## 1brbea2024002-print-pdf

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---

### Executive summary — context and program framing
- Authorities implementing the Economic Recovery and Transformation (BERT 2022) plan and an ambitious climate policy agenda, supported by the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF).
- Economic growth in 2024 robust; inflation continued to moderate supported by easing global commodity prices and lower domestic service prices.
- Gross international reserves: US$1.6 billion at end-September 2024, supporting the exchange rate peg.
- Hurricane Beryl (passed south of Barbados early on July 1, 2024) caused significant damage to the fishing sector and some coastal infrastructure; macroeconomic impact expected to be relatively moderate given timing during off-peak tourist season.
- Authorities committed to improving fiscal position and maintaining debt sustainability while creating fiscal space to increase investment (including climate resilience) and continuing structural reforms for inclusive, sustainable growth.

### Program implementation — EFF (performance and structural benchmarks)
- All quantitative performance criteria (QPCs) for this review have been met.
- Central fiscal outcomes:
  - Primary balance surplus during first half of FY2024/25: B$581 million (4 percent of GDP), outperforming program target of B$210 million (1.5 percent of GDP).
  - Public debt declined to around 105 percent of GDP at end-September 2024, down 6 percent of GDP from end-March 2024.
- Structural benchmarks completed:
  - SB#4: TIN established as unique identifier for importers/exporters and required for border transactions.
  - SB#21: Central online platform for government services and digital PSIP monitoring platform established.
  - SB#12: Standard contracts for routine procurements developed (met at third review, ahead of time).
- NISSS submitted outstanding financial statements (2017–2023) for audit by the Auditor General (SB#9), implemented with delay.
- Program targets remain aligned with authorities’ commitment to bring public debt down to 60 percent of GDP by FY2035/36.

### Program implementation — RSF (climate-related reform measures)
- Both RSF reform measures for this review completed:
  - RM#8: New Electricity Supply Bill tabled in Parliament (September) to enhance competition and local participation in renewable energy investment.
  - RM#9: CBB adopted strategy to build capacity to monitor and assess climate change risks, including data collection and joining the Network for Greening the Financial System.
- Preparatory work for fifth RSF review underway to:
  - integrate climate risks into financial stability assessments (RM#10), and
  - integrate climate concerns in PFM (RM#5),
  both with IMF technical assistance.

### Recent developments and outlook — growth, tourism, and sectoral activity
- Real economy:
  - Economy expanded 3.9 percent y/y from January to September 2024, driven by tourism, business services and construction.
  - Tourist arrivals through September 2024 rose by around 13 percent from the same period in 2023.
  - Construction activity grew by 7.2 percent y/y through September 2024.
- Near-term projection:
  - Real GDP growth projected at 3.8 percent in 2024 (broadly unchanged from third review).
  - Economy expected to expand by nearly 4 percent in 2024.
- Medium-term stabilization:
  - Growth and inflation expected to stabilize at long-term historical averages of about 2 and 2.4 percent, respectively.

### Hurricane Beryl — impacts and fiscal response (Box 1 highlights)
- Hurricane details and damages:
  - Hurricane Beryl: Category 3, passed south of Barbados early on July 1, 2024.
  - Damage: one-third of Bridgetown Fishing Harbour breakwater destroyed; 241 fishing vessels damaged; 64 vessels destroyed.
  - Around five percent of properties partially or fully closed for 1–12 weeks; estimated 200 tourism sector workers impacted.
- Cost estimates:
  - Total cost estimated around 1.4 percent of GDP; ECLAC estimate B$193 million (1.4 percent of 2024 GDP).
  - Macroeconomic impact estimated to be contained at 0.15 percent of GDP growth in 2024.
- Fiscal and recovery measures:
  - Government grants up to 25 percent of repair/purchase cost of boats; estimated budget cost B$2 million.
  - 30-year revolving fund being established with financial institutions to finance new boats.
  - Benevolent fund financed by B$2.6 million in donations from CAF, African Export-Import Bank, Dominica, Cayman Islands, and Rwanda.
  - As of mid-November, 56 boat owners received financial assistance totaling B$0.6 million.
  - More than 500 persons accessed NISSS’s Business Interruption Benefit (outside central government budget).
  - World Bank approved a US$54 million Beryl Emergency Response and Recovery project loan in November.
  - Government established new unit for coastal protection and reprioritized investment plan to prioritize harbor and Bridgetown port breakwater repairs.

### Labor market and prices
- Labor market:
  - Unemployment rate declined from an average of 8.7 percent in H1 2023 to 7.3 percent in H1 2024—the lowest level since 2008.
  - Unemployment claims remained below 7,500 for the first nine months of the year, around 12 percent lower than the 2017–2019 average.
  - Labor force participation increased in Q2 2024 to 63.5 percent.
  - Youth unemployment declined from 22 percent to 19.5 percent in H1 2024 (compared to H1 2023).
  - Female unemployment decline noted but source text truncated.
- Inflation and external sector:
  - Y/y retail price inflation fell to 0.7 percent in August, from 2.9 percent a year earlier.
  - 12-month average inflation declined from 3.4 percent to 2.4 percent.
  - Current account deficit narrowed to 5 percent of GDP through September, down from 9.5 percent of GDP in the same period in 2023.
  - Gross international reserves: US$1.6 billion at end-September 2024, equivalent to around 7 months of imports of goods and services.
  - Higher current transfers related to IFRS 17 for the insurance sector supported external improvement.

### Financial system and banking sector soundness
- Credit and lending:
  - Credit to the non-financial private sector picked up by 2.9 percent through September 2024.
  - New lending (Jan–Sep 2024) up around 20 percent from same period in 2023.
- Banking metrics (end-September 2024):
  - Capital adequacy ratio: over 20 percent (prudential requirement: 8 percent).
  - Return on assets (ROA): 1.2 percent.
  - Non-performing loans (NPLs) to total loans: 4.6 percent (down from 5.0 percent at end-2023).
  - Provisioning remains well above required levels.
- Finance companies and credit unions:
  - NPLs: between 10-11 percent of total loans at end-September 2024.
  - Capital to assets ratios: 21 percent (finance companies) and 11 percent (credit unions) at end-September 2024.

