## 1brbea2019002

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### Executive summary and outlook
- IMF EFF arrangement: Four-year EFF equivalent to SDR 208 million (about US$288 million, or 220 percent of Barbados’s quota) approved October 1, 2018.
- Disbursements: Completion of second review on December 16, 2019 allowed draw of equivalent of SDR 35 million (about US$48 million), bringing total disbursements to equivalent of SDR 105 million (about US$145 million).
- Program implementation: All quantitative performance criteria, indicative targets, and all structural benchmarks for end-September 2019 were met.
- Recent growth: Economy contracted by 0.2 percent during first nine months of 2019 (in line with program projections); tourism expanded by about 3 percent and directly represents about 17 percent of real GDP.
- Outlook: Growth expected to rebound to long-term average of about 2 percent; inflation expected to revert to just over 2 percent in the medium term as weather conditions normalize.
- Staff proposal: Modification of performance criteria relating to the primary balance, net international reserves and net domestic assets.

### Key macroeconomic indicators, estimates and projections
- Real GDP growth (annual percent):
  - 2016: 2.5; 2017: 0.5; 2018 (Est.): -0.6; 2019 (Proj.): -0.1; 2020 (Proj.): 0.6.
- CPI inflation (average):
  - 2016: 1.5; 2017: 4.4; 2018 (Est.): 3.7; 2019 (Proj.): 4.0; 2020 (Proj.): 4.8.
- CPI inflation (end of period):
  - 2016: 3.8; 2017: 6.6; 2018 (Est.): 0.6; 2019 (Proj.): 6.5; 2020 (Proj.): 2.3.
- Exports of goods and services (annual percent):
  - 2016: 6.6; 2017: 0.8; 2018 (Est.): 0.0; 2019 (Proj.): 3.3; 2020 (Proj.): 3.0.
- Imports of goods and services (annual percent):
  - 2016: 0.2; 2017: -0.4; 2018 (Est.): -0.4; 2019 (Proj.): 6.3; 2020 (Proj.): 1.1.
- Private sector credit (annual percent):
  - 2016: 1.5; 2017: 3.2; 2018 (Est.): 0.4; 2019 (Proj.): 0.0; 2020 (Proj.): 3.6.
- Broad money (annual percent):
  - 2016: 4.2; 2017: 1.2; 2018 (Est.): -0.2; 2019 (Proj.): 4.2; 2020 (Proj.): 2.9.

### Fiscal policy, targets and public debt
- Central government fiscal indicators (percent of GDP, fiscal year Apr–Mar):
  - Revenue and grants: 2016: 28.3; 2017: 28.6; 2018 (Est.): 29.3; 2019 (Proj.): 30.5; 2020 (Proj.): 30.2.
  - Expenditure: 2016: 33.6; 2017: 32.9; 2018 (Est.): 29.6; 2019 (Proj.): 27.0; 2020 (Proj.): 27.5.
  - Fiscal Balance: 2016: -5.3; 2017: -4.3; 2018 (Est.): -0.3; 2019 (Proj.): 3.5; 2020 (Proj.): 2.7.
  - Interest Expenditure: 2016: 7.6; 2017: 7.6; 2018 (Est.): 3.8; 2019 (Proj.): 2.5; 2020 (Proj.): 3.3.
  - Primary Balance: 2016: 2.2; 2017: 3.3; 2018 (Est.): 3.5; 2019 (Proj.): 6.0; 2020 (Proj.): 6.0.
- Primary surplus target: 6 percent of GDP for FY2019/20 and subsequent years; authorities aim to maintain 6 percent through FY2023/24 then gradually reduce.
- Central government gross debt (percent of GDP):
  - 2016: 149.5; 2017: 158.3; 2018 (Est.): 125.6; 2019 (Proj.): 115.9; 2020 (Proj.): 109.9.
- Debt anchors under program macro framework:
  - 80 percent of GDP medium-term target in FY2027/28, and 60 percent of GDP long-term anchor in FY2033/34.

### Debt restructuring outcomes and terms
- Domestic restructuring:
  - Completed November 2018; immediate reduction in debt-to-GDP ratio of about 30 percentage points in nominal terms; reduction in gross financing needs (GFN) of about 35 percentage points of GDP.
- External restructuring (terms agreed October/November 2019):
  - 26 percent haircut on original principal and past due and accrued interest.
  - New long-term instrument: 10-year maturity, 5-year grace period, 6.5 percent coupon, and a natural disaster clause.
  - US$40 million repayment in first two years (US$7.5 million in cash and US$32.5 million in short-term bonds maturing in 2021 bearing a 6.5 percent coupon).
  - Implies present value loss for creditors of just over 40 percent (using 12 percent discount rate).
- Impact: Restructuring facilitates reaching 80 percent debt/GDP by FY2027/28 and 60 percent by FY2033/34; Fund’s lending-into-arrears policy continues to apply until restructuring concluded.

### Balance of payments, reserves and external position
- Current account balance (percent of GDP):
  - 2016: -4.3; 2017: -3.8; 2018 (Est.): -3.7; 2019 (Proj.): -3.7; 2020 (Proj.): -3.6.
- Capital and financial account balance (percent of GDP):
  - 2016: 0.8; 2017: 0.8; 2018 (Est.): 9.1; 2019 (Proj.): 6.3; 2020 (Proj.): 5.4.
  - o/w IMF disbursement: 2018 (Est.): 1.0; 2019 (Proj.): 1.9; 2020 (Proj.): 1.4.
  - o/w FDI: 2016: 3.4; 2017: 3.1; 2018 (Est.): 4.4; 2019 (Proj.): 3.5; 2020 (Proj.): 3.7.
- Gross international reserves (US$ million):
  - 2016: 320.0; 2017: 205.7; 2018 (Est.): 499.6; 2019 (Proj.): 636.5; 2020 (Proj.): 733.7.
- Reserves coverage:
  - Reserves in months of imports of G&S: 2016: 1.9; 2017: 1.2; 2018 (Est.): 3.0; 2019 (Proj.): 3.6; 2020 (Proj.): 4.1.
  - Reserves in percent of ARA: 2016: 65.8; 2017: 40.8; 2018 (Est.): 102.6; 2019 (Proj.): 125.4; 2020 (Proj.): 135.9.
- Recent developments: International reserves increased from US$220 million (May 2018 low) to more than US$600 million at end-October 2019; net international reserves increased to about US$500 million.

### Financial sector and monetary policy
- Private sector credit: declined by about 1 percent in first three quarters of 2019; weak overall but expected to rise with stabilization and FDI.
- Banking sector soundness:
  - Sector remains well capitalized and liquid; profitability currently negative.
  - In June 2019: most capitalized bank CAR 26 percent; one bank just under 8 percent; two small credit unions had capital under prescribed 10 percent of assets.
  - Rate spread between bank loans and deposits is 6 percent.
- Central Bank of Barbados (CBB) governance and liquidity:
  - Recommendation to improve governance framework to limit monetary financing, strengthen mandate, autonomy, and decision-making.
  - Draft CBB law provisions: total advances cannot exceed 7.5 percent of preceding 3 year moving average government revenue; advances subject to cash repayment at end of each fiscal year; advances at market rates.
  - Negative capital position of the CBB remains stable; recapitalization plan to be developed by mid-2020 (structural benchmark).
- AML/CFT: 2018 FATF evaluation identified deficiencies; recommendations include comprehensive risk assessment and strengthening law enforcement and judicial prioritization.

### Structural reforms, competitiveness and growth strategy
- Growth pillars: invest in high-skilled knowledge economy; mobilize private domestic savings; make Government an enabler of growth; diversify into renewable energy, high-tech and software.
- Business climate reforms recommended:
  - Streamline business start-up (one-stop shop), eliminate company seal requirement, single business administration number, strengthen minority shareholder protections, digitize property records.
- Credit infrastructure:
  - Establish credit registry and credit collateral registry; draft Fair Credit Reporting Act and Code of Conduct for credit bureaus.
- Exchange control liberalization:
  - As of August 2019 residents can open FX deposit accounts; authorities plan to allow banks to lend in FX to residents funded by these deposits; recommendation to phase out FX fee as reserves strengthen.

### State-Owned Enterprises (SOEs) and public financial management
- SOE transfers: were close to 8 percent of GDP in FY2017/18; envisaged to decline to under 6 percent of GDP by FY2021/22 via oversight, cost reduction, revenue enhancement, mergers and divestment.
- FMA Act: adopted January 2019; proclaimed end-July 2019; most provisions enter into force in 2020; strengthens SOE oversight, requires annual statements of intent and end-of-year reports.
- Tariff and fee adjustments: Bus fares increased from BRB$2 (US$1) to BRB$3.50 in April 2019; three fees introduced in 2018 transferred to relevant SOEs; 2019 introduced new water consumption rates.

### Social protection and mitigation
- Social spending: protected under program; floor on CG social spending monitored cumulatively.
- Labor market: average unemployment rate about 11 percent in first three quarters of 2019.
- Social mitigation for SOE reforms: includes training, outplacement, worker enfranchisement options, enhanced severance packages, preferential access to procurement and land.

### Reserve adequacy, disaster resilience and climate policy
- Reserve adequacy:
  - ARA range: 9.9 and 16.5 percent of GDP (equivalent to 3.5 to 5 months of import cover).
  - Staff projects gross reserves to surpass 150 percent of ARA by end of Fund-supported program.
- Natural disaster clauses:
  - Included in new domestic and external bonds: allow capitalization of interest and deferral of scheduled amortization over two-year period following a major natural disaster; trigger for domestic bonds is CCRIF payout above US$5 million.
- Contingent financing:
  - Government discussing contingent credit facility with IDB to borrow up to 2 percent of GDP in case of natural disaster.
  - CCRIF payout example: US$5.8 million payment on October 19, 2018 following Tropical Storm Kirk.

### Risks to the outlook and Risk Assessment Matrix (RAM)
- Overall: Domestic and external risks elevated.
- Key global risks (likelihood / impact / policy response):
  - Tighter and volatile global financial conditions — Likelihood: High; Impact: Medium; Response: continue fiscal consolidation.
  - Weaker-than-expected global growth — Likelihood: High; Impact: High; Response: structural measures to improve competitiveness.
  - Large swings in energy prices — Likelihood: Medium; Impact: Medium; Response: structural diversification.
- Country-specific risks:
  - Fiscal slippages/higher fiscal multipliers — Likelihood: High; Impact: High; Response: adhere to fiscal consolidation and accelerate reforms.
  - Brexit — Likelihood: High; Impact: High; Response: improve competitiveness and adhere to fiscal consolidation.
  - Extreme weather conditions — Likelihood: Medium; Impact: High; Response: invest in resilience, include adverse weather clauses in debt, insurance and contingent credit.
- Staff view: capacity to repay Fund remains adequate; debt service to IMF projected to remain below 2 percent of exports and below 1 percent of GDP through 2032.

### Program monitoring, performance criteria, and technical modalities
- Proposed modifications: three end-March 2020 QPCs at authorities’ request:
  - Revise floor on net international reserves downward.
  - Revise ceiling on net domestic assets of CBB upward.
  - Revise floor on CG primary balance to reflect nominal GDP revision while maintaining 6 percent primary balance by end FY2019/20.
- Structural benchmarks: reset four and introduce one new (actuarial review, new public pension law, BCED implementation benchmarks split and reset, fiscal rule benchmark reset, BRA audits and compliance plan new).
- Selected program quantitative targets (examples):
  - CG Primary Balance (percent of GDP): CG Primary balance targeted at 6.0 for FY2019/20 and FY2020/21.
  - Ceiling on Net Domestic Assets of CBB (BRB$ millions): end-December 2018 target 1,977; end-March 2019 target 1,992; targets set through September 2020.
  - Floor on Net International Reserves (BRB$ millions): adjusted targets and actuals documented (e.g., adjusted target end-December 2018: 531; actual end-December 2018: 832; end-March 2019 actual: 889; end-June 2019 actual: 941; end-September 2019 actual: 971).
- Reporting framework and timetables:
  - Daily reporting (lag no more than one week): CBB NIR and CBB GIR.
  - Monthly reporting (lag no more than two weeks): CBB NDA and detailed monetary surveys.
  - Monthly reporting (lag no more than four weeks): real and fiscal sector data (RPI, CG budgetary accounts, arrears, program loan disbursements).
  - Quarterly reporting (lag no more than four weeks): nominal and real GDP, tourism indicators, CG debt by holder and maturity, SOE financial positions.
  - Annual reporting: audited financial statements of public institutions and commercial banks within specified lags.

### Data, statistics and capacity building
- National accounts improvements: rebased annual GDP estimates to 2010; quarterly GDP by activity developed; rebasing to 2016 delayed due to resource constraints.
- Technical assistance: CARTAC and Canada’s PRASC support; two-year Canada-funded project started May 2019 to maximize capacity building on national accounts.
- Data dissemination: need to launch a National Summary Data Page to implement e-GDDS; STA conducted SDDS assessment and provided draft action plan.

### Authorities’ commitments and staff recommendations
- Authorities agree fiscal adjustment is difficult but necessary; SOE reform central; fiscal consolidation on track to deliver 6 percent primary surplus in FY2019/20.
- Staff appraisal recommends completion of second review of the extended arrangement, completion of the financing assurances review, and supports authorities’ request to modify three performance criteria, conditional on continued strong program implementation.

*IMF staff report: Barbados — Staff Report for the 2019 Article IV Consultation, Second Review under the Extended Arrangement (November 27, 2019).*

### 285.7 Adult literacy rate

### 285.7 Adult literacy rate

### Social and demographic indicators (most recent year)
- Population (2017 est., thousand): 285.7
- Adult literacy rate: 99.7
- Per capita GDP (2017 est., US$ thousand): 17.4
- Poverty rate (individual, 2010): 19.3
- Life expectancy at birth in years (2013): 75.3
- Gini coefficient (2010): 47.0
- Rank in UNDP Development Index (2014): 57
- Unemployment rate (2018 est.): 10.1
- Main products, services and exports: tourism, financial services, rum, sugar, and chemicals.

### Key macroeconomic indicators, estimates and projections (annual percentage change unless indicated)
- Real GDP growth:
  - 2016: 2.5
  - 2017: 0.5
  - 2018 (Est.): -0.6
  - 2019 (Proj.): -0.1
  - 2020 (Proj.): 0.6
- CPI inflation (average):
  - 2016: 1.5
  - 2017: 4.4
  - 2018 (Est.): 3.7
  - 2019 (Proj.): 4.0
  - 2020 (Proj.): 4.8
- CPI inflation (end of period):
  - 2016: 3.8
  - 2017: 6.6
  - 2018 (Est.): 0.6
  - 2019 (Proj.): 6.5
  - 2020 (Proj.): 2.3
- Exports of goods and services:
  - 2016: 6.6
  - 2017: 0.8
  - 2018 (Est.): 0.0
  - 2019 (Proj.): 3.3
  - 2020 (Proj.): 3.0
- Imports of goods and services:
  - 2016: 0.2
  - 2017: -0.4
  - 2018 (Est.): -0.4
  - 2019 (Proj.): 6.3
  - 2020 (Proj.): 1.1
- Real effective exchange rate (average):
  - 2016: 0.9
  - 2017: 2.5
  - 2018 (Est.): 1.2
  - 2019: ...
  - 2020: ...
- Net domestic assets:
  - 2016: 7.1
  - 2017: 2.8
  - 2018 (Est.): 4.1
  - 2019 (Proj.): 1.8
  - 2020 (Proj.): 2.9
  - Of which: Private sector credit:
    - 2016: 1.5
    - 2017: 3.2
    - 2018 (Est.): 0.4
    - 2019 (Proj.): 0.0
    - 2020 (Proj.): 3.6
- Broad money:
  - 2016: 4.2
  - 2017: 1.2
  - 2018 (Est.): -0.2
  - 2019 (Proj.): 4.2
  - 2020 (Proj.): 2.9

### Central government fiscal indicators (fiscal year; FY runs April–March)
- Revenue and grants (percent of GDP):
  - 2016: 28.3
  - 2017: 28.6
  - 2018 (Est.): 29.3
  - 2019 (Proj.): 30.5
  - 2020 (Proj.): 30.2
- Expenditure (percent of GDP):
  - 2016: 33.6
  - 2017: 32.9
  - 2018 (Est.): 29.6
  - 2019 (Proj.): 27.0
  - 2020 (Proj.): 27.5
- Fiscal Balance (percent of GDP):
  - 2016: -5.3
  - 2017: -4.3
  - 2018 (Est.): -0.3
  - 2019 (Proj.): 3.5
  - 2020 (Proj.): 2.7
- Interest Expenditure (percent of GDP):
  - 2016: 7.6
  - 2017: 7.6
  - 2018 (Est.): 3.8
  - 2019 (Proj.): 2.5
  - 2020 (Proj.): 3.3
- Primary Balance (percent of GDP):
  - 2016: 2.2
  - 2017: 3.3
  - 2018 (Est.): 3.5
  - 2019 (Proj.): 6.0
  - 2020 (Proj.): 6.0

