US$600 million at end-October 2019.

On December 16, 2019, the Executive Board of the International Monetary Fund (IMF) completed the second review of Barbados’ economic reform program supported by an arrangement under the Extended Fund Facility (EFF). The completion of the review allows the authorities to draw the equivalent of SDR 35 million (about US$48 million), bringing total disbursements to the equivalent of SDR 105 million (about US$145 million).

The four-year extended arrangement under the EFF, for an amount equivalent to SDR 208 million (about US$288 million, or 220 percent of Barbados’s quota in the IMF), was approved by the Executive Board on October 1, 2018 (see Press Release No. 18/370 ).

The Executive Board today also concluded the 2019 Article IV consultation with Barbados. The associated press release will be issued separately.

Following the Board discussion of the review, Mr. Tao Zhang, Deputy Managing Director, and Acting Chair made the following statement:

“Barbados continues to make good progress in implementing its comprehensive homegrown economic reform program. All quantitative performance criteria, indicative targets, and all structural benchmarks for end-September 2019 were met.

“The fiscal adjustment continues as programmed with the primary surplus targeted at 6 percent of GDP for FY2019/20 and subsequent years. This target for end-September 2019 was met by a significant margin, and the FY2019/20 budget provides a solid basis for reaching the target for the next fiscal year. Tax policy reforms aim to enhance revenue, while improvements in tax and customs administration are essential to support medium-term revenue. The planned adoption of a fiscal rule in 2020 will help sustain the adjustment effort over the medium and long term.

“State-Owned Enterprise (SOE) reforms are essential for achieving the primary surplus target and maintaining it over the medium term. To secure fiscal space for investment in physical and human capital, transfers to SOEs are envisaged to significantly decline by a combination of stronger oversight of SOEs, cost reduction, revenue enhancement, and mergers and divestment.

“Adequate social spending and an improved safety net to protect the most vulnerable members of society are key priorities of the program. Social spending is being protected, preserving Barbados’ strong social safety net and limiting the impact of the stabilization program on low-income households.

“A comprehensive public debt restructuring complements the fiscal consolidation. The recent agreement reached with commercial external creditors will help reduce uncertainty and improve prospects for investment. Under the program’s macroeconomic framework, the restructuring agreement will facilitate reaching the 80 percent of GDP medium-term debt target in FY2027/28, and the 60 percent of GDP long-term anchor in FY2033/34.

“An improved governance framework of the Central Bank of Barbados would facilitate limiting monetary financing to the government, and strengthening the central bank’s mandate, autonomy, and decision-making structure. Measures to strengthen the AML/CFT regime would also be helpful.

“Strengthening disaster resilience is key to boosting medium-term economic prospects. Climate change is likely to increase Barbados’ vulnerability to weather-related events that could have a major impact on its economy. With the inclusion of natural disaster clauses into new domestic and external bonds, Barbados effectively used the debt restructuring to strengthen its protection against natural disasters.

“Structural reforms are needed to unlock Barbados’ growth potential. While the process for providing construction permits has been streamlined, much room for improvement in the business climate remains. Deeper regional integration would also help increase Barbados’ growth prospects.”

Full IMF Report – Article IV Consultation and Second Review