### Fiscal performance, revenues, and expenditures
- Primary surplus (H1 FY2024/25): B$581 million (4 percent of GDP); program target was B$210 million (1.5 percent of GDP).
- Public debt (including government-guaranteed SOE debt): around 105 percent of GDP at end-September 2024; down from around 111 percent of GDP at end-FY2023/24 (rebasing contributed).
- Revenue drivers:
  - Stronger collections of CIT, property tax, and VAT.
  - CIT boost from IFRS17 implementation for insurance sector and CIT reform in November 2023 (higher rates for some companies and shift to monthly pre-payments).
  - Early issuance of land tax bills increased property tax collection (expected to unwind in H2).
  - One-off revenue gains from 2023 CIT reform and IFRS17 estimated to increase FY2024/25 revenues by about B$100 million (0.3 percent of GDP).
- Expenditure and capital spending:
  - Expenditure broadly in line with budget in H1.
  - Capital spending exceeded typical seasonal patterns but fell short of third review targets due to Hurricane Beryl and execution constraints.
  - Interest expenses increased due to step-up coupons on restructured domestic bonds and higher interest on floating-rate external debt.

### GDP rebasing and statistical implications
- GDP rebased (production side) for 2010–2023 using 2016 SUT replacing 2010 SUT; sources include tax system information, surveys, financial statements, and more comprehensive agricultural data.
- Rebasing effects:
  - Upward revision to nominal GDP broadly across sectors except accommodation and food services and personal and other services.
  - GDP deflator growth revised downward from 2019 onwards, narrowing upward revision to nominal GDP to 5 percent by 2023 (from 10 percent in reference year 2016).
  - Public debt-to-GDP ratio reduced (debt ratio end-FY2023/24 was 111 percent of GDP, down 5.5 percentage points due to rebasing).
  - Revenue-to-GDP, primary surplus-to-GDP, and exports-to-GDP ratios reduced by higher GDP denominator.
  - Debt-carrying capacity measures (debt service-to-revenue, debt service-to-exports) remain unaltered.

### Market sentiment, ratings, and reserves
- Sovereign debt spreads remained around the 350-450 basis points range, broadly tracking EMBIG.
- Credit rating changes (Oct–Nov 2024):
  - Fitch: upgraded to B+ (Stable).
  - Standard & Poor’s: upgraded to B (Positive).
  - Moody’s: unchanged at B3 (Stable).
- Gross international reserves: US$1.6 billion at end-September 2024.

### Public debt assessment, financing strategy, and DSA findings
- Public debt trajectory:
  - Declined from 138.2 percent of GDP in FY2020/21 to around 105 percent of GDP at end-September 2024.
  - Under program baseline, debt target of 60 percent of GDP projected to be achieved by FY2035/36.
- DSA summary and projections (selected series):
  - Public debt (percent of GDP) — selected fiscal years: Actual 2023: 111.4; 2024: 102.8; 2025: 97.4; 2026: 92.2; 2027: 87.1; 2028: 82.2; 2029: 77.7; 2030: 73.9; 2031: 70.1; 2032: 66.3; 2033: 63.0; 2034: 59.6; 2035: 56.3; 2036: 53.8.
  - Change in public debt (percent of GDP) — 2024: -8.6; 2025: -5.4; 2026: -5.2; 2027: -5.1; 2028: -4.8.
  - Memo: Nominal GDP (US$ million end-FY2023/24): 6,844.1 (and related series provided).
- DSA assessment:
  - Overall risk of sovereign stress: Moderate (near, medium, long term: Moderate).
  - Probability of debt not stabilizing (pct): 8.1.
  - Fanchart width: 85.0.
  - Mechanical medium-term signal: Moderate.
  - Staff commentary: Public debt on downward trajectory; sustainable under baseline but with wide uncertainty.

### Debt-for-climate conversion (Box 4) — mechanics and expected savings
- Overview:
  - Conversion exchanges existing high interest domestic debt for newly issued low interest domestic debt to generate savings and create fiscal room for climate investment; operation generally neutral to stock of public debt but expected significant interest savings.
- Mechanics:
  - Government plans to issue around US$295 million (4.1 percent of FY2024/25 GDP) of new domestic Barbadian dollar-denominated debt to domestic banks, backed by an IDB/EIB guarantee (AAA) and issued at a low interest rate (still to be determined).
  - Proceeds to repurchase higher interest domestic bonds (coupon rates up to 8 percent) from NISSS and private sector.
  - Authorities considering a private sector guarantee up to US$75m, potentially taking deal to US$375m (4.5 percent of FY2024/25 GDP).
- Expected savings and fiscal impact:
  - Interest savings expected up to US$130 million (1.8 percent of FY2024/25 GDP) over the next 15-20 years (time value of money not accounted for).
  - Conversion intended to create fiscal room for new loans for climate investment while being generally neutral to public debt stock.
- Financing of SCWR Project:
  - SCWR total cost: US$110 million (1.5 percent of FY2024/25 GDP).
  - IDB loan: US$40 million.
  - GCF loan: US$30 million.
  - GCF grants: US$40 million.
  - Loans to be serviced with savings from the debt conversion.

### Mobilizing external and domestic financing; domestic market development
- External financing:
  - RSF disbursements substitute for more expensive financing; projected to save about 0.3 percent of GDP in debt service through 2029 relative to commercial external debt.
  - Reform of Fund charges and surcharges (October 2024) expected to reduce Barbados’ payments to the Fund by around SDR 15 million (US$20 million) between 2025-2030.
  - Disbursements from other IFIs expected around US$175 million in FY2024/25 (policy and project loans), revised from US$200 million at third review.
  - Total external loans and grants through FY2025/26 projected around US$250 million.
  - Redemption of restructured Eurobonds begins June 2025; recent retirement: government retired US$77.6 million (1.1 percent of GDP) of Eurobonds (November).
- Domestic financing and market development:
  - BOSS Plus subscriptions since 2022: over B$300 million.
  - Government restarted issuance of 90-day and 180-day T-bills in September 2023.
  - Net domestic financing Apr–Sep 2024: around B$130 million (majority through T-bills).
  - Domestic financing projected around B$120 million (0.8 percent of GDP) in FY2024/25 via drawdown of cash buffers and modest capital market financing.
  - Planned measures: restart issuance of savings bonds; introduce bonds-on-demand facility; publish auction results to foster transparency.

### Monetary policy framework, liquidity management, and financial safety net
- Exchange rate peg since 1975 remains critical anchor; authorities committed to policies sustaining the peg.
- Reserves: reached 209 percent of the Fund’s reserve adequacy metric at end-September.
- CBB actions and modernization:
  - Revised Central Bank Act of 2020 strengthened autonomy and limited monetary financing.
  - CBB to consider removing foreign exchange fee introduced in 2017 given improved conditions.
  - Developing a benchmark monetary policy rate; internal research paper planned for early next year.
  - Liquidity forecasting unit testing prototype daily liquidity forecasting framework; aim to submit refined version by end-2024 (end-March 2025 SB).
  - Proposed elements for modernized framework include reserve requirements on domestic currency deposits, a mid-rate interest rate corridor with a policy rate, standing deposit and lending facilities anchored to the policy rate, and OMOs.
  - Authorities committed to recapitalize the CBB per 2021 plan.
- Financial safety net:
  - New CBB Act provides legal basis for Emergency Liquidity Assistance (ELA) and lender-of-last-resort operations for SIBs and SIFIs.
  - Authorities working to establish ELA framework, update Collateral Policy, and strengthen Barbados Deposit Insurance Scheme with US Treasury TA.
  - CBB designated resolution authority under the Financial Institutions Act should develop a resolution framework.