### Public debt (fiscal year; central government gross debt, incl. guaranteed and arrears, percent of GDP)
- Central gov't gross debt:
  - 2016: 149.5
  - 2017: 158.3
  - 2018 (Est.): 125.6
  - 2019 (Proj.): 115.9
  - 2020 (Proj.): 109.9
- External debt (percent of GDP):
  - 2016: 31.3
  - 2017: 28.5
  - 2018 (Est.): 32.6
  - 2019 (Proj.): 28.7
  - 2020 (Proj.): 28.1
- Domestic debt (percent of GDP):
  - 2016: 118.2
  - 2017: 129.8
  - 2018 (Est.): 93.0
  - 2019 (Proj.): 87.2
  - 2020 (Proj.): 81.9

### Balance of payments and reserves
- Current account balance (percent of GDP):
  - 2016: -4.3
  - 2017: -3.8
  - 2018 (Est.): -3.7
  - 2019 (Proj.): -3.7
  - 2020 (Proj.): -3.6
- Capital and financial account balance (percent of GDP):
  - 2016: 0.8
  - 2017: 0.8
  - 2018 (Est.): 9.1
  - 2019 (Proj.): 6.3
  - 2020 (Proj.): 5.4
  - o/w Public Sector:
    - 2016: -1.8
    - 2017: -1.4
    - 2018 (Est.): 3.5
    - 2019 (Proj.): 3.3
    - 2020 (Proj.): 1.8
  - o/w IMF disbursement:
    - 2016: 0.0
    - 2017: 0.0
    - 2018 (Est.): 1.0
    - 2019 (Proj.): 1.9
    - 2020 (Proj.): 1.4
  - Private Sector:
    - 2016: 2.6
    - 2017: 2.2
    - 2018 (Est.): 4.1
    - 2019 (Proj.): 3.1
    - 2020 (Proj.): 3.5
  - o/w FDI:
    - 2016: 3.4
    - 2017: 3.1
    - 2018 (Est.): 4.4
    - 2019 (Proj.): 3.5
    - 2020 (Proj.): 3.7
- Net Errors and Omissions:
  - 2016: 1.0
  - 2017: 0.3
  - 2018 (Est.): 0.3
  - 2019 (Proj.): 0.0
  - 2020 (Proj.): 0.0
- Overall balance (percent of GDP):
  - 2016: -2.5
  - 2017: -2.6
  - 2018 (Est.): 5.7
  - 2019 (Proj.): 2.6
  - 2020 (Proj.): 1.8

- Exchange rate (BDS$/US$): 2.0 (2016, 2017, 2018); 2019: ...; 2020: ...
- Gross international reserves (US$ million):
  - 2016: 320.0
  - 2017: 205.7
  - 2018 (Est.): 499.6
  - 2019 (Proj.): 636.5
  - 2020 (Proj.): 733.7
- Reserves in months of imports of G&S:
  - 2016: 1.9
  - 2017: 1.2
  - 2018 (Est.): 3.0
  - 2019 (Proj.): 3.6
  - 2020 (Proj.): 4.1
- Reserves in percent of ARA:
  - 2016: 65.8
  - 2017: 40.8
  - 2018 (Est.): 102.6
  - 2019 (Proj.): 125.4
  - 2020 (Proj.): 135.9

- Nominal GDP, CY (BDS$ millions):
  - 2016: 9,660
  - 2017: 9,956
  - 2018 (Est.): 10,173
  - 2019 (Proj.): 10,414
  - 2020 (Proj.): 10,682
- Nominal GDP, FY (BDS$ millions):
  - 2016/17: 9,734
  - 2017/18: 10,011
  - 2018/19: 10,234
  - 2019/20: 10,481
  - 2020/21: 10,786

### Program developments, outcomes, and policy recommendations
- IMF EFF arrangement and disbursements:
  - Four-year EFF equivalent to SDR 208 million (about US$288 million, or 220 percent of Barbados’s quota) approved October 1, 2018.
  - Completion of second review on December 16, 2019 allowed authorities to draw equivalent of SDR 35 million (about US$48 million), bringing total disbursements to equivalent of SDR 105 million (about US$145 million).
- Program implementation and targets:
  - All quantitative performance criteria, indicative targets, and all structural benchmarks for end-September 2019 were met.
  - All program targets for end-June and end-September 2019 have been met.
  - All three structural benchmarks for the second review have been met.
- Fiscal policy and debt targets:
  - Primary surplus targeted at 6 percent of GDP for FY2019/20 and subsequent years.
  - Under program macro framework, restructuring agreement facilitates 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.
- Debt restructuring:
  - Completion of domestic debt restructuring (November 2018) reduced uncertainty and contributed to a downward debt trajectory.
  - Agreement reached with External Creditor Committee on restructuring of external debt to private creditors in October 2019; debt exchange offer launched in early November 2019.
- State-Owned Enterprise (SOE) reforms:
  - SOE reforms continued: review of tariffs and fees charged by SOEs, tightened reporting requirements, cost reductions.
  - Transfers to SOEs envisaged to significantly decline via stronger oversight, cost reduction, revenue enhancement, mergers and divestment.
- Social protection:
  - Adequate social spending and improved safety net are program priorities; social spending is being protected to limit impact on low-income households.
- Central bank and financial governance:
  - Recommendation to improve governance framework of the Central Bank of Barbados to limit monetary financing, strengthen mandate, autonomy, and decision-making structure.
  - Measures to strengthen the AML/CFT regime are recommended.
- Disaster resilience and climate change:
  - Strengthening disaster resilience is key; inclusion of natural disaster clauses into new domestic and external bonds used in debt restructuring to strengthen protection against natural disasters.
- Structural and competitiveness reforms:
  - Structural reforms needed to unlock growth potential; construction permit process has been streamlined but broader business climate improvements and deeper regional integration recommended.

### Executive summary: recent developments and outlook
- International reserves increased from a low of US$220 million (5-6 weeks of import coverage) in May 2018 to more than US$600 million at end-October 2019, supported by IFI lending and external commercial debt moratorium.
- Risks to the outlook are elevated but growth could surprise on the upside with increasing private sector confidence.
- Staff proposes modification of performance criteria relating to the primary balance, net international reserves and net domestic assets.

*IMF staff report: Barbados — Staff Report for the 2019 Article IV Consultation, Second Review under the Extended Arrangement (November 27, 2019).*

### 3.      During the first nine months of 2019, the economy contracted by 0.2 percent, in line

### 1brbea2019002 - 3.      During the first nine months of 2019, the economy contracted by 0.2 percent, in line

### Growth and tourism
- During the first nine months of 2019, the economy contracted by 0.2 percent, in line with program projections.
- Tourism sector:
  - Expanded by about 3 percent.
  - Directly represents about 17 percent of real GDP.
  - Indirect share in GDP is much larger as all other sectors are highly dependent on tourism activity.
  - Arrivals from the United States gained market share; with the real appreciation of the dollar, the share of arrivals from the United States has been gradually increasing relative to the United Kingdom and Canada.
  - Higher long stay arrivals contributed to growth in tourism.
- Other sectors:
  - Construction, manufacturing and agriculture contributed negatively to growth in the first three quarters of 2019.
- Labor market:
  - The average unemployment rate was around 11 percent in the first three quarters of 2019, unchanged from previous years.
- Outlook:
  - Growth is expected to rebound to its long-term average of about 2 percent.
  - External demand for tourism services is projected to remain buoyant.
  - Medium term: improving confidence expected to lead to rising investment and FDI, offsetting fading impact of fiscal consolidation.

### Inflation and prices
- Since the second half of 2018, inflation has been decreasing, with an uptick in the second half of 2019 owing to a fall-off in rainfall.
- Domestic and international drivers:
  - Domestic: abolition of the National Social Responsibility Levy (NSRL) in the second half of 2018 was a major contributor to lower inflation.
  - International: lower oil prices in the second half of 2018 and the first nine months of 2019 contributed to lower inflation.
  - Domestic food prices increased in 2019 owing to a fall-off in rainfall.
  - Increased transportation and utility costs also impacted prices.
- Supply disruption:
  - Closure of Petrotin, Barbados’ traditional supplier of fuel products, necessitated switching suppliers in the first half of 2019.
- Outlook:
  - Inflation is expected to revert to just over 2 percent in the medium term as weather conditions normalize.

### Fiscal developments and program targets
- Program goal:
  - Under the BERT program, authorities aim to increase the primary balance from 3½ percent of GDP in FY2018/19 to 6 percent in FY2019/20.
- FY2019/20 budget (approved March):
  - Reflects IMF technical assistance: broadening VAT base and land tax.
- First half FY2019/20 performance:
  - Revenues: strong VAT, property taxes, and import duties; lower-than-expected CIT and bank asset tax (negatively impacted by domestic debt restructuring).
  - Expenditures: layoffs in central government and SOEs (reducing wage bill) and reduction in transfers to public institutions more than offset a small increase in goods and services spending.
- Projections and targets:
  - Primary fiscal balance projected to reach 6 percent of GDP in FY2019/20 and to remain at that level for several years.
  - Authorities aim to maintain the primary balance at 6 percent of GDP until FY2023/24, and to gradually reduce it thereafter.
  - Intermediate and long-term debt targets: 80 percent of GDP in FY2027/28 and 60 percent of GDP in FY2033/34.
- Fiscal table excerpts (In percent of GDP):
  - Total revenue: 28.6 (2017/18), 29.3 (2018/19), 31.2 (2019/20 Program), 30.5 (2019/20 Proj), 30.2 (2020/21), 30.2 (2021/22)
  - Tax revenue: 26.7, 27.5, 29.3, 28.6, 28.3, 28.3
  - Income and profits: 7.5, 8.2, 7.8, 7.2, 6.6, 6.6
  - VAT: 8.9, 9.2, 9.4, 9.7, 9.9, 9.9
  - Social levy (NSRL): 1.5, 0.5, 0.0, 0.0, 0.0, 0.0
  - Total expenditure: 32.9, 29.6, 28.5, 27.0, 27.5, 27.9
  - Interest: 7.6, 3.8, 3.3, 2.5, 3.3, 3.7
  - Transfers: 12.1, 12.5, 11.4, 11.5, 11.2, 10.8
  - CG Fiscal balance: -4.3, -0.3, 2.7, 3.5, 2.7, 2.3
  - CG Primary balance: 3.3, 3.5, 6.0, 6.0, 6.0, 6.0
  - CG gross debt: 158.3, 125.7, 117.1, 115.9, 109.9, 103.4

### Debt restructuring
- Domestic:
  - A domestic debt restructuring completed in November 2018 reduced public debt without jeopardizing financial sector stability.
  - Resulted in an immediate reduction in the debt-to-GDP ratio of about 30 percentage points in nominal terms, and a reduction in gross financing needs (GFN) of about 35 percentage points of GDP.
  - Sharp drop partially reflects restructuring of holdings of the CBB and the NIS.
  - Authorities will develop plans to recapitalize the CBB and address medium and long-term challenges for the NIS (structural benchmark for end-June 2020).
- External:
  - In October 2019, agreement reached with the external creditor committee on restructuring external debt to private creditors; debt exchange offer launched in early November.
  - Terms include:
    - 26 percent haircut on original principal and past due and accrued interest.
    - Issuance of a new long-term debt instrument: 10-year maturity, 5-year grace period, 6.5 percent coupon, and a natural disaster clause.
    - US$40 million re-payment in the first two years (US$7.5 million in cash and US$32.5 million in short-term bonds maturing in 2021 and bearing a 6.5 percent coupon).
    - Implies a present value loss for creditors of just over 40 percent (using the 12 percent discount rate used by the government and the external creditor committee).
  - Under the program’s macroeconomic framework, the agreement ensures debt reaches 80 percent of GDP in FY2027/28 and 60 percent of GDP in FY2033/34.
  - Fund policy: until the debt restructuring process is concluded, the Fund’s lending into arrears policy continues to apply; financing assurances remain in place.

### Balance of payments and reserves
- Current account:
  - In the first three quarters of 2019, the current account deficit narrowed, supported by fiscal adjustment, a strong tourism sector, and favorable price developments.
  - Lower international oil and food prices and reduced demand from fiscal consolidation led to decreased imports relative to the first three quarters of 2018.
  - Despite a real effective exchange rate appreciation of about 3 percent relative to 2018, external demand for tourism increased, improving the service balance.
  - External sector assessment: Barbados’ external position in 2018 was broadly consistent with fundamentals and desirable policies.
- Financing and inflows:
  - By June 2019, disbursements: IMF about US$100 million; CDB US$100 million; IDB US$75 million.
  - IDB and CDB planning additional policy-based lending in late 2019 or early 2020 (amounts under discussion).
  - FDI remains subdued; large construction projects in the pipeline yet to materialize.
- Reserves:
  - Since approval of the extended arrangement supported under the EFF, gross international reserves increased to more than US$600 million as of end-October 2019; about 3½ months of goods and services import coverage and about 125 percent of the Assessment of Reserve Adequacy (ARA) metric.
  - Net international reserves increased to about US$500 million.
- Medium-term projections:
  - Current account deficit projected to narrow to about 3percent of GDP.
  - Private sector investment expected to replace official inflows, with reserves increasing to about 120 percent of the ARA metric.
  - Reserves projected to be well in excess of external debt service.
  - Completion of external debt restructuring expected to support rebuilding of reserves through 26 percent face value reduction, lengthened maturities, smoother repayment profile, and reduced interest.
  - Foreign reserves expected to reach about 120 percent of the ARA metric by the time the government reaches its long-term target of 60 percent of GDP by FY2033/34.

### Financial sector
- Private sector credit:
  - In the first three quarters of 2019, private sector credit declined by about 1 percent.
  - Liquidity in the banking sector increased.
  - Banks reported limited investment opportunities.
  - Rate spread between bank loans and deposits is 6 percent, indicating inefficiencies in financial intermediation.
- Outlook:
  - Higher credit growth expected as the economy stabilizes and FDI resumes; key to boosting economic growth.
  - Financial sector remains well capitalized and liquid despite recent domestic debt restructuring.

### Risks to the outlook
- Overall: Domestic and external risks are elevated.
- Domestic risks:
  - Government’s untested ability to reach and sustain a 6 percent primary surplus.
  - Fiscal adjustment could be less than targeted due to implementation delays, increased spending from political pressures, or weaker-than-expected impact of new revenue measures introduced in 2019.
  - Starting FY2020/21, CIT and PIT revenues could be impacted by the CIT reform adopted in late 2018.
- External risks:
  - Disorderly Brexit, weaker-than-expected global growth, tighter global financial conditions, and extreme weather events.
  - Key tourism markets and market shares: UK about 33 percent, US 30 percent, Canada 13 percent.
  - Weaker growth in these markets could reduce arrivals and investment in tourism infrastructure.
  - Tighter global financial conditions could depress FDI inflows, particularly for new accommodation, lowering construction.
  - Extreme weather events and other natural disasters (e.g., flooding) could cause large financial losses; Barbados’ further-into-the-Atlantic location may offer some protection against the strongest hurricanes, but potential impacts can be large.

### Article IV policy issues — Fiscal adjustment and tax reform
- FY2019/20 primary balance:
  - Expected to increase to 6 percent of GDP; the 3½ percentage point adjustment is underpinned by revenue and expenditure measures.
  - Expenditure-side focus: curtailing interest payments and transfers to public institutions, modest reduction in the wage bill.
  - Social spending protected; no further public wage increases envisaged after a 5 percent increase in FY2018/19.
- Nature of tax reforms:
  - Shift in revenue structure from income to consumption and wealth, and from residents to non-residents.
  - Corporate Income Tax (CIT) reform (approved December 2018):
    - Eliminated differentiation between resident and non-resident corporate profits; unified tax structure.
    - Reform expected to be revenue neutral.
    - Government announced gradual reduction in PIT starting July 2019, with top rate reduced to 28.5 percent effective January 2020.
  - Revenue measures to offset PIT reforms:
    - Increased and more progressive rates for several taxes (e.g., property taxes).
    - New taxes introduced (e.g., room rate levy).
    - VAT base broadened by eliminating exemptions and preferential rates (e.g., in tourism sector).
  - Measures to increase revenues from tourism:
    - Rise in hotel accommodation VAT rate from 7.5 percent to 10 percent in January 2020.
    - Broadening of VAT base.
    - Tourism Development Fee (transferred to tourism-related SOEs).
    - Increase in property taxes, room rate levy, and 10 percent tax on short-term renting (e.g., Airbnb).
- Box 1 — CIT reform details:
  - Introduced a single sliding scale of tax rates applied to all companies (except insurance companies that continue to pay tax on premium income).
  - Multiple allowances, like foreign currency earning allowance, removed.
  - Reform entails a sharp reduction in the tax burden for resident firms (about 2 percent of GDP) offset by an increase in the tax burden of companies that were operating in the international business sector.
  - Under conservative assumptions reflecting a potential loss of tax base of about 25 percent, CIT revenue from international business companies could increase by 2 percentage points of GDP.
  - Bulk of revenue would originate from companies with taxable income above BRB$30 million.
  - CIT reform expected to have limited impact on revenues for FY2019/20 due to time lag; effects expected to be evident in FY2020/21.
- Structural reforms:
  - Tax policy reforms to enhance revenue productivity.
  - Improvements in tax and customs administration to support medium term revenue.
  - Public financial management reforms to improve fiscal planning and monitoring, strengthen the macro-fiscal unit at the Ministry of Finance, and introduce a fiscal rule.
  - SOE reform expected to reduce transfers to SOEs and create room for additional capital spending.

*International Monetary Fund — Barbados country report excerpt (content unit: 1brbea2019002)*

### 2.5 percent on the first BRB$10 million of taxable

### 1brbea2019002 - 2.5 percent on the first BRB$10 million of taxable

### Tax Regimes and Rates
- New corporate income tax schedule (progressive tiers described at top of source):
  - 2.5 percent on the first BRB$10 million of taxable income, 2 percent on the next BRB$10 million, 1.5 percent on the next BRB$10 million, and 0.25 percent on the remainder
- Barbados: Old CIT regime (Profits / Rate):
  - Up to BRB$1 million — 5.5 percent
  - Between BRB$1 and BRB$20 million — 3.0 percent
  - Between BRB$20 and BRB$30 million — 2.5 percent
  - Above BRB$30 million — 1.0 percent
- Barbados: New CIT regime — differentiates lower rates for companies formerly considered as domestic but higher rates for companies formerly belonging to the International Business and Financial Sector.

### Revenue Mix and Risks
- Findings:
  - The new revenue mix entails risks due to highly mobile global capital and vulnerability of higher taxation of foreign-origin corporate profits to regulatory changes in other countries.
  - Tourism industry revenues are highly correlated with the business cycle in the US, Canada, and the UK (the main countries of origin); revenues could decrease in case of a slowdown in these economies.

### Public Financial Management and Fiscal Rule
- Institutional changes:
  - New Financial Management and Audit (FMA) Act establishes better procedures for budget planning, preparation, and execution.
  - Introduces a Medium-Term Fiscal Framework to guide the budget process and provides expenditure ceilings to line ministries based on the annual budget.
  - The Minister of Finance will present the budget statement to Parliament at the same time as delivery to parliament of the budget estimates.
- Fiscal rule plans and targets:
  - A fiscal rule is planned to be tabled in Parliament by end-2020.
  - IMF technical assistance mission scheduled for March/April 2020 to advise on modalities including coverage, correction mechanisms, escape clause and institutional arrangements.
  - Fiscal rule will target a steady reduction of the debt/GDP ratio to 80 percent by FY2027/28 and 60 percent by FY2033/34.
  - An escape clause will allow countercyclical fiscal policy in case of severe shocks, including climate change-related natural disasters.

### Barbados Customs and Excise Department (BCED) — Capacity and Reform
- Role and urgent needs:
  - BCED collects around 38 percent of total tax receipts.
  - BCED urgently needs to hire trained workers at all staff levels and undergo a full reorganization of its human resources.
  - Legal framework requires updating, including enacting the CARICOM Information Bill.
- Box 2 — Proposed measures (three areas)
  - Governance and management:
    - Develop Key Performance Indicators for BCED’s operations for planning and monitoring purposes. Collect timely and accurate data on customs operations.
    - Reorganize employees’ responsibilities between strategic and operational functions. Strengthen internal audit and develop a code of conduct.
    - Upgrade the IT system to ASYCUDA World from ASYCUDA ++.
    - Update the legal framework, enacting into law the CARICOM Information Bill (Cargo and Passengers) and adopt the Harmonized Commodity Description and Coding system (HS) 2017 tariff.
  - Core functions and compliance:
    - Strengthen the technical skills and the size of staff. Establish oversight mechanisms.
    - Introduce a Holistic Risk Management (HRM) framework: data collection; developing manuals of processes and procedures; identifying regulation loopholes; introducing electronic forms; using the Taxpayer Identification Number (TIN); segmenting importers according to size and risk; identifying sensitive goods.
    - Improve customs controls: improve post-clearance audit, establish a concession monitoring unit and a bonded warehouse unit, use a TIN and electronic forms for all transactions, cooperate with Barbados Revenue Authority (BRA).
  - Trade facilitation and stakeholder engagement:
    - Implement measures described in the WTO Trade Facilitation Agreement, such as publishing of the Customs Act and Regulations and providing more information online.
    - Establish a trusted trader program, an advanced ruling program, and a stakeholder forum.
- Progress reported:
  - New customs director hired; IT system updated with new ASYCUDA World software.
  - Arrival of a Long-Term Expert, supported by FAD, to help reform customs administration, including creation of a trusted trader program, an exemption monitoring unit and a post-clearance audit unit.

### State Owned Enterprises (SOEs)
- Fiscal burden and composition:
  - Many SOEs depend on government transfers; fees and tariffs not linked to cost structures.
  - Salaries and pensions account on average for 45 percent of overall expenditures and reach 70-80 percent in the health and environment sectors.
  - Transfers to SOEs were close to 8 percent of GDP in FY2017/18.
- Program targets and measures:
  - Grants to SOEs are expected to decline to under 6 percent of GDP by FY 2021/22 through:
    - Stronger oversight and improved reporting and tighter control over SOE borrowing.
    - Cost reduction, including reduction of the wage bill (estimated savings from layoffs are about [0.3] percent of GDP from FY2019/20 onwards).
    - Revenue enhancement, including an increase in user fees.
    - Mergers and divestment.
- Governance and reporting reforms:
  - Under the new FMA law, the government must approve all SOE borrowing and can sanction SOEs for noncompliance with reporting requirements.
  - SOEs required annually to provide statements of intent and end-of-year reports on financial and non-financial performance.
  - IMF technical assistance delivered to SOEs and line ministries to implement the new Act.
  - Government plans to establish a specialized SOE audit fully integrated in the budgeting cycle by 2022.
- Tariff and fee adjustments:
  - Bus fares increased from BRB$2 (US$1) per ride to BRB$3.50 in April 2019.
  - Three fees introduced in 2018 are transferred to relevant SOEs: Airline Travel and Tourism Development Fee, Health Service Contribution, Garbage and Sanitation Contribution.
  - 2019 introduced new water consumption rates for commercial and residential customers.
  - Comprehensive review of tariffs and fees charged by SOEs completed (structural benchmark for end-September 2019).
- Mergers:
  - Ongoing and planned mergers include GIS with CBC, UDC with RDC, and mergers among entities promoting tourism.

### Monetary and Financial Sector Policies
- Central bank liquidity and legal limits:
  - Following high monetary financing (e.g., more than 8 percent of GDP in FY2016/17), the CBB will provide liquidity to the government only to smooth unforeseen developments.
  - Under draft new CBB law, total advances:
    - (i) cannot exceed 7.5 percent of the preceding 3 year moving average government’s revenue;
    - (ii) are subject to cash repayment at the end of each fiscal year;
    - (iii) are at market rates.
  - With MCM TA support, the CBB will develop a liquidity management operational framework.
- Safeguards, governance and capitalization:
  - CBB implemented 2018 Safeguard Assessment recommendations: published 2018 audited financial statements and put in place new structure for foreign reserve management.
  - Implementation of IFRS advancing; oversight in reserves management and system controls within RTGS remain work in progress.
  - Work on the new CBB law (structural benchmark for end-December 2019) well underway; final IMF technical assistance mission took place in November 2019. Authorities expect Parliament to adopt the new law with a minor delay in January 2020.
  - Negative capital position of the CBB remains stable; a recapitalization plan will be developed by mid-2020 (structural benchmark for June 2020), with IMF technical assistance planned for the first half of 2020.
- Banking sector soundness:
  - Despite domestic debt restructuring, depositary corporations remain sound; commercial banks, deposit-taking finance and trust companies, and credit unions are in general liquid and well-capitalized although capital buffers have declined.
  - Profitability is currently negative.
  - In June 2019, the most capitalized bank had a capital adequacy ratio of 26 percent, while one bank’s capital ratio was just under 8 percent.
  - Two small credit unions had capital under the prescribed 10 percent of assets.
  - Authorities are providing explicit and time-bound regulatory forbearance targeting select financial institutions with high (post debt restructuring) concentration ratios until they rebuild capital buffers.
  - Credit growth is expected to increase with improvements in the business climate and fiscal sustainability.
- AML/CFT framework:
  - 2018 FATF evaluation identified AML/CFT deficiencies posing reputational risks.
  - Recommendations include: conduct a comprehensive risk assessment; improve statistics and IT systems; ensure law enforcement and judicial prioritization of AML/CFT offences; strengthen law enforcement.
  - Authorities prepared a new National Risk Assessment with major stakeholders; improvements in governance, training, statistics, and IT are facilitating risk assessments; judicial reforms help prioritize AML/CFT offences.

### Growth-Oriented Reforms
- Structural constraints and priorities:
  - Declining total factor productivity has been a drag on growth over the last two decades; major constraints include unsustainable fiscal policy and a poor business climate.
  - Adoption of the new Town and Country Planning Law in January 2019 streamlined construction permits.
  - Growth diagnostic prepared with staff support.
- Business climate reforms recommended:
  - Streamline the process for setting up new businesses (including a one-stop shop).
  - Eliminate the requirement to use a company seal.
  - Introduce a single business administration number.
  - Amend the company law to strengthen protection of minority shareholders.
  - Reform customs administration to facilitate trading across borders.
  - Digitize property records in the land registry.
- Credit infrastructure:
  - Establish a credit registry and credit collateral registry.
  - Authorities drafting a Fair Credit Reporting Act and a Code of Conduct for credit bureaus.
  - Key aspects: dissemination of financial and non-financial firms’ and individuals’ data, coverage of data, access rights by borrowers and lenders, and dissemination of creditor scores as value added services (cited WB 2019).
- Exchange control liberalization:
  - As of August 2019, residents can open FX deposit accounts in the domestic banking system.
  - Authorities plan to allow banks to lend in FX to residents funded by these deposits, and have relaxed the FX surrender requirement for exporters.
  - FX fee introduced in July 2017 was assessed by the IMF as a CFM and remains in place; recommendation that this fee should be phased out as the reserve position strengthens further.
  - Emphasis on properly timed and sequenced capital flow liberalization supported by macroprudential and financial sector prudential policies; monitor risks associated with FX lending and introduce related micro and macroprudential tools.

### Regional Integration and Resilience
- Regional integration:
  - Deeper regional integration in CARICOM and CSME could increase growth potential through functional integration (regional regulatory agencies), streamlined Common External Tariff (CET), and stronger cooperation to avoid incentive races and to strengthen disaster resilience.
- Natural disasters and climate change resilience:
  - Climate change likely to increase vulnerability to weather-related events.
  - Barbados insures natural disaster risks through CCRIF.
  - Inclusion of natural disaster clauses into new domestic and external bonds during domestic debt restructuring:
    - Clauses allow capitalization of interest and deferral of scheduled amortization over a two-year period following a major natural disaster.
    - For new domestic bonds, the trigger for a natural disaster event is a payout above US$5 million by CCRIF.
  - Government in discussion with the IDB on a contingent credit facility that would allow Barbados to borrow up to 2 percent of GDP in case of a natural disaster.
  - While financial resilience scores high, structural and post-disaster resilience can be improved (e.g., ‘roofs to reefs’ program, strengthening public procurement).

*Source: 1brbea2019002 - 2.5 percent on the first BRB$10 million of taxable*

### 44.      Data shortcomings are being addressed. With support from the Caribbean Regional

### 1brbea2019002 - 44.      Data shortcomings are being addressed. With support from the Caribbean Regional

### Data and statistical capacity
- With support from the Caribbean Regional Technical Assistance Center (CARTAC) and Canada’s Project for the Regional Advancement of Statistics in the Caribbean (PRASC), Barbados:
  - improved and rebased the annual GDP estimates to 2010;
  - developed quarterly GDP by economic activity estimates.
- Further improvements and rebasing of the GDP estimates to 2016 have been delayed due to lack of resources.
- A new two-year project funded by Canada started in May 2019 to maximize capacity building on national accounts, in collaboration with CARTAC and PRASC.
- Additional staff at the Barbados Statistical Service (BSS) is needed to ensure that STA TA to Barbados can be effectively delivered.

### Program implementation and targets
- All program targets and benchmarks for the second review were met, including:
  - all quantitative performance criteria (QPCs), indicative targets (ITs), and all three structural benchmarks for end-September 2019.
  - End-June 2019 structural benchmark: government conducted a comprehensive review of the tax system.
  - End-July 2019 structural benchmark: the Financial Management and Audit (FMA) Act was proclaimed.
  - Government conducted a comprehensive review of tariffs and fees charged by SOEs.

### Proposed modifications to performance criteria and targets
- Staff proposes to modify three end-March 2020 QPCs at the request of the authorities to:
  - revise the floor on net international reserves downward to reflect earlier than envisaged resumption of external debt service, revised projected disbursements from IDB and CDB, and revised trade balance projections;
  - revise the ceiling on net domestic assets of the CBB upward to reflect new information on arrears’ repayment;
  - revise the floor on the CG primary balance to reflect the small nominal GDP revision and the authorities’ intention to continue to meet the 6 percent primary balance target by end FY2019/20.
- New performance criteria for September 2020 are proposed.
- Staff proposes to modify the end-March 2020 ceiling ITs on CG domestic and public institutions arrears to reflect faster-than-expected repayment of arrears in 2019.

### Structural benchmarks reset and new benchmarks
- Staff proposes to reset four structural benchmarks and introduce one new one:
  - Actuarial review for civil service pensions (structural benchmark #17): reset from end-December 2019 to end-June 2020. Authorities hired external consultants; an actuarial report is expected by end-June 2020.
  - New public pension law (structural benchmark #20): reset from end-June 2020 to end-September 2020 to allow for public consultations after actuarial review.
  - BCED implementation (IMF 19/182 end-December 2019 benchmark): revised and split into two benchmarks:
    - first benchmark (structural benchmark #18) for end-March, 2020 to establish a trusted trader program;
    - second benchmark (structural benchmark #22) for end-August, 2020 to: (i) deploy staff to the exemption monitoring unit and undertake at least eight verification assignments; (ii) train and deploy at least 6 officers in the post clearance audit unit; and (iii) undertake post release verification of entries and subject at least 3500 entries.
  - Fiscal rule benchmark (IMF 19/182 end-June 2020): reset to end-December 2020 (structural benchmark #23) to allow time for an IMF technical assistance mission likely fielded in March/April 2020 to help design a new fiscal rule.
  - New benchmark for the BRA (end-June 2020 structural benchmark #19): (i) execute an initial 20 “issue based” audits on large taxpayers; and (ii) develop a risk-based compliance plan to target improvements in “on-time” filing and payments compliance rates.

### Financing, debt service, and safeguards
- With strong implementation, Barbados’ capacity to repay the Fund remains adequate and financing assurances remain in place (Table 10).
- Debt service to the IMF is projected to remain below 2 percent of exports and below 1 percent of GDP throughout the projection period to 2032.
- Gross reserves are projected to remain around 120 percent of ARA over the full projection period.
- The EFF-supported program is fully financed over the next 12 months, with good prospects for the remainder of the program period.
- Adequate safeguards remain in place for further use of Fund resources.
- The projected external debt service does not undermine the medium-term viability of the BOP and thereby, the capacity of Barbados to repay the Fund.
- Footnote: CCRIF made a US$5.8 million payment to the government of Barbados on October 19, 2018, following the passage of Tropical Storm Kirk, under Barbados’ excess rainfall policy.

### Authorities' views and priorities
- Authorities broadly agree with staff’s views on macroeconomic policies and projections, and concur that:
  - the fiscal adjustment effort is difficult but necessary;
  - reform of SOEs is a central element of the effort;
  - fiscal consolidation is on track to deliver a 6 percent of GDP primary surplus in FY2019/20.
- Strengthening disaster resilience is a top priority:
  - Government aims to include natural disaster clauses in new debt instruments and build on domestic and external debt restructuring.
  - ‘Roofs to Reefs’ program aims to build coherent, integrated structural resilience.
  - Expanded participation in CCRIF; discussions with the IDB on a contingent credit facility are underway and expected to be completed ahead of the next hurricane season.
  - Authorities seek international concessional support for small island states and look to develop innovative insurance/resilience instruments, including Growth and Resilience Bonds.
- Competitiveness and deeper Caribbean integration are viewed as cornerstones of the economic program:
  - aim to create a single regulatory, investment, trade and payment space;
  - prioritize regional cooperation to avoid a race to the bottom on tax incentives, and to strengthen disaster resilience regionally.
- Structural reforms to boost growth potential include improving the business climate, digitizing government services (including corporate and legal registries), and deep reform of SOEs.