### AML/CFT, digitalization, and business environment improvements
- AML/CFT progress:
  - Barbados removed from FATF “grey list” in February 2024 after implementing commitments.
  - Beneficial ownership information accessible to law enforcement via expedited court processes.
  - Designated non-financial businesses and professions subject to more stringent requirements.
  - National AML/CFT Risk Assessment to be updated by 2027.
- Digitalization and business environment:
  - Central online platform for government services established; digital PSIP platform developed (end-September 2024 SB; met).
  - Single Registration Portal launched in September issuing a single TIN for BCED, NISSS, and BRA to new taxpayers.
  - Business Barbados expected to begin operations before end-FY2024/25.
  - August 2024: digital clearing system launched reducing bank check processing time to one day (from three to five days).

### Growth strategy, structural reforms, and social policies
- Growth objective under BERT 2022: raise potential to 3-5 percent per year through seven pillars including climate resiliency, skills, business environment, domestic savings mobilization, digital technologies, logistics hub ambition, and knowledge-based diversification.
- Barbados 2035—A Plan for Investment in Prosperity and Resilience: 10-year investment plan identifying 12 priorities with total cost up to US$11.6 billion over 10 years, of which up to US$5 billion could come from public sector (contingent on fiscal space and financing availability).
- Social and human capital measures:
  - Barbados Population Policy 2023 laid in Parliament July 2024.
  - National First Jobs Initiative, Apprenticeship Scheme, and return to free tertiary education at vocational, technical, and undergraduate levels.
  - Youth Advance Corps and National Transformation Initiative aim to upskill workforce.

### SOE and pension reforms
- SOE reforms:
  - Divestment of BAMC (end-December 2023 SB); expected reduction in budget transfers by about 0.3 percent of GDP over medium term; transitional fiscal cost expected in FY2024/25.
  - Amalgamation plans for Urban Development Commission and Rural Development Commission; restructuring of National Housing Corporation (end-December 2023 SB).
  - TMU SOE transfers in H1 FY2024/25 below last year’s levels, consistent with QPC.
- NISSS and pension reforms:
  - NISSS transitioned to an independent statutory corporation in late-2023.
  - NISSS submitted financial statements up to 2023 for audit (implemented with delay in July).
  - Authorities estimate pension reforms (raising pensionable age and minimum contributions) will preserve NIF assets for at least 30 years.
  - Key NISSS fund balances (as of end-2023): NIF B$3.6 billion; Unemployment Fund B$57.5 million; Severance Fund B$98.8 million; Catastrophe Fund B$27.6 million.
  - NIF portfolio recovered to B$4 billion by June 2024 after falling from peak B$4.9 billion (end-2017).

### Climate policy, renewable energy targets, and RSF-supported measures
- Objective: make Barbados a green and fossil fuel-free country by 2035 (authorities initially targeted 2030; current estimates suggest 2035).
- Renewable energy progress and projects:
  - Installed solar power capacity share: 19 percent of total installed electricity capacity in 2023.
  - Feasibility studies for a 30-50 MW onshore wind farm (8 -14 percent of current total installed electricity capacity).
  - Renewstable Barbados Inc. (IDB financing) developing a 13MW solar facility with hydrogen-based energy storage; project cost expected around US$165 million; capacity to be contracted via a 25-year PPA with BLPC.
- Grid and storage capacity:
  - Grid can absorb around 100MW of electricity.
  - New framework (Sept 2023) to increase investment in energy storage (RM#6); four-year pilot underway.
  - Target: first licenses for energy storage in place by end-2024.
  - BLPC sought cost recovery for up to 90MW in battery storage via Clean Energy Transition Rider; Fair Trade Commission approved cost recovery for 15 MW.
- Financial sector climate risk work:
  - CBB joined NGFS; adopted strategy to build capacity and integrate climate risk analysis with IMF TA.
  - Target: fully integrated climate risk framework by 2026.
  - CBB to incorporate climate risks into bank stress testing by end-March 2025 with IMF TA (RM#10).

### Mobilizing climate finance and institutions
- Climate investment plans based on authorities’ programs amount to around US$1 billion.
- Debt-for-climate conversion soon-to-be-completed; will reduce interest burden by swapping high-interest debt with low-interest debt guaranteed by IDB and EIB; savings to service new IDB and GCF loans for SCWR Project.
- Blue Green Bank:
  - Legislation approved by Parliament in June; government capital contribution US$15 million to be made by end of fiscal year; funding agreement signed with GCF.
  - Pledged contributions from CAF, USAID, and other bilateral partners expected soon; bank to be operational early 2025.
  - New bank to support climate investment projects across region of more than US$250 million, initially focusing on resilient housing and renewable energy.
- Blue Bond (2022): estimated to have generated about US$50 million of savings for marine conservation projects.

### Risk assessment — annexed RAM and country-specific risks
- RAM likelihood definitions:
  - “low” <10 percent; “medium” 10–30 percent; “high” 30–50 percent.
- Global risks (selected):
  - Intensification of regional conflict(s): Likelihood: High; Impact: Medium.
  - Commodity price volatility: Likelihood: High; Impact: Medium.
  - Global growth slowdown: Likelihood: Medium; Impact: Low.
  - Monetary policy calibration risks: Likelihood: Medium; Impact: Medium.
- Country-specific risks (selected):
  - Deceleration of reform momentum: Likelihood: Medium; Impact: High. Policy response: adhere to fiscal strategy, sustain planned investment, maintain social spending to preserve consensus.
  - Loss of tourism competitiveness: Likelihood: Medium; Impact: High. Policy response: implement structural measures to increase competitiveness and boost private investment into tourism.
  - Extreme climate events: Likelihood: Medium; Impact: High. Policy response: accelerate climate-resilient infrastructure investment and seek contingency instruments (e.g., CCRIF, hurricane clauses).