### Staff appraisal and recommendations
- Progress:
  - Authorities continue to make good progress implementing the Economic Recovery and Transformation (BERT) plan.
  - All QPCs, ITs, and structural benchmarks for end-September 2019 were met.
- Fiscal stance:
  - Fiscal adjustment continues as programmed with the primary surplus targeted at 6 percent of GDP for FY2019/20.
  - The primary surplus target for end-September 2019 was met by a wide margin.
- Growth and external position:
  - Growth is expected to rebound to its long-term average of about 2 percent over the medium term.
  - Barbados’ external position is broadly consistent with fundamentals and desirable policies.
  - Risks include a disorderly Brexit and a US slowdown.
- SOE reforms:
  - Transfers to SOEs are envisaged to decline from 8 percent of GDP in FY2017/18 to 6 percent of GDP by FY2021/22 through: (i) stronger oversight and improved reporting; (ii) cost reduction, including reduction of the wage bill; (iii) revenue enhancement, including an increase in user fees; and (iv) mergers and divestment.
- External debt restructuring:
  - Authorities reached agreement with the external creditor committee and launched a debt exchange offer that includes a natural disaster clause.
  - Under the macroeconomic framework, the restructuring will facilitate reaching the 80 percent of GDP medium term debt anchor in FY2027/28, and the 60 percent of GDP long-term anchor in FY2033/34.
- Central Bank governance:
  - Amendments to the Central Bank Law aim to limit central bank financing of the Government to short-term advances and to strengthen the CBB’s mandate, autonomy, and decision-making structures.
- Risks and challenges:
  - Program implementation will remain challenging due to limited implementation capacity and the need to maintain high primary surpluses over a sustained period.
  - Implementing the ambitious structural reform agenda will be challenging given limited implementation capacity.
- Recommendation:
  - With continued strong program implementation, staff recommends completion of the second review of the extended arrangement under the Extended Fund Facility, completion of the financing assurances review, and supports the authorities’ request to modify three performance criteria.

*BARBADOS — INTERNATIONAL MONETARY FUND; Content unit: 1brbea2019002.*

### 63.      Staff proposes that the next Article IV consultation take place on a 24-month

### 1brbea2019002 - 63.      Staff proposes that the next Article IV consultation take place on a 24-month

### Real sector developments
- Real GDP growth: 2.5 (2016), 0.5 (2017), -0.6 (2018), -0.1 (2019), 0.6 (2020) — (Table 1 / Table 6).
- Sectoral contributions: negative contribution from construction and services (Figure 1 summary).
- Tourism: weak growth in tourism arrivals illustrated relative to ECCU, Dominican Republic, Jamaica (Figure 1).
- Potential GDP growth: recovering from low levels; capital accumulation and potential GDP show modest recovery (Figure 1).
- Labor market: total employment ~60–80 (ten thousands) series; unemployment rate slightly increased to 10.1 (2018 est. from Table 1); labor participation continued upward trend (Figure 1; Table 1).
- Inflation: CPI inflation (average) 1.5 (2016), 4.4 (2017), 3.7 (2018), 4.0 (2019), 4.8 (2020) — Table 1; inflation declined due to lower consumption taxes and energy prices (Figure 1).

### Fiscal sector developments and public debt
- General government expenditures and composition: transfers remain high; interest expenditure declined after debt restructuring (Figure 2 narrative).
- Central government fiscal indicators (fiscal year, Apr–Mar): Revenue and grants 28.3 (2016/17), 28.6 (2017/18), 29.3 (2018/19), 31.2 (2019/20), 30.5 (2020/21) percent of GDP — Table 2b.
- Expenditure: 33.6 (2016/17), 32.9 (2017/18), 29.6 (2018/19), 28.5 (2019/20), 27.5 (2020/21) percent of GDP — Table 2b.
- Fiscal balance (central government): -5.3 (2016/17), -4.3 (2017/18), -0.3 (2018/19), 3.5 (2019/20), 2.7 (2020/21) percent of GDP — Table 2b.
- Interest expenditure (percent of GDP): 7.6 (2016/17), 7.6 (2017/18), 3.8 (2018/19), 2.5 (2019/20), 3.3 (2020/21) — Table 2b.
- Primary balance: 2.2 (2016/17), 3.3 (2017/18), 3.5 (2018/19), 6.0 (2019/20), 6.0 (2020/21) percent of GDP — Table 2b.
- Central government gross debt (incl. guaranteed and arrears), FY levels (BDS$ millions): 14,548 (2016/17), 15,843 (2017/18), 12,853 (2018/19), 12,227 (2019/20), 12,152 (2020/21) — Table 2a.
- Public debt ratios (percent of FY GDP): 149.5 (2016/17), 158.3 (2017/18), 125.6 (2018/19), 115.9 (2019/20), 109.9 (2020/21) — Table 3.
- Exceptional financing (from debt restructuring) included: 5,100 (2018/19), 4,532 (2019/20), 4,612 (2020/21), and subsequent amounts in Table 2a.

### External sector developments
- Current account balance (US$ millions): -206 (2016), -189 (2017), -242 (2018), -242 (2019), -205 (2020) — Table 4a.
- Exports of goods and services (US$ millions): 2,083 (2016), 2,100 (2017), 2,100 (2018), 2,168 (2019), 2,234 (2020) — Table 4a.
- Imports of goods and services (US$ millions): 2,035 (2016), 2,027 (2017), 2,020 (2018), 2,146 (2019), 2,169 (2020) — Table 4a.
- Trade balance (percent of GDP): -14.6 (2016), -14.4 (2017), -14.4 (2018), -16.1 (2019), -15.7 (2020) — Table 4b.
- Services balance and travel: Travel credit significant (e.g., Travel credit 1,040 (2016), 1,082 (2017), 1,113 (2018), 1,162 (2019), 1,208 (2020) US$ millions) — Table 4a.
- Gross international reserves (US$ million): 320 (2016), 206 (2017), 500 (2018), 636 (2019), 734 (2020) — Table 1 / Table 4a.
- Import coverage (months of imports of G&S): 1.9 (2016), 1.2 (2017), 3.0 (2018), 3.6 (2019), 4.1 (2020) — Table 1 / Table 4a.
- Net International Reserves and import coverage improved with IFI loans and debt restructuring (Figure 3 narrative).

### Monetary and financial sector developments
- Central Bank of Barbados (CBB) reserves and claims: CBB’s claims on Government declined after domestic debt restructuring; CBB international reserves increased sharply; banks’ reserves at CBB remained high (Figure 4).
- Interest rates: T-bill rate declined after debt restructuring; deposit rate remained very low (Figure 4).
- Private sector credit growth: weak — private sector credit annual percent changes: 1.5 (2016), 3.2 (2017), 0.4 (2018), 0.0 (2019), 3.6 (2020) — Table 5 / Table 6.
- Monetary aggregates (broad money growth): 4.2 (2016), 1.2 (2017), -0.2 (2018), 4.2 (2019), 2.9 (2020) percent change — Table 5 / Table 6.
- Banks’ liquid assets to total assets decreased over last two years with some loan growth (Figure 5).
- Banking sector: capital adequacy ratio for banks ~10–20 percent (series 2012–2018); return on assets turned negative in recent period; NPLs remained flat; mortgage exposures increased slightly in 2018 (Figure 5).

### Social development and competitiveness
- Public social spending (health and education) as percent of GDP: overall public social spending series shown (Figure 6); social spending remained constant as share of GDP and in line with peers (Figure 6 narrative).
- Life expectancy: higher than peers; Life Expectancy 2017 series shows ~64–80 range with Barbados among higher values (Figure 6).
- Human Development Index ranking: Barbados among higher development outcomes relative to regional peers (Figure 6).
- Competitiveness: Real effective exchange rate appreciated recently; Doing Business Distance to Frontier score for Barbados below regional average (DB19: BRB shows value in comparative chart); Tourism Competitiveness and Global Competitiveness Index rankings deteriorated between 2014-15 and 2016-17 (Figure 7).

### Regional context and comparisons
- Growth and volatility: Barbados’ growth relatively lower but less volatile compared to ECCU, Bahamas, Jamaica, Trinidad and Tobago (Figure 8).
- External imbalances: current account deficits reduced (Figure 8).
- Reserves: Reserves in months of imports, 2018 — Barbados 3.0, Bahamas 4.3, ECCU 4.7, Jamaica 5.7, Trinidad and Tobago 10.8 (Figure 8).
- Debt: General government gross debt-GDP ratio, 2018 — Barbados 99 (percent), Jamaica 71, ECCU 61, Bahamas 45, Trinidad and Tobago 91 (Figure 8); note Figure 8 also indicates Barbados has highest debt in region.

### Projections and program financing highlights
- Real GDP projections (annual percent change): 0.6 (2020), 1.5 (2021), 1.8 (2022), 1.8 (2023), 1.8 (2024) — Table 6.
- CPI inflation (average) projections: 4.8 (2020), 2.3 (2021), 2.3 (2022), 2.3 (2023), 2.3 (2024) — Table 6.
- Current account projection (percent of GDP): -3.8 (2020), -3.6 (2021), -3.4 (2022), -3.0 (2023), -3.0 (2024) — Table 6.
- Program financing (EFF Supported Program): prospective drawings in SDR million: 70.0 (2019), 52.0 (2020), 34.0 (2021), 17.0 (2022) — Table 10; total prospective purchases sum to program schedule in Table 8/10.
- Gross financing requirements and sources (US$ millions): Gross Financing Requirements 322 (2017), 375 (2018), 336 (2019), 286 (2020), 386 (2021), 418 (2022), 291 (2023) — Table 9; key sources include FDI, public long-term borrowing, and exceptional financing via restructuring (Table 9).

*Source: IMF staff presentation and tables contained in the provided content unit.*

### Annex I. Risk Assessment Matrix (RAM)

### Annex I. Risk Assessment Matrix (RAM)

### Overview
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff).
- The relative likelihood of risks listed is the staff’s subjective assessment of the risks surrounding the baseline (“low” indicates a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent).
- The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities.
- Non-mutually exclusive risks may interact and materialize jointly.

### Likelihood scale (staff’s subjective assessment)
- "low" = probability below 10 percent
- "medium" = probability between 10 and 30 percent
- "high" = probability between 30 and 50 percent

### Global Risks (entries from the RAM)
- Tighter and volatile global financial conditions.
  - Likelihood: High
  - Impact: Medium
  - Policy Response: Continue with fiscal consolidation to significantly reduce debt-to-GDP ratio and rebuild credibility, thereby increasing investors’ confidence.
- Weaker-than-expected global growth.
  - Description: Idiosyncratic factors in the U.S., Canada, and the UK, and stressed emerging markets feed off each other to result in a synchronized and prolonged growth slowdown.
  - Likelihood: High
  - Impact: High
  - Policy Response: Structural measures to improve competitiveness and support development of other sectors.
- Large swings in energy prices.
  - Description: Elevated price volatility or large persistent price increases could complicate economic management, adversely affecting investment in the energy sector, and hamper reserves accumulation.
  - Likelihood: Medium
  - Impact: Medium
  - Policy Response: Structural measures to improve competitiveness and support development of other sectors with the aim to increase reserve accumulation.

### Country-specific Risks (entries from the RAM)
- Fiscal slippages/higher fiscal multipliers.
  - Effect: Would generate market concerns about fiscal sustainability and undermine private sector confidence necessary for investment.
  - Likelihood: High
  - Impact: High
  - Policy Response: Adhere to fiscal consolidation strategy under the program and accelerate growth-promoting structural reforms to boost investor confidence.
- Brexit.
  - Effect: Adverse impact on tourism and investment from uncertainties and economic spillovers associated with U.K. negotiations with the E.U.
  - Likelihood: High
  - Impact: High
  - Policy Response: Structural measures to improve competitiveness and boost attractiveness to tourists. Adhere to fiscal consolidation strategy and accelerate growth-promoting structural reforms to boost investor confidence.
- Extreme weather conditions.
  - Note: Barbados is less frequently impacted by hurricanes than other Caribbean states. However, the impact, should it occur, can be large.
  - Likelihood: Medium
  - Impact: High
  - Policy Response:
    - Invest in climate resilient infrastructure that could mitigate disaster risk.
    - Include adverse weather clauses in government debt.
    - Ensure adequate insurance, including under CCRIF.
    - Make use of contingent credit facilities.

*International Monetary Fund — Annex I. Risk Assessment Matrix (RAM)*

### 13. External debt is projected to decrease from about 33 percent of GDP in 2018 to about

### 13. External debt is projected to decrease from about 33 percent of GDP in 2018 to about

### External debt projections and public debt management
- External debt is projected to decrease from about 33 percent of GDP in 2018 to about 23 percent of GDP by 2024 with a low risk profile.
- The public debt management strategy is assumed to limit expensive financing from the external capital market and rely on multilaterals and/or domestic sources of financing.
- External debt is projected to decrease from about 33 to about 23 percent of GDP by 2024 (Table 1).
- Risks stemming from the external debt profile are reduced after the debt restructuring with smoother and lower debt service and gross financing needs.
- External debt is not projected to be higher than 30 percent of GDP by 2024 under any of the stress tests considered (Figure 6).

### Public sector DSA headline figures and assumptions
- Nominal gross public debt (selected years, in percent of GDP): 2017: 122.1; 2018: 158.3; 2019: 125.6; 2020: 117.8; 2021: 113.1; 2022: 107.4; 2023: 101.4; 2024: 95.6; (another entry) 90.5.
- Public gross financing needs (in percent of GDP): 2017: 34.3; 2018: 51.3; 2019: 15.0; 2020: 11.3; 2021: 7.5; 2022: 6.4; 2023: 6.4; 2024: 7.9; 5Y CDS (bp) n.a.
- Real GDP growth (in percent): 2017: -0.5; 2018: 0.2; 2019: -0.5; 2020: 0.1; 2021: 0.8; 2022: 1.6; 2023: 1.8; 2024: 1.8.
- Inflation (GDP deflator, in percent): 2017: 0.9; 2018: 2.6; 2019: 2.7; 2020: 2.3; 2021: 2.1; 2022: 2.3; 2023: 2.3; 2024: 2.3.
- Nominal GDP growth (in percent): 2017: 0.4; 2018: 2.8; 2019: 2.2; 2020: 2.4; 2021: 2.9; 2022: 4.0; 2023: 4.2; 2024: 4.2.
- Effective interest rate (in percent): 2017: 6.8; 2018: 5.7; 2019: 2.6; 2020: 2.1; 2021: 2.9; 2022: 3.5; 2023: 4.1; 2024: 4.4; (table continues) 4.7.
- Change in gross public sector debt (in percent of GDP, selected): 2017: 8.0; 2018: 8.8; 2019: -32.7; 2020: -7.8; 2021: -4.7; 2022: -5.7; 2023: -6.0; 2024: -5.9; cumulative: -35.1.
- Identified debt-creating flows (in percent of GDP, selected): 2017: 8.0; 2018: 0.9; 2019: -2.9; 2020: -6.4; 2021: -6.0; 2022: -6.6; 2023: -6.1; 2024: -5.4; cumulative: -35.1.
- Primary deficit (in percent of GDP): 2017: 1.2; 2018: -3.3; 2019: -3.5; 2020: -6.0; 2021: -6.0; 2022: -6.0; 2023: -5.5; 2024: -5.0; cumulative: -34.5.
- Primary (noninterest) revenue and grants (in percent of GDP): 2017: 26.4; 2018: 28.6; 2019: 29.3; 2020: 30.5; 2021: 30.2; 2022: 30.2; 2023: 30.2; 2024: 30.2; cumulative: 181.6.
- Primary (noninterest) expenditure (in percent of GDP): 2017: 27.5; 2018: 25.3; 2019: 25.8; 2020: 24.5; 2021: 24.2; 2022: 24.2; 2023: 24.7; 2024: 25.2; cumulative: 147.1.
- Automatic debt dynamics (in percent of GDP, selected): 2017: 6.9; 2018: 4.2; 2019: 0.6; 2020: -0.4; 2021: 0.0; 2022: -0.6; 2023: -0.1; 2024: 0.1; cumulative: 0.4 (balance).
- Residual, including asset changes (in percent of GDP, selected): 2017: 0.0; 2018: 7.9; 2019: -29.8; 2020: -1.4; 2021: 1.3; 2022: 0.8; 2023: 0.2; 2024: -0.5; cumulative: -0.5.

### Composition of public debt and scenario assumptions
- Baseline underlying assumptions (in percent): Real GDP growth (2019–2024): 0.1; 0.8; 1.6; 1.8; 1.8; 1.8. Inflation (2019–2024): 2.3; 2.1; 2.3; 2.3; 2.3; 2.3. Primary Balance (in percent of GDP, 2019–2024): 6.0; 6.0; 6.0; 6.0; 5.5; 5.0. Effective interest rate (2019–2024): 2.1; 2.9; 3.5; 4.1; 4.4; 4.7.
- Historical scenario assumptions (in percent): Real GDP growth (2019–2024): 0.1; -0.4; -0.4; -0.4; -0.4; -0.4. Primary Balance (2019–2024): 6.0; -0.3; -0.3; -0.3; -0.3; -0.3. Effective interest rate (2019–2024): 2.1; 2.9; 3.7; 4.5; 4.8; 5.4.
- Constant Primary Balance scenario: Primary Balance maintained at 6.0 (2019–2024).