### Policy discussions and IMF recommendations (selected)
- Fiscal path and targets:
  - Primary surplus expected to reach 3.8 percent of revised GDP for FY2024/25 (in line with third review).
  - Primary balance expected to rise to a steady-state of 4.3 percent of revised GDP in FY2025/26, consistent with 60 percent debt target by FY2035/36.
  - Capital spending expected to decline slightly in FY2025/26 before rising to steady-state around 3.4 percent of GDP over the medium term.
  - Additional programmed capital spending prioritized for critical infrastructure and Hurricane Beryl repairs; fiscal costs to be absorbed by budget reallocation.
- Use of one-off and windfall revenues:
  - One-off revenue gains estimated B$100 million (0.3 percent of GDP) provide space for additional programmed capital spending.
  - Additional windfalls from CIT reform could be used for social and capital spending or to rebuild fiscal space if capital spending constraints persist.
- Potential additional fiscal measures to create fiscal space or contingencies:
  - (i) Broadening the tax base, including revamping the VAT regime for tourism sector.
  - (ii) Reforming the property tax regime.
  - (iii) Further streamlining current expenditures and prioritizing capital expenditure.
- Structural reforms to strengthen revenue collection and fiscal institutions:
  - Mandatory use of TIN for importers/exporters and border transactions (end-September 2024 SB; met).
  - Ongoing BCED HR assessment to address high vacancy rates (end-March 2025 SB).
  - Exemptions Enforcement Monitoring Unit established in Ministry of Finance; recertification scheduled to begin in 2025.
  - Guidelines for public investment project appraisal by March 2025 (IMF TA support).
  - Cash Management Unit created and staffed (end-March 2024 SB; met).
  - New PPP framework under development; Procurement law amendments expected (end-March 2025 SB).
  - Fiscal Council met in October to discuss terms of reference and workplan ahead of FY2025/26 budget cycle.

### Capacity development, technical assistance, and monitoring
- IMF CD priorities: institutional and analytical capacity development; AML/CFT; fiscal rules implementation; tax administration and PFM; central bank market operations and financial supervision; national accounts and price statistics (STA/CARTAC).
- CD delivery aligned with EFF and RSF reform objectives; resident representative office key channel for engagement.
- Program monitoring:
  - All QPCs, ITs, and SBs for end-September 2024 met.
  - Program ITs/QPCs for December 2024 and March 2025 unchanged from third review.
  - TMU defines detailed reporting frequencies and lag requirements for NIR, NDA, fiscal and debt data, arrears, and other indicators.

*Source: 1brbea2024002-print-pdf.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The authorities are implementing the home-grown Economic Recovery and Transformation (BERT 2022) plan and an ambitious climate policy agenda, supported by the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF).
- Economic growth in 2024 has been robust and inflation has continued to moderate, supported by easing global commodity prices and lower domestic service prices.
- The external position strengthened and international reserves rose to US$1.6 billion at end-September 2024, supporting the exchange rate peg.
- Hurricane Beryl caused significant damage to the fishing sector and some coastal infrastructure; the macroeconomic impact is expected to be relatively moderate in part because the storm occurred during the off-peak tourist season.
- Authorities remain committed to improving the fiscal position and maintaining debt sustainability while creating fiscal space to increase investment, including to boost climate resilience, and continuing structural reforms to achieve more inclusive, sustainable growth.

### Program implementation — EFF
- All quantitative performance criteria (QPCs) for this review have been met.
- The primary balance recorded a surplus of 4 percent of GDP during the first half of FY2024/25, overperforming the program target mainly due to stronger-than-expected tax collection.
- Public debt declined to around 105 percent of GDP at end-September 2024, a decline of 6 percent of GDP from end-March 2024.
- All three structural benchmarks (SBs) for the review have been completed:
  - SB#4: Establishment of the tax identification number (TIN) as the unique identifier for importers and exporters and as a requirement to conduct any border transactions.
  - SB#21: Establishment of a central online platform for government services and development of a digital platform to improve the monitoring and execution of the Public Sector Investment Programme.
  - SB#12: Development of standard contracts for routine procurements (met at the third review, ahead of time).
- The National Insurance and Social Security Service (NISSS) submitted all remaining outstanding financial statements (2017–2023) for audit by the Auditor General (SB#9), implemented with delay.
- Program targets remain consistent with the authorities’ commitment to bring public debt down to 60 percent of GDP by FY2035/36.

### Program implementation — RSF
- The authorities have completed both reform measures (RMs) for this RSF review.
- RM#8: In September, the government tabled in Parliament a new Electricity Supply Bill to enhance competition in the electricity market and introduce local participation in renewable energy investment.
- RM#9: The Central Bank of Barbados (CBB) adopted a strategy for building capacity to monitor and assess climate change risks, including building a data collection mechanism and joining the Network for Greening the Financial System.
- Preparatory work is underway for the fifth RSF review to:
  - integrate climate risks into financial stability assessments (RM#10), and
  - integrate climate concerns in the public financial management (PFM) process (RM#5),
  both with support from IMF technical assistance.

### Recent developments and outlook — Growth and sectoral activity
- The economy posted a 3.9 percent y/y expansion from January to September 2024, driven by tourism, business services and construction.
- Tourist arrivals through September 2024 rose by around 13 percent from the same period in 2023, driven mainly by visitors from the US, Canada, and CARICOM, aided by the T20 Cricket World Cup in June and expanded airlift capacity.
- Construction activity grew by 7.2 percent y/y through September 2024, led by tourism projects and public sector investments, including rehabilitation of water and road infrastructure.

### Recent developments and outlook — Hurricane Beryl (Box 1)
- Hurricane Beryl passed south of Barbados as a Category 3 hurricane early on July 1, 2024.
- Much of the damage occurred to coastal infrastructure and environs: a third of the Bridgetown Fishing Harbour’s breakwater was destroyed, with damage to 241 fishing vessels and destruction of another 64 vessels.
- Around five percent of properties partially or fully closed over a period of 1–12 weeks, impacting an estimated 200 tourism sector workers.
- Initial estimates suggest the total cost of Hurricane Beryl could reach around 1.4 percent of GDP. ECLAC estimated total damages, losses, and additional costs at B$193 million (1.4 percent of 2024 GDP).
- The overall macroeconomic impact is estimated to be contained at 0.15 percent of GDP growth in 2024, reflecting the storm’s timing on the tail-end of the ICC T20 World Cup and the off-peak tourist season.
- The fiscal cost has been relatively contained and targeted mainly at the fishing industry:
  - Government grants of up to 25 percent of the cost of repairs or purchase of boats, at an estimated budget cost of B$2 million.
  - A 30-year revolving fund is being established with financial institutions to finance new boats.
  - A benevolent fund for fisherfolk financed by B$2.6 million in donations from CAF, the African Export-Import Bank, Dominica, the Cayman Islands, and Rwanda.
  - As of mid-November, 56 boat owners had received financial assistance totaling B$0.6 million.
  - More than 500 persons across the fishing and tourism sectors who experienced job losses and employment interruptions accessed NISSS’s Business Interruption Benefit (outside the central government budget).
  - The World Bank approved a US$54 million Beryl Emergency Response and Recovery project loan in November to support recovery, enhance disaster preparedness, and boost resilience.
- Government response measures include establishing a new unit for coastal protection and beach maintenance and re-evaluating the new investment plan to prioritize harbor and Bridgetown port breakwater repairs.