### Stress tests and risk assessment
- Stress test results summary: External debt is not projected to exceed 30 percent of GDP by 2024 under any stress tests considered (Figure 6).
- Stress test scenarios noted:
  - Interest rate shock, CA shock, combined shock, real depreciation shock (one-time real depreciation of 30 percent occurs in 2019), non-interest current account shock, growth shock.
- Selected DSA stress-test metrics and benchmarks:
  - Gross financing needs benchmark: 15 percent of GDP.
  - Bond spread benchmarks: 200 and 600 basis points.
  - External financing requirement benchmarks: 5 and 15 percent of GDP.
  - Change in share of short-term debt benchmarks: 0.5 and 1 percent.
  - Public debt held by non-residents benchmarks: 15 and 45 percent.
  - Share of foreign-currency denominated debt benchmarks: 20 and 60 percent.
- Public gross financing needs (in percent of GDP, baseline projections 2019–2024 shown across figures): range around 4.7–12+ (figures in charts).
- Figure 6 boundary tests (selected values):
  - Historical external debt: 34 (2014/2018 historical reading).
  - Baseline external debt projection: 23 (by 2024).

### External sector assessment — external sustainability and current account
- External position in 2018: broadly consistent with fundamentals and desirable policies.
- Reserves: reached levels by mid-2019 covering 3½ months of imports of goods and services.
- Current account deficit developments:
  - Current account deficit narrowed from 9.2 percent of GDP in 2014 to 3.7 percent of GDP in 2018.
  - Net capital and financial flows improved from 0.8 percent of GDP in 2016 and 2017 to about 5 percent of GDP in 2018.
  - Improvement explained by FDI in the tourism sector, an IMF lending arrangement catalyzing financing from other IFIs, and a commercial external debt service moratorium.
  - In the first 3 quarters of 2019, the current account deficit narrowed, supported by fiscal adjustment, a strong tourism sector, and favorable price developments.
- Medium-term projections and inflows:
  - Projections point to improvements in the current account deficit supported by large fiscal consolidation, strong tourism receipts and a restructuring of commercial external debt.
  - Foreign direct investment (FDI), mainly in the tourism sector, is projected to average 4 percent of GDP in 2019-2022.
  - Barbados expected to continue benefiting from official inflows from multilateral lenders for infrastructure and budgetary support.
  - Business and financial inflows notable, supported by Barbados offshore banking center.
- External balance model results:
  - EBA-lite CA model: cyclically-adjusted current account balance estimated at -3.6 percent of GDP in 2018.
  - Multilaterally consistent cyclically adjusted CA Norm: -3.9 percent of GDP.
  - Implied CA gap: 0.3 percent of GDP (small).
  - Using current account elasticities implies a small undervaluation of the REER of 0.9 percent.
  - REER approach suggests an overvaluation by about 18 percent.
  - Real effective exchange rate appreciated by an average of 3 percent in the last 3 years.
  - Staff view: REER model less reliable than CA model given short sample and data substitutions; CA model suggests external position broadly consistent with fundamentals and desirable policies.

### Table 1 — External Debt Sustainability Framework (selected figures, in percent of GDP unless noted)
- Baseline: External debt (selected years): 2014: 34.1; 2015: 34.0; 2016: 31.3; 2017: 28.5; 2018: 32.6; 2019: 28.7; 2020: 28.1; 2021: 26.8; 2022: 25.4; 2023: 24.1; 2024: 22.8.
- Change in external debt (selected): 2014: 1.0; 2015: -0.1; 2016: -2.7; 2017: -2.8; 2018: 4.1; 2019: -3.9; 2020: -0.7; 2021: -1.3; 2022: -1.4; 2023: -1.3; 2024: -1.3.
- Identified external debt-creating flows (4+8+9, selected): 2014: 2.4; 2015: 0.3; 2016: 0.0; 2017: -0.2; 2018: -1.2; 2019: 0.2; 2020: -0.3; 2021: -0.7; 2022: -1.1; 2023: -1.3; 2024: -1.3.
- Current account deficit, excluding interest payments (in percent of GDP): 2014: -7.5; 2015: -4.4; 2016: -2.5; 2017: -2.1; 2018: -3.3; 2019: -3.0; 2020: -2.2; 2021: -2.1; 2022: -2.0; 2023: -2.0; 2024: -2.0.
- External debt-to-exports ratio (in percent): 2014: 84.6; 2015: 82.4; 2016: 73.1; 2017: 67.9; 2018: 79.5; 2019: 69.4; 2020: 67.7; 2021: 65.2; 2022: 62.3; 2023: 59.1; 2024: 56.0.
- Gross external financing need (in billions of US dollars) 4/: 2014–2024: 0.5; 0.4; 0.3; 0.3; 0.3; 0.3; 0.3; 0.3; 0.3; 0.3; 0.3.
- Gross external financing need (in percent of GDP): 2014: 10.5; 2015: 9.0; 2016: 6.5; 2017: 6.6; 2018: 5.4; 2019: 5.0; 2020: 5.3; 2021: 4.8; 2022: 4.9; 2023: 4.7; 2024: 4.7.
- Debt-stabilizing non-interest current account: -3.3.

*Source: IMF staff.*

### 3. Reserves continued to accumulate and have increased to adequate levels. The reduced

### 3. Reserves continued to accumulate and have increased to adequate levels. The reduced

### Reserve adequacy and recent developments
- Official inflows from the IMF and other IFIs helped boost international reserves to US$500 million, equivalent to 3 months of import cover by end-2018.
- By end-September 2019, reserves reached more than US$600 million (3.5 months of import cover or 120 percent of ARA).
- The Assessing Reserve adequacy (ARA) methodology suggests that gross reserves should be in the range of 9.9 and 16.5 percent of GDP, corresponding to 3.5 to 5 months of import cover.
- Staff projections indicate that gross reserves will surpass 150 percent of ARA by the end of the Fund-supported program.
- Debt service following the pending agreement with commercial creditors on debt restructuring is expected to be manageable.

### Key statistics (reserves and adequacy)
- US$500 million — international reserves by end-2018 (3 months of import cover).
- More than US$600 million — international reserves by end-September 2019 (3.5 months of import cover; 120 percent of ARA).
- ARA range: 9.9 and 16.5 percent of GDP (equivalent to 3.5 to 5 months of import cover).
- Projected: gross reserves to surpass 150 percent of ARA by the end of the Fund-supported program.

### Competitiveness of the tourism sector
- Tourism contributes 35 percent of GDP, with wholesale and retail trade, as well as transportation and storage services accounting for 68 percent Reserve Adequacy Metrics.
- Employment: 11.6 percent work directly in tourism, with 23.3 percent indirectly benefitting.
- In 2018, Barbados’ share of all visitors to the region was 3 percent.
- In 2018 Barbados recorded the highest number of tourist arrivals, mainly from U.K., U.S. and Canada.
- Barbados Tourist Arrivals by Source, 2018:
  - UK: 32%
  - USA: 30%
  - Canada: 13%
  - Other Europe: 6%
  - Other: 19%
  - 661 thousand tourists (total arrivals reported)
- Tourism competitiveness measures:
  - Barbados is ranked 134th (out of 136) in price competitiveness, with airfare, hotel costs, and fuel prices identified as biggest limiting factors.
  - The IMF’s Week @ the Beach index places Barbados as one of the most expensive for hotels and meals.
- Other observations:
  - Barbados’ share of tourism to the Caribbean has been on a declining trend, although the number of arrivals to Barbados has increased.
  - Tourist arrivals are more volatile and slowing, a trend across the Caribbean.
  - Relative to other island destinations, Barbados’ tourist arrivals display greater fluctuation.
  - Easier global connectivity has increased competition in the industry.
  - The dominance of tourism means the economy is highly exposed to external demand shocks; recessions in principal markets can cause tourist arrivals to decline.

### Medium-term growth diagnostics — constraints and dynamics
- Growth dynamics:
  - In recent decades, Barbados’ economic growth has been low; since early 1980s, growth has underperformed average growth in EMDEs.
  - In 2000–15, Barbados’ TFP declined on average by 2.3 percentage points per year, while total growth averaged 0.5 percent per year.
- Growth constraints identified via Hausmann-Rodrik-Velasco framework:
  - Fiscal imbalances (high public debt and elevated tax rates) limit growth potential and create uncertainty.
  - An unfavorable business environment: weaknesses in getting electricity, protecting minority investors, obtaining construction permits (note: construction permit data collected in May 2018, before new Town and Country planning legislation in early 2019).
  - High cost of finance related to fiscal imbalances constrains growth and investment:
    - Gross saving and investment are low.
    - Crowding out effects are significant; the ratio between public debt and private credit is high.
    - Financial sector: high credit-to-GDP ratio, banking sector very liquid and well-capitalized despite recent losses; bank spread is relatively high; absence of developed credit reporting institutions indicates inefficiencies.
  - Relative strengths: Barbados scores high on indicators related to market efficiency and social returns, though skilled emigration is reducing human capital potential.

### Policy actions and recommendations (identified by staff and authorities)
- Fiscal and debt sustainability:
  - Under the BERT program, Barbados aims to increase the primary surplus from 3½ percent of GDP in FY2018/19 to 6 percent of GDP in FY2019/20, and to keep the primary surplus at that level for several years thereafter.
  - Together with public debt restructuring, the fiscal adjustment should reduce public debt from about 160 percent of GDP in mid-2018 to 60 percent of GDP by FY2033/34.
- Business climate improvements:
  - Development of the Corporate Affairs and Intellectual Property Office (CAIPO) to streamline registration of new business and strengthen maintenance of commercial records.
  - Formalizing the credit bureau regime by drafting a Fair Credit Reporting Act and a Code of Conduct for credit bureaus.
  - Establishing a credit registry and credit collateral registry and broadening eligible collateral to facilitate access to credit.
  - Authorities intend to review components of the World Bank’s Doing Business survey to identify and address key obstacles to growth.

### Vulnerability to natural disasters and climate change (resilience)
- Historical exposure and recent assessments:
  - Over 1955-2018, Barbados was impacted by five hurricanes; the largest (Hurricane Janet, 1955) caused damage amounting to 14 percent of GDP.
  - A 2016 study ranked Barbados 29th among 33 small states at risk of natural disasters.
  - Caribbean Development Bank’s multidimensional vulnerability index shows relatively low vulnerability for Barbados.
  - Barbados’ geographic location further into the Atlantic may offer some protection from the strongest hurricanes.
- Climate change projections and risks:
  - Standard climate change models project about ½ a meter of sea-level rise by 2100, with much higher increases over following centuries if temperatures continue to rise.
  - Studies predict sharp declines in GDP per capita for the Caribbean by 2100 under some scenarios; other IMF work finds substantial negative effects, though smaller than the most severe projections.
  - Climate change risks include water shortages, declining agricultural productivity, land degradation, and declining fish stock.
- Channels of economic impact:
  - Natural disasters reduce current and potential growth by destroying physical capital, inducing out-migration, and reducing human capital; they increase public debt and poverty through post-disaster spending.
  - A natural disaster could sharply reduce tourism, which accounts directly for an estimated 35 percent of GDP and supports many other sectors.
- Simulation of disaster impact:
  - A shock of 14 percent of GDP (size of 1955 hurricane) is used in simulations, assuming two thirds of losses covered by government.
  - Growth is assumed to decline relative to baseline by about 7 percentage points in the first year, and by 2 percentage point next year, with rebound thereafter (relationship from IMF 2017).
- Structural resilience and costs:
  - Investment in resilient infrastructure (sea walls, robust sewage systems) and “soft” measures (early warning systems, building codes, land use planning) helps contain damage and speed recovery.
  - Investing in resilient infrastructure is costly and requires cost-benefit analysis.
  - Barbados faces exposure to both hurricanes and earthquakes.
- Large resilience projects:
  - Preliminary estimates: the ‘Roofs to Reefs’ project will require [public and private] investment of US$1-1.5 billion over next 10 years to increase housing resilience to withstand category 4 hurricanes.
  - Authorities are yet to assess costs of other projects under consideration.

_ Source: Fund staff calculations._

### 9. Such projects require both donor financing and increased fiscal space. The authorities’

### 9. Such projects require both donor financing and increased fiscal space. The authorities’

### Fiscal space and capital expenditure projections
- The authorities’ fiscal space is limited at present but is expected to increase as the stabilization program proceeds.
- Staff projects the room for capital expenditure to increase from 2 percent of GDP in FY2019/20 to 3 percent of GDP at the end of the EFF-supported program and about 4 percent over the medium term.
- The FY2019/20 budget aims to increase the primary surplus to 6 percent of GDP in FY2019/20.
- The fiscal balance improved from -4.3 in FY2017/18 to about 0 percent of GDP in FY2018/19. It is projected to further improve to 3 percent of GDP in FY2019/20 and remain in surplus over the medium term.
- The Government stands ready to take additional measures, if necessary, to reach the primary surplus target of 6 percent of GDP.

### Soft resilience measures and disaster preparedness
- A recent Comprehensive Disaster Management Audit (UN 2018) assesses “soft measures” for Barbados.
- Findings from the audit:
  - Warning and alert systems perform relatively well.
  - Safe area designation requires improvement.
  - Barbados scores high in land use planning.
  - Current building codes diverge from plans to improve housing resilience to category 4 hurricanes.
  - Tightening regulation could provide additional protection from potential losses in future.
- Response and recovery frameworks are relatively well developed (UN, 2018):
  - Institutions are relatively efficient in assessing damage, responding, and developing reconstruction plans.
  - Policies to improve government and business sector continuity require attention.
- Social safety net:
  - Relatively efficient and well-targeted non-contributory transfer programs enable quick humanitarian response.
  - Limited fiscal space would constrain an increase in coverage in case of a sudden shock.
- Public procurement:
  - Improvements could strengthen capacity to respond to natural disasters.
  - Government commitments: establishment of a College of Negotiators; strengthening the capacity of the Public Accounts Committee to carry out oversight while ensuring full transparency.

### Financial resilience and contingency arrangements
- Insurance:
  - Barbados insures natural disaster risks through the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
  - CCRIF provides parametric insurance products and reduces insurance costs relative to individual market purchases.
  - CCRIF payouts are made within 14 days of the event to provide liquidity and allow maintenance of government functions.
  - The trigger for a natural disaster event in domestic bond clauses is a CCRIF payout above US$5 million.
  - A CCRIF payout of US$5.8 million occurred on October 19, 2018, following Tropical Storm Kirk under Barbados’ excess rainfall policy.
- Domestic public debt restructuring:
  - Most new bonds include a natural disaster clause allowing capitalization of interest and deferral of scheduled amortization falling due over a two-year period following a major natural disaster.
  - These clauses insure against liquidity shortages at the time of a natural disaster though they do not substantially reduce the debt burden.
- Contingent liquidity from multilateral partners:
  - Discussions with the IDB on a contingent credit facility that would allow Barbados to borrow up to 2 percent of GDP in case of a natural disaster.
  - CDB instruments: Emergency Response Grant (US$0.2 million) and Immediate Response Loan (US$0.75 million).
  - IMF Rapid Financing Instrument (RFI) access: 50 percent of quota (SDR 47.25 million) per year and 100 percent of quota on a cumulative basis.

### Implementation of Article IV advice and structural reforms relevant to resilience
- Key prior staff recommendations focused on:
  - Balancing the budget within three years and maintaining the balance thereafter.
  - Reducing expenditure, especially transfers to SOEs, and reforming public pensions.
  - Broadening the tax base while increasing progressivity.
  - Strengthening the business climate and competitiveness.
  - Eliminating reliance on Central Bank financing of the government deficit to maintain the peg.
- Implementation highlights:
  - Fiscal consolidation and reforms under the BERT plan supported by the IMF Extended Fund Facility are being implemented.
  - SOE reforms include layoffs during FY2018/19, contract renegotiations at the Barbados Water Authority and the Sanitation Service Authority, efficiency gains from mergers, and bus fare increases. [A full review of SOE tariffs and fees was completed in September 2019].
  - Tax policy changes to shift from direct to indirect taxation and a fairer distribution between residents and non-residents.
  - Reformed Corporate Income Tax (CIT) to unify treatment of domestic and international companies and comply with EU and OECD guidelines.
  - Plans to reduce Personal Income Tax (PIT) rates and measures to increase VAT collection (broadening the VAT base, moving items from zero-rated to exempt, increasing the VAT rate on the accommodation sector from 7.5 to 10 percent).
  - Increased progressivity through higher property tax, especially on high income earners and the accommodation sector.
  - Plans to reform the Barbados Customs and Excises Department to strengthen governance and accountability.
  - Review of the public sector pension scheme under the program to address long-run sustainability.
  - Institutional improvements: new Town and Country Planning law (January 2019); new business plan and staffing strategy for CAIPO and plan to outsource CAIPO management.
  - With fiscal adjustment putting the overall balance in surplus, CBB financing is not needed anymore; authorities are revising the CBB Act to prohibit financing of the budget and limit CBB financing to limited cash management needs with positions to be closed within any single fiscal year.