### Recent developments and outlook — Labor market and prices
- The unemployment rate declined from an average of 8.7 percent in H1 2023 to 7.3 percent in H1 2024, the lowest level since 2008.
- Unemployment claims remained below 7,500 for the first nine months of the year, around 12 percent lower than the 2017–2019 average.
- Labor force participation increased in Q2 2024 to 63.5 percent, after a slight decline in Q1 2024, reflecting strong activities in tourism, construction, manufacturing, wholesale and retail, and business services.
- Youth unemployment declined from 22 percent to 19.5 percent in H1 2024 (compared to H1 2023).
- Female unemployment declined from 9.8 percent to [text truncated in source at this point].

### Mission, approvals, and institutional engagement
- The mission team visited Bridgetown, Barbados during October 31–November 6, 2024. Team members included Michael Perks (head), Daniel Jenya, Aiko Mineshima, Camila Perez (all WHD), Patrick Blagrave (Resident Representative), Yong Sarah Zhou (SPR), and Eduardo Camero Godinez (FAD). Laron Alleyne and Amy Carrington (IMF Local Office) assisted the mission. Ann Marie Wickham (OED) joined some meetings.
- The mission met with Prime and Finance Minister Mia Mottley, Central Bank of Barbados Governor Kevin Greenidge, Minister in the Ministry of Finance Ryan Straughn, other senior government officials, trade unions, banks, the private sector, and development partners.
- Approved by Ana Corbacho (WHD) and Peter Dohlman (SPR).

*Source: EXECUTIVE SUMMARY (1brbea2024002-print-pdf).*

### 6.8 percent, respectively.

### 1brbea2024002-print-pdf - 6.8 percent, respectively.

### Inflation Developments and External Sector
- Y/y retail price inflation fell to 0.7 percent in August, from 2.9 percent a year earlier.
- 12-month average inflation declined from 3.4 percent to 2.4 percent.
- Decline drivers:
  - Easing of global commodity prices (e.g., food and oil imports).
  - Lower prices of durable goods and hospitality services.
- Offsetting upward pressures:
  - Higher prices of certain domestic agricultural products due to drought-related supply shortages.
  - Higher freight costs.
- Current account and reserves:
  - The current account deficit narrowed to 5 percent of GDP through September, down from 9.5 percent of GDP in the same period in 2023.
  - Gross international reserves reached US$1.6 billion at end-September 2024, equivalent to around 7 months of imports of goods and services.
- Additional note: Higher current transfers related to the introduction of IFRS 17 for the insurance sector supported the external improvement.

### Financial System and Banking Sector
- Credit to the non-financial private sector picked up by 2.9 percent through September 2024, driven mainly by higher lending to real estate and households.
- New lending to the non-financial private sector in January to September was up around 20 percent from the same period in 2023.
- Banking system soundness:
  - Capital adequacy ratio: over 20 percent at end-September 2024 (prudential requirement: 8 percent).
  - Return on assets (ROA): 1.2 percent.
  - Non-performing loans (NPLs) to total loans: 4.6 percent at end-September 2024, down from 5.0 percent at end-2023.
  - Provisioning remains well above required levels.
- Finance companies and credit unions:
  - NPLs between 10-11 percent of total loans at end-September 2024.
  - Capital to assets ratios of 21 and 11 percent, respectively, at end-September 2024.

### Fiscal Performance and Public Debt
- Primary surplus for first half of FY2024/25: B$581 million (4 percent of GDP), outperforming program target of B$210 million (1.5 percent of GDP).
- Overall public debt (including government-guaranteed SOE debt): around 105 percent of GDP at end-September 2024, down from around 111 percent of GDP at end-FY2023/24 (rebasing of GDP contributed).
- Revenue performance:
  - Revenues overperformed projections due to stronger collections of corporate income tax (CIT), property tax, and value-added tax (VAT).
  - Strong CIT collection reflected IFRS17 implementation for the insurance sector and CIT reform in November 2023 (higher tax rate for some companies and shift from semi-annual to monthly tax pre-payments).
  - Early issuance of land tax bills led to higher property tax collection (expected to unwind in the second half of the fiscal year).
- Expenditure:
  - Broadly in line with budget during first half of fiscal year.
  - Government outlays following Hurricane Beryl relatively contained with targeted support for affected sectors.
  - Capital spending exceeded typical seasonal patterns but fell short of third review targets due to early hurricane season (Hurricane Beryl in early July) and execution constraints.
  - Interest expenses increased due to step-up in coupons on restructured domestic bonds and higher interest on floating-rate external debt.
- Fiscal composition and impacts:
  - Freight costs continued to rise in H1 2024 due to rerouting expenses from Panama Canal congestion and geopolitical conflicts.
  - One-off revenue gains from the 2023 CIT reform and adoption of IFRS17 expected to persist, increasing FY2024/25 revenues by about B$100 million (0.3 percent of GDP).

### GDP Rebasing and Statistical Implications
- Authorities published rebased GDP statistics (production side) for 2010-2023 based on 2016 Supply and Use Table (SUT) replacing 2010 SUT.
- New GDP statistics use tax system information, survey data, financial statements, and more comprehensive agricultural food crops data.
- Rebasing effects:
  - Upward revision to nominal GDP broadly across sectors, except accommodation and food services and personal and other services.
  - GDP deflator growth revised downward from 2019 onwards, narrowing the upward revision to nominal GDP to 5 percent by 2023 (from 10 percent in reference year 2016).
  - Public debt-to-GDP ratio reduced (debt ratio as of end-FY2023/24 was 111 percent of GDP, down 5.5 percentage points due to rebasing).
  - Revenue-to-GDP, primary surplus-to-GDP, and exports-to-GDP ratios were reduced by the higher GDP denominator.
  - Debt-carrying capacity measures (debt service-to-revenue, debt service-to-exports) remain unaltered.

### Market Sentiment and Ratings
- Sovereign debt spreads remained contained around the 350-450 basis points range, broadly tracking EMBIG.
- Credit rating changes (late 2023 and Oct–Nov 2024):
  - Fitch: upgraded to B+ (Stable) in October/November 2024.
  - Standard & Poor’s: upgraded to B (Positive) in October/November 2024.
  - Moody’s: unchanged at B3 (Stable).

### Outlook and Risks
- Near-term projections:
  - Economy expected to expand by nearly 4 percent in 2024.
  - Real GDP growth projected at 3.8 percent in 2024 (broadly unchanged from third review).
  - Inflation projected to pick up in H2 2024, leaving 12-month moving average inflation at around 2.3 percent at end-2024.
  - Medium-term stabilization: growth and inflation expected to stabilize at long-term historical averages of about 2 and 2.4 percent, respectively (unchanged from third review).
  - Current account deficit expected to narrow to 5.9 percent of GDP in 2024 and to about 5 percent of GDP by 2028 as tourism and commodity prices normalize.
- Risk assessment:
  - Risks remain high and tilted to the downside.
  - External risks: growth slowdowns in key source markets (US, UK, Canada), intensification of regional conflicts, global commodity price volatility.
  - Domestic risks: climate change and natural disasters, potential deceleration of reform momentum affecting fiscal discipline and debt sustainability.
  - Mitigants: authorities’ strong track record under IMF program, commitment to reforms, readiness to take additional fiscal measures if needed.

### Policy Discussions and Recommendations
- Fiscal path and targets:
  - Primary surplus expected to reach 3.8 percent of revised GDP for FY2024/25 (in line with third review).
  - Primary balance expected to rise in FY2025/26 to a steady state of 4.3 percent of revised GDP, consistent with achieving 60 percent debt target by FY2035/36.
  - Capital spending expected to decline slightly in FY2025/26 before rising to a steady-state of around 3.4 percent of GDP over the medium term.
  - Additional programmed capital spending prioritized for critical infrastructure and repairs from Hurricane Beryl; fiscal costs of hurricane measures to be absorbed by budget reallocation.
- Use of one-off and windfall revenues:
  - Unanticipated one-off revenue gains (estimated B$100 million; 0.3 percent of GDP) provide space for additional programmed capital spending.
  - Any additional windfalls from CIT reform could be used for critical social and capital spending or to rebuild fiscal space if capital spending constraints persist.
- Potential additional fiscal measures (to create fiscal space or contingencies):
  - (i) Broadening the tax base, including revamping the VAT regime for the tourism sector.
  - (ii) Reforming the property tax regime.
  - (iii) Further streamlining current expenditures and prioritizing capital expenditure.
- Structural reforms to strengthen revenue collection and fiscal institutions:
  - Tax compliance:
    - Mandatory use of tax identification number (TIN) for importers and exporters and border transactions (end-September 2024 SB; met).
    - Ongoing work to assess BCED human resource needs and address high vacancy rates (end-March 2025 SB).
  - Tax waivers and exemptions:
    - Pre-existing tax and customs waivers required to requalify under modernized duty and tax exemptions framework (end-March 2024 SB; met).
    - Exemptions Enforcement Monitoring Unit established in the Ministry of Finance to audit concessions; recertification scheduled to begin in 2025.
    - Fund TA in December to review tax expenditure reporting and provide recommendations.
  - Public financial management (PFM) enhancements:
    - Guidelines for public investment project appraisal by March 2025 (supported by IMF TA).
    - Cash Management Unit created and staffed under the Treasury Department (end-March 2024 SB; met).
    - Standard procurement contracts developed and used (end-September 2024 SB; met).
    - New PPP framework under development; amendments to procurement law expected (end-March 2025 SB).
    - Implementation of the 2019 PFM Act ongoing; updated medium-term fiscal framework and mid-year fiscal report tabled in Parliament.
    - Work to deepen fiscal risk analysis with Fund TA in December; next Fiscal Risk Statement to accompany FY2025/26 budget.
  - Fiscal Council:
    - The new Fiscal Council met in October to discuss terms of reference and workplan ahead of the FY2025/26 budget cycle.

*Source: 1brbea2024002-print-pdf.*

### 15. The authorities are continuing to make progress on SOE reforms to reduce the impact

### 15. The authorities are continuing to make progress on SOE reforms to reduce the impact

### SOE reforms and fiscal implications
- Divestment of the Barbados Agriculture Management Company (BAMC) (end-December 2023 SB).
- Expected reduction in budget transfers by about 0.3 percent of GDP over the medium term.
- A transitional fiscal cost is expected in FY2024/25.
- Amalgamation plans approved by Cabinet (end-December 2023 SB) for:
  - Urban Development Commission and Rural Development Commission.
  - Restructuring of the National Housing Corporation.
- During the first half of FY2024/25, TMU SOE transfers were below last year’s levels, consistent with the program quantitative performance criterion (QPC).

### National pension system reforms and NISSS (Box 3)
- Transition of the NISSS to an independent statutory corporation in late-2023 increased autonomy from the central government budget and operational flexibility.
- NISSS submitted all financial statements up to 2023 for audit by the Auditor General (end-March 2024 SB; not met during third review, implemented with delay in July); the Auditor General has commenced a fact-finding assessment.
- Authorities estimate that the reforms to increase the pensionable age and increase the minimum contributions will preserve the National Insurance Fund’s pension assets for at least 30 years.
- Key NISSS fund balances (as of end-2023):
  - National Insurance Fund (NIF): B$3.6 billion.
  - Unemployment Fund: B$57.5 million.
  - Severance Fund: B$98.8 million.
  - Catastrophe Fund: B$27.6 million.
- Levies and contributions for private sector employees total 23.9 percent of insurable earnings (breakdown shown in source).
- NIF portfolio and operations:
  - 2018/19 sovereign debt restructuring included a B$1.3 billion haircut on government debt (about 26 percent of its reserves).
  - Surge in pandemic-related unemployment insurance claims to over 50,000 in 2020 (from an average of 12,000 in 2018/19).
  - NISSS borrowed funds from the NIF and received government liquidity support via a buy-back of B$169 million of debt.
  - A three-year recapitalization plan for the Unemployment Fund equivalent to B$143 million was completed end-March 2023.
  - Portfolio holdings fell from a peak of B$4.9 billion (end-2017) to B$3.7 billion (end-2023) and recovered to B$4 billion by June 2024.
  - In 2022 and 2023, NISSS operated without drawing down reserves.
- Structural legal and policy changes:
  - NISSS transitioned to an independent statutory corporation in 2023.
  - Parliament approved a revised public pension law increasing: (i) the pension age by one year to 68 to be phased in by 2034, and (ii) the required weeks of qualifying contributions from 500 to 750.
  - Submission of all outstanding NISSS financial statements to the Auditor General to increase transparency and oversight.