### Revenue administration and tax reforms
- Corporate Income Tax (CIT) reform details:
  - Single converged scale of tax rates for all companies.
  - Profits up to BRB$1 million taxed at 5.5 percent.
  - Taxes above BRB$30 million taxed at 1 percent (with two intermediate brackets).
  - Several allowances, including a foreign currency earnings allowance, abolished.
  - Expected to be revenue neutral in part because the highest income bracket rate increased from 0.25 percent to 1 percent.
- Personal Income Tax (PIT) reductions:
  - Top PIT rate reduced from 40 percent to 33.5 percent as of July 1, 2019, and to 28.5 percent as of January 1, 2020.
  - Compensating measures: broadening VAT base, higher land taxes, increase in tourism room rate levies, new gaming taxes and online taxes.
- VAT and administration targets:
  - Increase VAT collection by broadening the VAT tax base and moving items from zero-rated to exempt.
  - Increase in VAT rate on accommodation sector from 7.5 to 10 percent.
  - Measurable targets for BRA to improve on-time filing for Corporate Income Tax and VAT from current levels (less than 50 percent for both) to 75 percent over Calendar Year 2019 (structural benchmark for end-December 2019).
  - TAMIS implementation to continue through 2019; online filing of personal income tax for 2018 to be done in TAMIS.
  - Large Taxpayer Unit (LTU) established.
  - All refunds due to taxpayers to be paid within six months after the filing date going forward.
  - By December 2019, citizens will be able to pay taxes online; by the end of the fiscal year, BRA will terminate the use of cheques to become fully digitalized.

_International Monetary Fund — Barbados staff report excerpts (content unit: 1brbea2019002)._

### 10. In 2020, we will enhance resources and improve our strategies for taxpayers in the

### 1brbea2019002 - 10. In 2020, we will enhance resources and improve our strategies for taxpayers in the

### Large Taxpayer Unit (LTU) and tax administration
- By June 2020, the BRA will:
  - execute an initial 20 “issue based” audits on taxpayers in the large taxpayer segment; and
  - develop a risk-based compliance plan to improve “on-time” filing and payments compliance rates (new structural benchmark).
- During 2020, targets and plans:
  - Increase ‘on-time’ filing of returns for all large taxpayers to move to over 90 percent for all core taxes (VAT, CIT, PAYE).
  - Develop and fully implement, by September 2020, a compliance improvement plan for the LTU by economic sectors to ensure targeted sectoral interventions and more detailed monitoring of compliance. Components will include:
    - key performance indicators;
    - establishing baseline performance;
    - preparation of timely (weekly/monthly/quarterly) reporting to monitor performance in-line with the outcomes of the BRA’s annual business plan.

### Modernization of Barbados Customs and Excise Department (BCED)
- Organizational and staffing developments:
  - A new organizational structure was approved in December 2018.
  - A Comptroller of Customs and 2 Deputies were appointed on September 1, 2019.
- Operational priorities and systems:
  - Urgent improvement required in traceability, targeting of cargo, clearance of goods, post clearance audit, and special regimes controls to reach international best practices.
  - Customs operations need to be led by more accurate risk assessment to improve targeting of non-compliant actors and facilitate trade.
  - Parliament approved funding to complete the ASYCUDA World by June 2019.
  - Personnel hired to update 2007 tariffs.
  - ASYCUDA world has been relocated under the control of BCED from its go-live date of September 9.
  - A full time Customs IT unit will be installed soon.
- Reform focus areas following IMF technical assistance:
  - BCED governance structure, operational standards, legal framework, and ability to retain adequate levels of trained personnel.
- Revised benchmarks for Customs (revised and reset structural benchmarks):
  - By end-March 2020: establish a trusted trader program (TTP) that gives defined rights and benefits to members and have at least eight companies participate.
  - By end-August 2020:
    - deploy staff to the exemption monitoring unit and undertake at least eight exemption verification assignments (process has begun through the newly implemented Cargo Inventory Management Unit);
    - train and deploy at least 6 officers full-time in the post clearance audit unit and undertake at least 8 field audits;
    - undertake post release verification of entries and subject at least 3500 entries to this control.

### Fiscal rule
- The Government intends to seek Parliamentary approval of a fiscal rule (reset structural benchmark for end-December 2020) to enhance fiscal transparency and lock in fiscal consolidation gains.
- Key elements of the proposed fiscal rule:
  - Aim to limit the annual budgeted overall fiscal deficits of the public sector (covering all fiscal activities), to achieve a reduction in public debt to no more than 60 percent of GDP by 2033.
  - Coverage to include all fiscal activities associated with the public sector, including SOEs, as well the fiscal implications of PPPs (capturing all associated actual or contingent fiscal liabilities and risks).
  - Establish an automatic correction mechanism triggered by substantial cumulative deviations from the annual overall balance target, requiring additional fiscal adjustment once cumulative deviations exceed a pre-specified threshold.
  - Include an escape clause, limited to major adverse shocks and triggered only with Parliamentary approval or ratification, with a pre-defined list of events/shocks and measurable conditions for triggering.
  - Consider institutional arrangements and legal options to strengthen the sanction regime and transparency, including:
    - requiring an independent body to independently assess macroeconomic projections used in budget preparation and overall fiscal policy;
    - disclosing budget execution with respect to the fiscal rule;
    - supporting transparency and accountability through Parliamentary hearings by officials;
    - requiring the Minister of Finance to explain deviations inconsistent with the fiscal rule in a mid-term budget review in Parliament and outline corrective steps.

### Public Financial Management (PFM) and budget process reforms
- Financial Management and Audit Act (FMA Act):
  - Adopted by parliament in January 2019; proclaimed in July 2019 (structural benchmark); most provisions enter into force in 2020.
  - Introduces measures to improve PFM, fiscal transparency, and strengthen SOE oversight.
  - A training programme for finance officers in State Owned Enterprises regarding obligations under the legislation is being executed by CARTAC.
- Action plan to implement the new public management act:
  - Strengthen the strategic phase of budget formulation:
    - Update BERT annually, based in part on expenditure and revenue reviews, to present Government’s current and medium-term priorities, fiscal target and macro-fiscal analysis;
    - Set budget ceilings in accordance with the updated BERT to guide allocation;
    - Cabinet to provide clear instructions for budget submissions and move away from incremental budgeting.
    - IMF Fiscal Affairs Departments to provide technical advice on budget procedures and timing.
  - Reform Budget Documentation:
    - Annual Budget Documentation (Budget Estimates) should provide a comprehensive narrative and assessment of alignment between the fiscal framework and fiscal objective, and describe all revenue and expenditure measures.
    - In October 2019, a mid-year budget review was prepared and presented in Parliament.
  - Strengthen procurement efficiency and quality:
    - Establish Colleges of Negotiators to improve negotiation outcomes.
    - Strengthen effectiveness of the Public Accounts Committee for real-time public oversight.
  - Review legal and regulatory framework for PPPs:
    - Continue developing capacities on PPP management and participate in an IMF regional seminar on fiscal risks by end-2019.
    - Ensure clear definition, integration into investment strategy and medium-term fiscal framework, safeguard public finances against PPP fiscal costs and risks, ensure transparent competitive processes, and design transparent reporting and auditing procedures in line with international standards.

### Debt restructuring and debt management
- Debt restructuring timeline and outcomes:
  - Comprehensive debt restructuring, including external debt to private creditors and treasury bills, announced on June 1, 2018.
  - On October 15, 2018, agreement reached with an overwhelming majority of domestic creditors.
  - Agreement with External Creditor Committee in November 2019 on terms for restructuring US dollar-denominated commercial debt:
    - 26 percent upfront face value reduction in the debt.
    - Agreed interest rate at 6.5 percent.
    - Terms support medium-term targets of 80 percent debt/GDP by 2027/28, and 60 percent by 2033/34.
    - Inclusion of a natural disaster clause.
- Central Bank and NIS impacts and follow-up:
  - Debt restructuring impacted the CBB’s capital; plans will be developed to recapitalize the CBB.
  - Plans to address medium and long-term challenges for the NIS stemming from the debt restructuring (structural benchmark for end-June 2020).
- Debt management reforms and transparency:
  - Request technical assistance from the IMF to develop and implement a medium-term debt management strategy (MTDS) underpinned by an objective to meet financing needs at the lowest possible cost over the medium to long-term consistent with prudent risk.
  - Publish medium-term debt strategy and borrowing plan with the budget on an annual basis.
  - Undertake a review of debt management practices, including assessment of the effectiveness of the auction mechanism for long-term debt.

### Domestic expenditure arrears and SOE arrears
- Commitment and arrears resolution:
  - Domestic expenditure arrears will be gradually reduced and resolved, and the Government commits not to run new expenditure arrears.
  - Program to settle arrears at 85 cents on the dollar, with aim to complete by March 2020.
  - System developed for monitoring SOE arrears on an ongoing basis.
  - Legislation introduced so all borrowing by SOEs receive approval of the Minister of Finance; loans by SOEs to be guaranteed by Central Government if non-commercial or dependent on Central Government.
  - A target for non-accumulation of new SOE arrears is included in the program.

### Public sector reform and SOE restructuring
- Objectives and measures:
  - Modernise and improve efficiency, quality and cost effectiveness of the public sector to create room for capital spending and reduce domestic arrears.
  - Undertake analysis to classify activities as essential, highly desirable, optional, or better delivered elsewhere; rationalisation of SOEs and some Government Departments.
  - Retooling, empowering, retraining and enfranchising public sector workers to improve effectiveness; review public sector labour laws with two studies underway.
- SOE-specific actions and benchmarks:
  - Framework developed to restructure and transform SOEs based on retooling, retraining and enfranchisement.
  - Comprehensive review conducted of all state-owned entities to identify efficiency gains, cost recoveries, and enfranchisement opportunities.
  - SOEs listed in the TMU have submitted standardized quarterly financial reports (structural benchmark).
  - A consolidated report on SOE performance prepared and a first report submitted to Parliament with the Budget Estimates in early April 2019 (structural benchmark).
  - Completed review of all tariffs and fees charged by SOEs in September 2019 (structural benchmark).
  - Specific adjustments already implemented: increased bus fares, adjusted water rates, and introduced an interim health levy, airline & travel development fee and a garbage and sewage contribution levy.
- FMA Act implications for SOE oversight:
  - Conveys greater autonomy to the Ministry of Finance to oversee SOEs, including ensuring prior approval for all borrowings and assumption of liabilities.
  - Establishes clear definitions for classification of public entities, roles and responsibilities, tighter reporting requirements, and sanctions for noncompliance.
- Social mitigation measures:
  - Programme includes measures to mitigate adverse effects on the vulnerable from SOE restructuring, including models of worker enfranchisement, preferential access to public procurement and agricultural lands, and enhanced severance packages.

### Civil service pension reform
- Priorities and benchmarks:
  - Review the civil service pension scheme to address long-run sustainability.
  - Table a revised public pension law in Parliament by end-September 2020 (reset structural benchmark).
  - Publish an actuarial report by end-June 2020 (reset structural benchmark).
  - Prepare a pension reform white paper and discuss in Cabinet.
  - External consultants hired to cost different pension systems for new entrants.
  - Options under consideration include making the public service scheme contributory for new employees, increasing the earliest age of eligibility for new employees, and reducing the rate of benefit accrual for each year of service for new employees.

### Monetary and financial sector policies
- Exchange rate peg and reserve rebuilding:
  - Barbados’ exchange rate peg to the US dollar maintained since 1975; strong commitment to maintain the peg.
  - Implement fiscal and structural policies necessary to support the peg and rebuild international reserves.
- Central Bank Law and safeguards:
  - Amend the Central Bank Law to enhance its autonomy (structural benchmark by end-December 2019).
  - IMF Safeguards Assessment of the Central Bank of Barbados completed; continue implementing outstanding recommendations.
- Financial sector liberalization and reserve-linked measures:
  - Commercial banks’ minimum requirement to hold Government securities reduced from 20 to 17.5 percent of domestic deposits in November 2018, and will be gradually further reduced as monetary conditions permit.
  - Aim to remove the FX fee of 2 percent on all FX sales as reserve positions strengthen.
- Exchange control relaxation measures (effective August 1):
  - Allowed all Barbadians to open foreign currency denominated accounts.
  - Allowed foreign currency proceeds from sale of assets to be repatriated in foreign currency or kept locally in a foreign currency account.
  - Eliminated the surrender requirement of 70 percent of foreign exchange brought into Barbados.
  - Increased select foreign exchange limits such as the limit on personal travel facilities.

_Italic: Source — 1brbea2019002 (PDF chapter/section)_

### 30. The growth strategy of the Barbados Economic Recovery and Transformation Plan

### 30. The growth strategy of the Barbados Economic Recovery and Transformation Plan

### Key pillars of the growth strategy
- The strategy rests on a number of key pillars:
  - (i) investing in a high skilled, productive, and knowledge based economy, particularly in skills training and education more generally;
  - (ii) better mobilizing private domestic savings for local investment; and
  - (iii) making Government an enabler of growth by improving the ease of doing business, accelerating the speed of government licensing, and increasing the predictability of the fiscal and regulatory environment; and
  - (4) diversifying our economy into new areas such as renewable energy, high-tech and software development to complement a renewed vigor for the traditional services sectors.

### Knowledge-based economy, skills, and education initiatives
- Major initiatives already initiated:
  - A large commitment to retooling and retraining Barbadians over the next 4 years across all sectors and at all levels.
  - Deliver excellence to global standards while retaining national identity.
  - Launch of a new Barbados Youth Advance Corps which will cater to 1000 students per year for a 2 year Programme.
  - Launch of a National First Jobs Initiative and apprenticeship scheme to add options for young people leaving school.
  - Reintroduced return to free tertiary education at vocational, technical and undergraduate levels.
  - Plan to integrate the Barbados Community College, Samuel Jackson Polytechnic and the Erdiston Teacher Training College to improve their offering.
  - Reforms to secondary schooling aimed at supporting great teaching and confident students with every school becoming a top school in some fields.
  - Improve efficiency in post-secondary and tertiary institutions with a view to plowing most of any found savings back into enhanced offerings.

### Government as an enabler: judicial, regulatory, and digital reforms
- Judicial and dispute resolution actions:
  - Strengthen the judiciary and reduce the time for court hearings and redress.
  - By end fiscal year 2019/20, establish a self-financing Commercial Court to speed-up commercial adjudication and judgments.
  - Three Commercial Judges to staff this Court have already been interviewed and appointed.
  - Introduce new legislation compliant with UNCITRAL to deal with arbitration and alternate dispute resolution mechanisms.
  - Appointed five additional judges to the criminal courts, of which three are temporary, to deal with the significant backlog of criminal cases.
  - Additional Criminal Courts intended to ensure that all serious cases can be dealt with within six to nine months.
- Government digitization and online service delivery:
  - Government intends to facilitate a wide range of services online, including drivers’ licenses, clearing goods through Customs, applying for passports, planning and development applications, et cetera.
  - Ministry of Innovation Science and Technology has earmarked seven departments to start the digitization of Government: the Immigrating Department, the Civil Registry and the Courts, the Police Department, the International Business division, the Customs and Excise Department, the Town and County Planning Office, and the Barbados Licensing Authority.

### Gender, labour participation, and social measures
- Increasing participation of women in the labour force is key to diversification strategy.
  - Facilitate the opening of day care facilities in industrial parks and key Government office buildings over the next two years.
  - By end FY2019/20 establish paternity leave.

### Improving the business climate and trade facilitation
- Actions to promote growth by improving the business climate:
  - Recognize significant room for improvement—Barbados relatively low ranking in the World Bank’s Doing Business indicator and ranked well below key regional peers.
  - Registry and regulatory services must meet global standards to improve competitiveness.
  - Priority to speed up licensing processes.
  - Facilitate more efficient clearing of goods through Customs; Customs department to focus on facilitating trade and put in place tangible measures to make cargo clearance quicker and easier.
  - Establish a trusted trader program to give defined benefits to compliant traders, without comprising the revenue to be collected.
  - Commit to deconstructing and reconstructing systems to meet public interest, avert public mischief, use technology for efficiencies and efficacy, and be mindful of any discrimination or disenfranchisement.

### Structural benchmarks (selected highlights from Table 1)
- A. Prior Action
  - 1) Government to launch exchange offer for debt restructuring of the stock of central Government domestic debt held by private creditors and eligible for debt restructuring consistent with EFF supported program objectives. Timing: Before Board 10/1/18 — Status: Met Met.
- B. Structural Benchmarks for the First Review (end-December 2018 / end-March 2019)
  - 2) Parliament to adopt a revised Financial Management and Audit (FMA) Act — end-December 2018 — Status: Not met Implemented with delay.
  - 3) All SOEs listed in TMU paragraph 2 to prepare and submit standardized quarterly financial reports — end-December 2018 — Status: Met Met.
  - 4) Launch a training and outplacement programme to mitigate effects on the vulnerable from SOE restructuring — end-December 2018 — Status: Met Met.
  - 5) Parliament to adopt new Town and Country Planning legislation to streamline permits — end-December 2018 — Status: Not met Implemented with delay.
  - 6) Establish a Sandbox regime for fintech start-ups — end-December 2018 — Status: Met Met.
  - 7) LTU to update all LTU taxpayer accounts and commence audits targeting the most current tax period — end-December 2018 — Status: Met Met.
  - 8) Table a revised FMA Act to establish a permanent binding budget calendar — end-December 2018 — Status: Not met Implemented with delay.
  - 9) Submit consolidated report on performance of SOEs with budget estimates — end-March 2019 — Status: Not met Implemented with delay.
  - 10) Introduce a system for monitoring SOE arrears on an ongoing basis — end-March 2019 — Status: Met Met.
  - 11) Adopt new business plan and staffing strategy for CAIPO to streamline business registration — end-March 2019 — Status: Met Met.
- C. Structural Benchmarks for the Second Review
  - 12) Conduct a comprehensive review of the tax system, with IMF TA — end-June 2019 — Status: Met Met.
  - 13) Conduct a comprehensive review of all tariffs and fees charged by SOEs — end-September 2019 — Status: Met Met.
  - 14) Governor General to proclaim the FMA Act — end-July 2019 — Status: Met Met.
- D. Structural Benchmarks for Future Reviews (selected)
  - 15) Parliament to enact an amended Central Bank Law — end-December 2019 — (no status recorded).
  - 16) BRA to adopt measurable performance targets to increase on-time filing for corporate Income Tax and VAT from current levels (less than 50 percent for both respectively) to 75 percent over calendar year 2019 — end-December 2019 — (no status recorded).
  - 17) Conduct actuarial review of the civil service pension system with a view to reform it — end-June 2020 — Proposed reset.
  - 18) Customs Department to establish a trusted trader program with at least eight companies participating — end-March 2020 — Proposed revised and reset.
  - 19) BRA to execute an initial 20 “issue based” audits on large taxpayers and develop a risk-based compliance plan — end-June 2020 — Proposed new.
  - 20) Table a revised public pension law to enhance sustainability — end-September 2020 — Proposed reset.
  - 21) Develop plans to recapitalize the CBB and address medium and long-term challenges for the NIS stemming from the debt restructuring — end-June 2020.
  - 22) Customs Department to deploy staff and undertake exemption verifications, post clearance audits, and post release verification of at least 3,500 entries — end-August 2020 — Proposed revised and reset.
  - 23) Table legislation for a fiscal rule to enhance fiscal transparency, developed with IMF TA — end-December 2020 — Proposed reset.

### Quantitative performance criteria and indicative targets (selected figures from Table 2)
- Fiscal targets (in millions of Barbados dollars unless otherwise indicated):
  - Floor on the CG Primary Balance (performance criteria):
    - Target End December 2018: 257
    - Actual End December 2018: ...
    - Target End March 2019: 343
    - Actual End March 2019: ...
    - Target End June 2019: 125
    - Target End September 2019: 282
    - Target End December 2019: 439
    - Target End March 2020: 630
    - Target End June 2020: 130
    - Target End September 2020: 290
  - Floor on the CG Primary Balance (adjusted):
    - Target End December 2018: 240
    - Actual End December 2018: 331
    - Target End March 2019: 315
    - Actual End March 2019: 354 — Status: Met
    - Target End June 2019: 125
    - Actual End June 2019: 253
    - Target End September 2019: 281
    - Actual End September 2019: 418 — Status: Met
  - Non-accumulation of CG external debt arrears (continuous performance criterion):
    - Target End December 2018: 0 — Actual End December 2018: 0 — Target End March 2019: 0 — Actual End March 2019: 0 — Status: Met
  - Ceiling on CG Transfers and Grants to Public Institutions:
    - Target End December 2018: 495 — Actual End December 2018: 468
    - Target End March 2019: 732 — Actual End March 2019: 675 — Status: Met
    - Target End June 2019: 104 — Actual End June 2019: 88
    - Target End September 2019: 209 — Actual End September 2019: 183 — Status: Met
    - Target End December 2019: 313
    - Target End March 2020: 418
    - Target End June 2020: 106
    - Target End September 2020: 213
  - Ceiling on Public Debt (stock):
    - Target End December 2018: 13,629 — Actual End December 2018: ...
    - Target End March 2019: 12,871 — Actual End March 2019: ...
    - Target End June 2019: 12,853 — Actual End June 2019: ...
    - Target End September 2019: 12,698 — Actual End September 2019: ...
    - Target End December 2019: 12,544
    - Target End March 2020: 12,390
    - Target End June 2020: 12,261
    - Target End September 2020: 12,224
- Indicative targets:
  - Ceiling on CG Domestic Arrears:
    - Target End December 2018: 1,246 — Actual End December 2018: 338 — Status: Met
    - Target End March 2019: 1,246 — Actual End March 2019: 293 — Status: Met
    - Target End June 2019: 280 — Actual End June 2019: 279
    - Target End September 2019: 265 — Actual End September 2019: 180 — Status: Met
    - Target End December 2019: 180
    - Target End March 2020: 180
    - Target End June 2020: 130
    - Target End September 2020: 110
  - Floor on Social Spending (flow, cumulative over fiscal year):
    - Target End December 2018: 38 — Actual End December 2018: 74 — Status: Met
    - Target End March 2019: 50 — Actual End March 2019: 101 — Status: Met
    - Target End June 2019: 10 — Actual End June 2019: 10
    - Target End September 2019: 22 — Actual End September 2019: 23 — Status: Met
    - Target End December 2019: 35
    - Target End March 2020: 50
    - Target End June 2020: 10
    - Target End September 2020: 22
  - Ceiling on Public Institutions Arrears:
    - Target End September 2019: 120 — Actual End September 2019: 120 — Status: Met
    - Target End December 2019: 120
    - Target End March 2020: 120
    - Target End June 2020: 110
    - Target End September 2020: 110
- Monetary targets (selected):
  - Ceiling on Net Domestic Assets of the CBB:
    - Target End December 2018: 1,977 — Actual End December 2018: 1,827
    - Target End March 2019: 1,992 — Actual End March 2019: 1,876 — Status: Met
    - Target End June 2019: 2,006 — Actual End June 2019: 1,873
    - Target End September 2019: 2,006 — Actual End September 2019: 1,880 — Status: Met
    - Target End December 2019: 2,002
    - Target End March 2020: 2,002
    - Target End June 2020: 1,994
    - Target End September 2020: 1,994
  - Floor on Net International Reserves:
    - Target End December 2018: 510 — Actual End December 2018: ...
    - Target End March 2019: 707 — Actual End March 2019: ...
    - Target End June 2019: 893 — Actual End June 2019: ...
    - Target End September 2019: 901 — Actual End September 2019: ...
    - Target End December 2019: 864
    - Target End March 2020: 941
    - Target End June 2020: 930
    - Target End September 2020: 1,097
  - Floor on Net International Reserves (adjusted):
    - Target End December 2018: 531 — Actual End December 2018: 832
    - Target End March 2019: 717 — Actual End March 2019: 889 — Status: Met
    - Target End June 2019: 893 — Actual End June 2019: 941 — Status: Met
    - Target End September 2019: 900 — Actual End September 2019: 971 — Status: Met

### Technical Memorandum of Understanding (TMU) — definitions and monitoring modalities
- Purpose: Sets out understanding between Barbados authorities and the IMF regarding definitions of quantitative PCs and ITs and modalities for assessing performance and information requirements.
- Program test dates and coverage:
  - PCs and ITs are shown in Table 1 of the MEFP.
  - For program monitoring purposes, PCs and ITs are set for December 31, 2019; March 31, 2020; June 30, 2020; and September 30, 2020. The same variables are ITs for December 31, 2019 and June 30, 2020.
- Exchange rate convention:
  - All foreign currency-related assets, liabilities and flows will be evaluated at “program exchange rates” as defined below, with the exception of items affecting Government fiscal balances, which will be measured at current exchange rates.
  - Program exchange rates are those that prevailed on 08/29/2018. Table 1. Program Exchange Rates (08/29/2018) — Average daily selling rates as reported by the CBB:
    - Barbadian dollar to the US dollar: 2.0000
    - Barbadian dollar to the SDR: 0.345745
    - Barbadian dollar to the euro: 2.3392
    - Barbadian dollar to the Canadian dollar: 1.54662
    - Barbadian dollar to the British pound: 2.5739
    - Barbadian dollar to the East Caribbean dollar: 0.74074
    - Barbadian dollar to the Belizean dollar: 1.00000
- Definitions relevant to the program:
  - Central Government (CG): set of institutions currently covered under the state budget including transfers to SOEs.
  - CG revenues and expenditures: cover all items included in the CG budget as approved by Parliament.
  - Fiscal year: starts on April 1 and ends on March 31 of the following year.
  - Definition of debt: as per paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements (Executive Board Decision 15688 (14/107), adopted on December 5, 2014). Debt understood as a current liability created under a contractual arrangement requiring future payments; forms include loans, suppliers’ credits, and leases (with lease debt defined as the present value at inception of lease payments excluding operation, repair, or maintenance).
  - External CG debt: debt contracted or guaranteed by the CG in foreign currency.
  - Domestic CG debt: debt contracted or guaranteed by the CG in Barbados dollars.
  - Guarantee: any explicit legal or contractual obligation of the CG to service a debt owed by a third-party debtor.
  - CG debt considered contracted when authorized by Barbadian law or approved by Parliament and signed or accepted by relevant authority.
- Public Institutions covered under Section I include a range of entities (selected list):
  - Queen Elizabeth Hospital
  - University of the West Indies
  - Barbados Tourism Marketing Inc.
  - Sanitation Service Authority
  - Barbados Agricultural Management Corporation
  - Barbados Community College
  - National Conservation Commission
  - Transport Board
  - Child Care Board
  - NLICO
  - Barbados Water Authority
  - National Assistance Board
  - Barbados Cane Industry Corp.
  - Barbados Investment and Development Corporation
  - Invest Barbados
  - National Housing Corporation
  - Barbados Tourism Product Inc.
  - Student Revolving Loan Fund
  - Urban Development Commission
  - Barbados Agricultural Development and Marketing Corporation
  - Barbados Tourism Investment Inc.
  - Rural Development Commission
  - Caves of Barbados Limited
  - Barbados Conferences Services
  - Fair Trading Commission
  - Kensington Management Oval Inc.
  - National Accreditation Board
  - National Productivity Council
  - Financial Services Commission
  - Southern Meats
  - Gymnasium
  - Cultural Industries Development Authority
  - Caribbean Broadcasting Corporation

### I. Quantitative performance criterion: Floor on the CG Primary Balance (definition)
- CG primary balance defined as total revenues and grants minus primary expenditure and covers non-interest Government activities as specified in the budget.
- Measurement:
  - Measured as cumulative over the fiscal year and monitored above the line.
  - Revenues recorded when funds are transferred to a Government revenue account; tax revenues recorded net of tax refunds.
  - Tax refunds recorded when funds for repayment are transferred to the BRA from the Barbados Treasury Department.
  - Revenues include grants. Capital revenues exclude revenues from non-financial asset sales from divestment operations.
  - Central Government primary expenditure recorded on a cash basis and includes recurrent expenditures, capital spending, and transfers to SOEs.
  - Primary expenditures directly settled with bonds or other non-cash liability are treated as one-off adjustments, recorded as spending above-the-line, financed with debt issuance, and affect the primary balance.

*Source: 1brbea2019002 - 30. The growth strategy of the Barbados Economic Recovery and Transformation Plan (PDF chapter).*

### 5. Adjustors: The primary balance target will be adjusted upward (downward) by the surplus

### 5. Adjustors: The primary balance target will be adjusted upward (downward) by the surplus (shortfall) in disbursements of grants relative to the baseline projection.

### A. Primary Balance Adjustor and Monitoring
- Adjustor:
  - The primary balance target will be adjusted upward (downward) by the surplus (shortfall) in disbursements of grants relative to the baseline projection.
- Monitoring:
  - Data will be provided to the Fund on a monthly basis with a lag of no more than four weeks from the end-of-period (Section C, Table 2).

### B. Ceiling on Stock of Net Domestic Assets (NDA) of the Central Bank of Barbados (CBB)
- Definition of NDA:
  - NDA of the CBB are defined in the CBB survey as the difference between the monetary base and the sum of the NIR (as defined below) and commercial banks’ and Part III companies’ foreign currency deposits at the CBB.
  - The monetary base includes currency in the hands of the non-bank public plus vault cash held in the banking system, statutory cash reserve requirements, and the current account of commercial banks and non-bank financial institutions (Part III companies) comprising of credit balances held at the Central Bank.
- Monitoring:
  - Data will be reported on a monthly basis, with a lag of no more than two weeks from the end-of-period (Section B, Table 2).

### C. Floor on Net International Reserves (NIR)
- Definition of NIR:
  - NIR of the CBB are defined as the difference between reserve assets and reserve liabilities with a maturity of less than one year.
- Reserve assets (included):
  - Readily available claims on nonresidents denominated in foreign convertible currencies: CBB’s holdings of monetary gold, SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country's reserve position at the Fund.
- Reserve assets (excluded):
  - Sinking funds’ assets and any assets that are pledged, collateralized, or otherwise encumbered; claims on residents; claims in foreign exchange arising from derivatives in foreign currencies vis-a-vis domestic currency (such as futures, forwards, swaps, options, et cetera); precious metals other than gold; assets in nonconvertible currencies; and illiquid assets.
  - Note: Sinking funds’ assets are held on behalf of the Government to service the central Government debt falling due and are thus earmarked and not assets of the CBB. CBB staff pension plan’s assets are also excluded as their use is restricted to the specific purposes of the pension scheme and not “freely/readily available”.
- Reserve liabilities:
  - (1) All foreign exchange liabilities to residents and nonresidents with maturity of less than one year, including commitments to sell foreign exchange arising from derivatives (such as futures, forwards, swaps, options, et cetera);
  - (2) All liabilities outstanding to the IMF.
- Adjustors to NIR target:
  - The NIR target will be adjusted upward (downward) by 75 percent of the amount of the surplus (shortfall) in program loan disbursements from multilateral institutions (i.e., Caribbean Development Bank (CDB), the Interamerican Development Bank (IDB), and the Development Bank of Latin America (CAF)) relative to the baseline projection.
  - Program loan disbursements are defined as external loan disbursements from official creditors that are usable for the financing of the CG.
  - The NIR target will be adjusted upward (downward) by the surplus (shortfall) in disbursements of budget support grants relative to the baseline projection.
- Monitoring:
  - Data will be reported by the Central Bank on a daily basis, with a lag of no more than one week from the end-of-period (Section A, Table 2).

### D. Non-accumulation of Central Government (CG) External Debt Arrears (continuous)
- Obligation:
  - The CG will not incur new arrears in the payments of its external debt obligations at any time during the program.
- Definition of external arrears:
  - A delay in the payment of contractual obligations beyond the grace period set in the respective loan or debt contracts.
  - Exclusions: Arrears resulting from the nonpayment of debt service for which a clearance framework has been agreed or for which the Government or the institution with Government guaranteed debt is pursuing a debt restructuring.
- Performance criterion:
  - Applied on a continuous basis under the program.
- Monitoring:
  - Data on external arrears by creditors will be reported immediately.

### E. Ceiling on CG Transfers and Grants to Public Institutions
- Coverage:
  - CG Transfers and Grants to Public Institutions will include cash transfers and grants to entities listed in paragraph 3 above.
- Monitoring:
  - Measured as cumulative over the fiscal year and reported on a monthly basis, with a lag of no more than four weeks from the end-of-period (Section C, Table 2).

### F. Ceiling on the Stock of Public Debt
- Definition of public debt:
  - Domestic and external CG debt, CG guaranteed debt, and domestic CG expenditure arrears.
  - Interest and penalties arrears resulting from non-payment of debt service on external commercial debt subject to debt restructuring are excluded.
  - For program purposes, the stock of CG and CG guaranteed debt is measured under the disbursement basis excluding valuation effects.
  - Program FX rates defined in Table 1 will be used to value debt in FX.
- Adjustors:
  - The ceiling on stock of public debt will be adjusted upwards by the full amount of the surplus in disbursements from multilateral institutions (i.e., CDB, IDB, CAF) relative to the baseline projection.
  - The ceiling on stock of public debt will be adjusted downward by the amount of nominal debt forgiveness in the case of debt restructuring.
- Monitoring:
  - CG debt and CG guaranteed debt data by issuer, creditor, maturity, and currency will be reported to the Fund on a quarterly basis, with a lag of no more than four weeks from the end-of-period (Section D, Table 2).
  - Data on external and domestic arrears will be reported as set forth elsewhere in this TMU.

### II. Indicative Targets
- G. Ceiling on the Stock of Domestic CG Expenditure Arrears
  - Definition of domestic expenditure arrears:
    - Sum of:
      - (a) Any invoice received by a spending agency from a supplier of goods, services, and capital goods delivered and verified, for which payment has not been made within the contractually agreed period (taking into account any applicable contractual grace period), or in the absence of a grace period, within 60 days after the due date;
      - (b) Non-contributory pension transfers (by CG only), wages and pensions contributions to the NIS for which payment has been pending for longer than 60 days;
      - (c) Rent and loan payments to the NIS pending for longer than 60 days;
      - (d) Arrears on refunds of Personal Income Tax (PIT), Reverse Tax Credit (RTC), Corporate Income Tax (CIT), and Value Added Tax (VAT). Tax refund arrears are defined as obligations on tax refunds in accordance with tax legislation that remain unpaid six months after the filing date.
  - Monitoring:
    - Data on CG expenditure arrears and its components by creditors will be measured as cumulative over the fiscal year and reported by the EPOC on a monthly basis, with a lag of no more than four weeks from the end-of-period (Section D, Table 2).