### Public debt assessment and financing strategy
- Public debt declined from 138.2 percent of GDP in FY2020/21 to around 105 percent of GDP at end-September 2024.
- Under the program baseline, the debt target of 60 percent of GDP is projected to be achieved by FY2035/36.
- Projected debt service improvements reflect:
  - Recent GDP revisions.
  - Recent retirement of Eurobonds.
  - Favorable debt service schedule from the 2018-19 comprehensive debt restructuring.
  - Long-term borrowing from IFIs during the pandemic years.
  - Near-term drawdown of currently high cash buffers.
  - Expected development of domestic capital markets.
- Debt-for-climate conversion (once finalized) will provide further improvements to the debt service schedule relative to the current baseline.
- Sovereign Risk and Debt Sustainability Framework (SRDSF) indicates overall risk of sovereign stress remains moderate; public debt is assessed as sustainable but with wide uncertainty (wide fan chart).
- Persisting risks include:
  - Domestic risks from maintaining large primary surpluses (though somewhat reduced).
  - External risks: weaker-than-expected economic growth and natural disasters.
- Climate policy reforms and investments in climate adaptation, supported by the RSF arrangement, are essential to increase resilience and mitigate debt sustainability risks.

### Mobilizing external and domestic financing
- Medium-term debt strategy (MTDS) continues to rely on multilateral financing, including from the IMF, while preparing to re-access international markets.
- RSF disbursements substitute for more expensive financing and are projected to save about 0.3 percent of GDP in debt service through 2029, relative to commercial external debt.
- Reform of Fund charges and surcharges in October 2024 is expected to reduce Barbados’ payments to the Fund by around SDR 15 million (US$20 million) between 2025-2030.
- Disbursements from other IFIs are expected to reach around US$175 million in FY2024/25 (policy and project loans), revised slightly downward from around US$200 million at the third review.
- Total external loans and grants through FY2025/26 are projected to be around US$250 million, reflecting the SCWR project.
- Redemption of restructured Eurobonds begins in June 2025; authorities focus on restoring access to international capital markets, contingent on easing global financial conditions.
- Recent retirement: government retired US$77.6 million (1.1 percent of GDP) of Eurobonds from its balance sheet (November).

### Domestic debt issuance and market development
- Since launch of the Barbados Optional Savings Scheme (BOSS) Plus in 2022, over B$300 million in subscriptions by households, financial institutions, and pension schemes.
- Government restarted issuance of 90-day and 180-day Treasury bills in September 2023.
- From April-September 2024, net domestic financing reached around B$130 million, majority through T-bills.
- Domestic financing projected to reach around B$120 million (0.8 percent of GDP) in FY2024/25, in line with the third review, via drawdown of cash buffers accumulated in FY2023/24 and modest domestic capital market financing.
- Planned measures to deepen domestic markets:
  - Restart issuance of savings bonds.
  - Introduce a bonds-on-demand facility to enhance liquidity and accessibility of government bonds.
  - October 2024: authorities published results of the auction of government securities to foster domestic capital markets and improve transparency.

### Monetary policy framework and financial stability
- Exchange rate peg (since 1975) remains a critical anchor; authorities strongly committed to policies sustaining the peg.
- Gross international reserves reached 209 percent of the Fund’s reserve adequacy metric at end-September.
- Revised Central Bank Act of 2020 strengthened CBB autonomy, governance, and limited monetary financing.
- Staff assesses Barbados’ external position as broadly in line with medium-term fundamentals and desirable policies.
- Given improved macro conditions and capital controls protection, authorities should consider removing the foreign exchange fee introduced in 2017.
- CBB is focused on enhancing its monetary policy framework to absorb structural excess liquidity:
  - Work to develop a benchmark monetary policy rate; internal research paper planned for early next year.
  - Liquidity forecasting unit testing a prototype daily liquidity forecasting framework; aim to submit refined version to the Executive Committee by end-2024 (end-March 2025 SB).
  - Key elements of a modernized framework proposed:
    (i) reserve requirements on domestic currency deposits to mop up structural excess liquidity;
    (ii) a mid-rate interest rate corridor, with a policy rate to signal the policy stance;
    (iii) standing deposit and lending facilities anchored to the policy rate;
    (iv) open market operations (OMOs) to anchor short-term interbank rates around the policy rate.
  - Implementation should be gradual with regular consultations with the bankers’ association.
  - Authorities committed to recapitalize the CBB in line with the 2021 plan.

### Financial sector safety net, ELA, and deposit insurance
- New CBB Act provides legal basis for Emergency Liquidity Assistance (ELA) and the CBB’s role as lender of last resort, authorizing ELA to systemically-important banks (SIBs) and systemically-important non-bank financial institutions (SIFIs) supervised by the FSC.
- Authorities working to establish an ELA framework including proactive liquidity and collateral scanning, in-depth testing of funding plans, and periodic simulations.
- CBB updating its Collateral Policy to differentiate collateral for monetary policy vs ELA and refining valuation methods.
- Strengthening operations of the Barbados Deposit Insurance Scheme with technical assistance from the US Treasury.
- As designated resolution authority under the Financial Institutions Act, the CBB should begin developing a resolution framework for financial institutions.

### AML/CFT enhancements
- Barbados was removed from the FATF “grey list” in February 2024 after implementing commitments under the FATF Action Plan.
- Reforms included: enhanced financial sector supervision, transparency of beneficial owners, use of financial intelligence, money laundering prosecutions, and asset recovery.
- Recent progress:
  - Beneficial ownership information made available and accessible to law enforcement via expedited court processes.
  - Designated non-financial businesses and professions (e.g., lawyers and accountants) now subject to more stringent requirements on internal audit functions and transactions with higher risk jurisdictions.
  - Full implementation of the Merida Convention via the Prevention of Corruption Act.
- Updating the National AML/CFT Risk Assessment by 2027 is highlighted as important for tailoring strategic AML/CFT reforms.

### Growth strategy and structural reforms
- Authorities aim to raise growth potential to 3-5 percent per year (BERT 2022 Plan) through:
  (i) increase climate resiliency and green the economy;
  (ii) invest in skills training and education;
  (iii) improve business environment to support trade and investment;
  (iv) mobilize domestic savings;
  (v) promote digital technologies;
  (vi) establish Barbados as a logistics hub;
  (vii) diversify into knowledge-based niche activities.
- Growth Council established May 2023 to support implementation.
- Recent policy steps:
  - July 2024: new Barbados Population Policy 2023 laid in Parliament to maintain sufficient population for social care; plans to promote return of the diaspora, immigration of skilled workers, and support family wellbeing in reproductive decision making.
  - July Cabinet approval of “Barbados 2035—A Plan for Investment in Prosperity and Resilience,” a 10-year investment plan identifying 12 priorities with total cost up to US$11.6 billion over 10 years, of which up to US$5 billion could come from the public sector (contingent on fiscal space and financing availability).

### Digitalization and business environment improvements
- Completed establishment of a central online platform for government services and development of a digital platform to improve monitoring and execution of the Public Sector Investment Programme (end-September 2024 SB; met).
- Launched Single Registration Portal in September issuing a single TIN for BCED, NISSS, and BRA to new taxpayers.
- Established Business Barbados, expected to begin operations before end-FY2024/25, to manage corporate and intellectual property registry and offer business advisory services.
- August 2024: launched a digital clearing system to reduce bank check processing time to one day (from three to five days).