- H. Floor on CG Social Spending
  - Coverage (expenditures intended to have a positive impact on education, health, social protection, housing and community services and recreational activities; excluding operating expenditure):
    - Welfare Department spending including cash transfers and assistance for house rents, utilities, food, and education to the poor and vulnerable;
    - Child Care Board spending on protection of vulnerable children;
    - Youth Entrepreneurship Scheme assisting jobless youth to start own businesses;
    - Strengthening Human and Social Development programme targeting the unemployed and vulnerable families and youth;
    - Alternative Care for the Elderly programme targeting the elderly transferred to private care;
    - Provision of medication to HIV patients.
  - Monitoring:
    - Measured as cumulative over the fiscal year and reported on a quarterly basis, with a lag of no more than four weeks from the end-of-period (Section D, Table 2).

- I. Ceiling on the Stock of Public Institutions Expenditure Arrears
  - Definition:
    - Sum of:
      - (a) Any invoice received by a spending agency from a supplier of goods, services, and capital goods delivered and verified, for which payment has not been made within the contractually agreed period (taking into account any applicable contractual grace period), or in the absence of a grace period, within 60 days after the due date;
      - (b) Wages and pensions contributions to the NIS for which payment has been pending for longer than 60 days;
      - (c) Arrears on Tax obligations defined as obligations on taxes in accordance with tax legislation.
  - Coverage:
    - The list of public institutions covered by this indicative target is listed in paragraph 3 excluding University of West Indies (UWI).
  - Monitoring:
    - Data on SOE expenditure arrears and its components by creditors will be measured as cumulative over the fiscal year and reported on a monthly basis, with a lag of no more than four weeks from the end-of-period (Section D, Table 2).

*Source: 1brbea2019002 (TMU excerpt).*

### 28. Performance under the program will be monitored from data supplied to the IMF as

### 28. Performance under the program will be monitored from data supplied to the IMF as

### Reporting framework and responsibilities
- Financial Sector and External sector data to be provided by the CBB; Real and Fiscal sector data by the MOF, in consultation with relevant agencies unless otherwise noted.
- The authorities will transmit promptly to IMF staff any data revisions as well as other information necessary to monitor the arrangement under the EFF.
- Reporting timetables are defined by frequency and maximum allowed lag from end-of-period.

### Reporting on a daily basis (lag no more than one week of the end-of-period)
- CBB NIR, as defined in section I.
- CBB GIR.

### Reporting on a monthly basis (lag no more than two weeks of the end-of-period) — Financial Sector
- CBB NDA, as defined in section I.
- CBB survey showing the detailed composition of net foreign assets (NFA), net claims on the central Government (NCCG), claims on other depository corporations (CODC), claims on other sectors of the economy (COSE), other items net (OIN), and monetary base (MB).
- CBB purchases and sales of foreign exchange.
- Amounts offered, demanded and placed in Government auctions and primary issues; including minimum maximum and average bid rates.
- Statement of use and outstanding balance of the CG deposit in the CBB.

### Reporting on a monthly basis (lag no more than four weeks of the end-of-period) — Real and Fiscal Sector
- Real Sector
  - RPI index, its components, and weights.
- Fiscal Sector
  - CG budgetary accounts.
  - Net Domestic Financing and its components.
  - Net External Financing and its components.
  - Grants and transfers to public institutions listed in paragraph 3 as defined in Section I.
  - Stock of CG external arrears (interest, principal, and penalty amounts separately) by creditor and its components as defined in Section I. This will be reported immediately.
  - Program loan disbursements from multilateral institutions, including the CDB, the IDB, and the CAF, as defined in section I.
  - Budget support grants as defined in section I.
  - Liabilities of public-private partnerships (PPPs) (if any).
  - Stock of CG expenditure arrears by creditor and its components as defined in Section II.
  - Stock of expenditure arrears of public institutions listed in paragraph 3 by creditor and its components as defined in Section II.
- External Sector
  - BOP trade balance data.
  - CBB’s Cashflow Table deriving GIR and NIR.

### Reporting on a monthly basis (lag no more than six weeks of the end-of-period) — Financial Sector
- Other Depository Corporations (ODC) survey showing the gross items for NFA, claims on the CBB, net claims on the CG (NCCG), COSE, OIN, deposits included in broad money (BM), deposits excluded from BM, and liabilities to the CBB.
- Depository Corporations (DC) survey as the consolidation of CBB and ODC surveys showing the gross items for CBB NFA, ODC NFA, ODC NCCG, COSE, OIN, and BM.

### Reporting on a quarterly basis (lag no more than four weeks of the end-of-period) — Real, Fiscal, Financial, and External Sectors
- Real Sector
  - Nominal and real GDP.
  - Tourism and other real sector high frequency indicators.
- Fiscal Sector
  - Social expenditure and its components as defined in Section II.
  - Financial position of public institutions listed in paragraph 3 including non-audited income statement, balance sheet and profit and loss accounts.
  - CG domestic debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity).
  - CG external debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity).
  - CG domestic guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity).
  - CG external guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity).
  - SOE domestic non CG guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity).
  - SOE external non CG guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity).
  - Quarterly LT and ST debt amortization and interest projections separate for CG domestic, CG external, CG guaranteed domestic and CG guaranteed external debt.
  - Copies of loan agreements for any new loan contracted, including financing involving the issue of Government paper, and of any renegotiated agreement on existing loans.
  - Stock of Tax Refunds and its components as defined in Section II.
- Financial Sector
  - CBB Balance sheet.
- External Sector
  - Balance of Payments accounts.

### Reporting on a quarterly basis (lag no more than six weeks of the end-of-period) — Financial Stability Indicators (by bank and by sector)
- Regulatory capital.
- Regulatory Tier 1 capital.
- Risk-weighted assets.
- Total assets.
- Total liabilities.
- Nonperforming loans in BRB$ millions.
- Non-performing loans net of provisions.
- Gross loans.
- Sectoral distribution of loans to total loans.
- Return on assets.
- Return on equity.
- Interest margin.
- Gross income.
- Noninterest expenses.
- Liquid assets.
- Short-term liabilities.
- Net open position in foreign exchange.
- Large exposures to capital.
- Gross asset position in financial derivatives.
- Gross liability position in financial derivatives.
- Total income.
- Personnel expenses.
- Noninterest expenses.
- Spread between reference lending and deposit rates (base points).
- Highest interbank rate.
- Lowest interbank rate.
- Customer deposits.
- Total (non-interbank) loans.
- Foreign-currency-denominated loans.
- Foreign-currency-denominated liabilities.
- Net open position in equities.
- Net profits of the banking sector.

### Reporting on an annual basis (within 6 weeks of the end-of-period)
- Nominal and real GDP and its components from the demand and supply side (provided by the MOF).
- Audited financial statements of Public Institutions listed in Paragraph 2 within 12 weeks of the end-of-period.
- Summary of legislative changes pertaining to economic matters.
- Notification of establishment of new Public Institutions.
- Notification of change in juridical status of existing Public Institutions.

### Reporting on an annual basis (within 5 months of the end-of-period)
- Audited financial statements of Commercial Banks.

*Source: STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION, SECOND REVIEW UNDER THE EXTENDED ARRANGEMENT, REQUEST FOR COMPLETION OF THE FINANCING ASSURANCES REVIEW, AND MODIFICATION OF PERFORMANCE CRITERIA—INFORMATIONAL ANNEX (November 27, 2019).*

### 2000. However, it needs to launch a National Summary Data Page to implement the successor

### 1brbea2019002 - 2000. However, it needs to launch a National Summary Data Page to implement the successor

### Data Dissemination and Metadata
- Announcement: Needs to launch a National Summary Data Page to implement the successor initiative, the enhanced GDDS (e-GDDS).
- At the authorities’ request, STA has conducted an SDDS assessment and provided a draft action plan that could lead to SDDS subscription.
- Table of Common Indicators Required for Surveillance (selected entries and timing):
  - Exchange Rates: Fixed; Date of latest observation 07/2019; Date received 08/2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation 07/2019; Date received 08/2019; Frequency M; Reporting M; Publication M.
  - Reserve/Base Money: 07/2019; 08/2019; M; M; M.
  - Broad Money: 06/2019; 08/2019; M; M; M.
  - Central Bank Balance Sheet: 07/2019; 08/2019; M; M; M.
  - Consolidated Balance Sheet of the Banking System: 06/2019; 08/2019; M; M; M.
  - Interest Rates: 06/2019; 08/2019; M; M; M. (Includes market-based and officially-determined rates.)
  - Consumer Price Index: 09/2018; 12/2018; M; M; M.
  - Revenue, Expenditure, Balance and Composition of Financing – Central Government: 09/2017; 11/2017; Q; Q; Q.
  - Stocks of Central Government and Central Government-Guaranteed Debt: 09/2017; 11/2017; Q; Q; Q.
  - External Current Account Balance: 09/2017; 11/2017; Q; Q; Q.
  - Exports and Imports of Goods and Services: 09/2017; 11/2017; Q; Q; Q.
  - GDP/GNP: 2017; 11/2018; A; A; A.
  - Gross External Debt: 2016; 11/2017; A; A; A.
  - International Investment Position: 2016; 11/2017; A; I; I.
- Note on frequency codes: Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
- Statistical notes:
  - Any reserve assets that are pledged or otherwise encumbered should be specified separately.
  - Data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency.
  - General government definition: central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
  - International Investment Position includes external gross financial asset and liability positions vis-à-vis nonresidents.

### Program Performance and Reviews
- Authorities’ engagement:
  - Authorities value reinvigorated relationship with the Fund following the Article IV Consultation and Program Review mission.
  - Barbados hosted the 2019 Caribbean Forum.
- EFF performance:
  - Barbados continues to perform strongly under the Extended Fund Facility (EFF), having met all quantitative performance criteria (QPCs), indicative targets, and structural benchmarks for the Second Review.
  - Authorities have requested slight modifications to three end-March QPCs based on latest projections.
  - Proposal to extend four upcoming structural benchmarks to allow time for proper implementation given limited technical capacity.

### Outlook and Risks
- Growth drivers and expectations:
  - Growth expected to rebound, supported by continued growth in tourism and increasing private sector investment.
  - Fiscal consolidation creates space for infrastructure investment and reduces crowding-out and high cost of finance.
  - Structural reforms aimed to boost competitiveness and long-run growth potential.
- Key risks:
  - Slowdown in tourism triggered by economic slowdown in key markets.
  - Ongoing climate crisis posing existential risk to Barbados.
- Mitigation measures:
  - Reform business environment to attract tourism investment and improve competitiveness.
  - Steps to build resilience described under Building Resilience.

### Fiscal Policy and Public Financial Management
- FY2019/20 target and performance:
  - Primary surplus target for end-September 2019 met by a wide margin.
  - Fiscal consolidation on track to deliver the targeted 6 percent of GDP primary surplus in FY2019/20.
- Revenue drivers:
  - Lower primary expenditures including decreased transfers to SOEs.
  - Strong performance of VAT, property taxes, and import duties.
- PFM reforms:
  - Introduction of a new Financial Management and Audit Act to improve PFM, fiscal transparency, and SOE oversight.
  - Plan to introduce a fiscal rule with defined coverage, implementation, corrective mechanisms, escape clauses, and institutional arrangements, leveraging Fund technical assistance.
- Customs reform:
  - Strengthening the Customs and Excise Department (BCED) is a key priority: new senior management appointed; operations modernization program; restructuring with Fund technical assistance focused on governance, operational standards, legal framework, and human resource management.
- International tax stance:
  - Corporate tax system restructured to comply with international standards.
  - Authorities express concerns about erosion of tax sovereignty from evolving demands of standard setters.

### Debt Sustainability and Restructuring
- Long-term anchor:
  - Authorities committed to meeting the long-term program anchor of 60 percent debt-to-GDP by 2033-34.
- External restructuring outcomes:
  - Announcement of 100 percent creditor participation in US dollar-denominated commercial debt restructuring offer.
  - Upon closing (expected in December 2019), transaction will provide upfront debt cancellation of just over US$200 million.
  - The transaction will spread out heavy short-term U.S. dollar debt maturities over the next decade.
  - External debt exchange complements domestic restructuring closed in October 2018 covering the equivalent of US$6 billion.
  - Closing of the US dollar debt restructuring expected to reduce uncertainty, boost market confidence, and stimulate investment.

### Monetary and Financial Sector Policy
- Reserves and exchange rate:
  - Under the EFF program, international reserves have more than doubled to over US$600 million as of September 2019.
  - Adequate international reserves in place to protect the fixed exchange rate (in place since 1975).
- Central Bank law:
  - Work ongoing on amendments to the Central Bank Law to enhance autonomy, leveraging Fund technical assistance; revised law will meet international best practice while adhering to Barbados’ governance system.
- Exchange controls:
  - Authorities beginning to gradually relax exchange controls:
    - All Barbadians now allowed to open foreign currency denominated bank accounts.
    - Requirement to surrender 70 percent of foreign exchange brought into Barbados has been eliminated.
  - Authorities will closely monitor impact of reforms on reserve levels.
- Financial sector health:
  - Financial sector remains well capitalized and liquid despite domestic debt restructuring.
  - Liberalization measures include reduced commercial banks’ minimum requirement to hold Government securities.
  - Private sector credit growth has remained largely flat; reduced uncertainty, improved business climate, and improved fiscal sustainability expected to stimulate credit growth.

### Improving Competitiveness and Human Capital
- Competitiveness reforms:
  - Authorities committed to enhancing the business environment.
  - Modernization of the Town and Country Planning Act completed; further improvements planned in delivery of registry and regulatory services and licensing processes.
  - Customs improvements aimed at more efficient clearing of goods and trade facilitation.
- Investing in people:
  - Reduced interest bill from creditor negotiations will create fiscal space for increased social spending.
  - Reform plan prioritizes investments in a high skilled, productive, and knowledge-based economy, with emphasis on skills training and education.
  - Initiatives already taken include reintroduction of free tertiary education at vocational, technical, and undergraduate levels.

### Regional Integration
- Caribbean Forum outcomes:
  - 2019 Caribbean Forum provided platform to assess progress toward deeper economic integration.
  - Authorities view deeper integration as cornerstone of economic program with potential gains to employment, productivity, and long-run growth.
  - Regional cooperation needed to avoid a race to the bottom in granting tax incentives.
  - Authorities committed to reinvigorating regional integration within the Caribbean Community.

### Building Resilience and Climate Policy
- Climate and disaster resilience:
  - Goal to become a fossil fuel free country by 2030.
  - Launching the ‘Roofs to Reefs’ program to build coherent, integrated structural resilience.
  - Barbados insures natural disaster risks through the Caribbean Catastrophe Risk Insurance Facility (parametric insurance products).
  - Discussions with the IDB to secure access to a contingent credit facility instrument in case of a natural disaster.
- Insurance and financial innovation:
  - Hosted an Insurance Colloquium to discuss scaling-up insurance coverage in the Caribbean, including pooling risks with other regions.
  - Inclusion of natural disaster clauses in new debt instruments allowing capitalization of interest and deferral of scheduled amortization following a major natural disaster, under specified terms:
    - Once US dollar-denominated commercial debt restructuring closes, 80 percent of Barbados’ debt stock will include such clauses.
  - Authorities encourage multilateral institutions to adopt natural disaster clauses in their lending practices and to provide greater concessional support to small island states.
- International asks:
  - Call for major emitters to do more to support resilience of small states.
  - Multilateral institutions urged to consider country vulnerability in granting access to grants and concessional financing.

### Concluding Remarks and Governance
- Oversight and accountability:
  - Authorities undertake reform agenda in close consultation with the Social Partnership.
  - The Barbados Economic Recovery and Transformation Plan (BERT) Monitoring Committee provides oversight and accountability through monthly monitoring and periodic public communication.
- Progress assessment:
  - Despite limited technical capacity and still elevated risks, Barbados has made progress toward fiscal and debt sustainability, rebuilding reserves, reducing uncertainty, and generating growth.
  - Authorities resolved to continue meeting commitments under the EFF.

### Staff Statement Updates (since staff report circulation)
- Timing and summary:
  - Statement dated December 12, 2019 contains information that became available since staff report circulation; does not alter thrust of staff appraisal.
- Debt exchange completion and rating action:
  - Barbados’ restructuring of external debt to private creditors completed following a two-week consultation in November; creditors overwhelmingly accepted agreed terms.
  - The 75 percent threshold for activating the Collective Action Clause in Barbados’ three Eurobonds was surpassed by a wide margin.
  - Bondholder meetings in late November passed extraordinary resolutions so that 100 percent of debt instruments were exchanged for the new external debt instrument.
  - On December 11, the Barbadian authorities issued a press release to announce settlement of the debt exchange.
  - On December 11, Standard and Poor’s upgraded Barbados’ foreign currency sovereign credit rating from Selective Default to B-.

*Source: IMF staff and authorities material contained in the Barbados Article IV Consultation and Program Review documents provided in the source content.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1brbea2019002.pdf_