_1brbea2024002-print-pdf - 15. The authorities are continuing to make progress on SOE reforms to reduce the impact_

### 26. The authorities are continuing to implement Barbados’ ambitious climate policy

### 26. The authorities are continuing to implement Barbados’ ambitious climate policy

### Climate policy context and RSF support
- The authorities are implementing an ambitious climate policy agenda, supported by the RSF arrangement and other development partners.
- The RSF supports efforts through embedded policy reform measures (RMs) by providing long-term financing that generates fiscal policy space for investment and catalyzes investment in resilient infrastructure and the transition to renewable energy sources.
- Hurricane Beryl highlighted the need to accelerate reforms to increase climate resilience and secure a sustainable and prosperous future.
- Investments in climate resilience are expected to also help strengthen growth and the external position, mitigating risks to debt sustainability.

### Renewable energy expansion and targets
- Objective: make Barbados a green and fossil fuel-free country by 2035. (Authorities initially targeted 2030; current estimates suggest 2035.)
- Recent progress:
  - Share of installed solar power capacity reached 19 percent of total installed electricity capacity in 2023.
- Planned and ongoing projects:
  - Feasibility studies on a joint government–IFC project to develop the country’s first utility-scale onshore wind farm of 30-50 megawatts (MW) (8 -14 percent of the current total installed electricity capacity) in the northeastern part of the island.
  - Renewstable Barbados Inc., with IDB financing, is working to develop a solar power production facility with capacity of 13MW and an energy storage system using hydrogen technologies. The project cost is expected to be around US$165 million. Once complete, energy capacity is expected to be fully contracted through a 25-year Power Purchase Agreement (PPA) with Barbados Light and Power Company (BLPC).
- Legislative framework:
  - The new Electricity Supply Bill (RM#8) has been tabled in Parliament to establish an overarching framework for renewable energy investment, regulating generation, storage, transmission, distribution, dispatch, and sale of electricity, and to promote local participation.
  - Bill provisions include: creation of microgrids; underground placement of power lines; a requirement for BLPC to notify the Ministry of Energy in the event of major system failures; and enhanced regulatory oversight to balance corporate interests with consumer needs.
  - The drafting process began in 2019 with open public consultation during 2022-2023.

### Energy storage, grid capacity, and procurement
- Current grid absorption: the grid can only absorb around 100MW of electricity.
- Energy storage is critical to integrate renewable energy, balance supply and demand, and ensure stable electricity supply.
- Actions and targets:
  - A new framework was established in September 2023 to increase investment in energy storage (RM#6).
  - A four-year pilot is underway to gather data on the functioning of energy storage systems in Barbados.
  - Authorities are enhancing competitive procurement methods, including feed-in tariffs, auctions, and direct negotiations with international storage system providers to assess availability and affordability of storage solutions.
  - Target: first licenses for energy storage in place by the end of 2024.
- BLPC positions and assessments:
  - BLPC is pressing for full cost recovery of investments in battery storage, up to its initially requested amount of 90MW through the Clean Energy Transition Rider.
  - The Fair Trade Commission approved cost recovery for only 15 MW of the 90 MW applied by BLPC.
  - BLPC is conducting a full assessment of investments in battery storage that have already been approved.

### Financial sector: climate risks and regulatory work
- The Central Bank of Barbados (CBB) has joined the Network for Greening the Financial System (NGFS) and adopted a strategy with time-bound guideposts to build capacity to monitor and assess climate change risks (RM#9), leveraging IMF TA on climate risk analysis.
- Strategy objectives:
  - Ensure CBB staff capacity to understand and utilize datasets and tools for climate analysis.
  - Deepen understanding of climate hazards, exposures, and vulnerabilities.
  - Strengthen linkages between damages and the CBB’s macro-framework, leveraging location-specific damage estimates (e.g., to tourism buildings) from the Coastal Zone Management Unit.
  - Establish key milestones with the goal of achieving a fully integrated climate risk framework by 2026.
- Stress testing:
  - The authorities are on track to incorporate climate risks, starting with more imminent physical risks, into their bank stress testing framework by end-March 2025, with IMF TA (RM#10).
  - CBB has conducted a preliminary exercise and will continue to improve and refine its analysis, aiming to finalize the first exercise in the coming months.

### Public financial management, PPPs, and climate integration
- Authorities are advancing reforms to integrate climate concerns into the PFM process (RM#5), building on a diagnostic evaluation through C-PIMA.
- Objectives include improving integration of climate into:
  - Budget preparation.
  - Budget execution (including procurement).
  - Fiscal reporting.
  - Oversight and auditing.
- Specific actions:
  - Incorporating climate concerns into ongoing efforts to develop a PPP framework.
  - Deepening fiscal risk analysis.
  - Preparing guidelines on public investment project appraisal and maintenance.

### Mobilizing climate finance and institutions
- Climate investment needs and plans:
  - Current climate investment plans, based on the authorities’ programs, amount to around US$1 billion.
- Financing developments:
  - A soon-to-be-completed debt-for-climate conversion will reduce interest burden by swapping existing high-interest debt with low-interest debt guaranteed by the IDB and European Investment Bank (EIB). Savings will be used to service new IDB and Green Climate Fund (GCF) loans to fund the SCWR Project to enhance water supply resilience and reliability with a climate focus.
  - Legislation establishing a Blue Green Bank was approved by Parliament in June. The government plans to make its capital contribution of US$15 million by the end of the fiscal year, and a funding agreement has been signed with the GCF.
  - Pledged contributions from CAF, United States Agency for International Development (USAID), and other bilateral partners are expected soon, with the bank becoming operational in early 2025.
  - The new bank will support climate investment projects across the region of more than US$250 million, with an initial focus on resilient housing and renewable energy projects.
- Blue Bond:
  - Building on the successful issuance of the Blue Bond in 2022. The Blue Bond is estimated to have generated about US$50 million of savings for marine conservation projects.

### Data improvements and program performance
- Data improvements:
  - In July 2024, the Barbados Statistical Service (BSS) released quarterly estimates of activity-based GDP aligned to the benchmark Supply and Use estimates of 2016, benefitting from IMF TA support.
  - Authorities have requested further IMF TA to strengthen national accounts and GDP statistics, including prices, and continue improving external sector statistics (BPM6-based balance of payments for 2018-2021 and IIP statistics for 2017-2021), following IMF TA.
- Program performance and modalities:
  - All quantitative performance criteria (QPCs) and indicative targets (ITs) set for end-September 2024 were met.
  - End-September fiscal QPCs on the central government primary balance, external debt arrears, transfers to public institutions, and public debt were all comfortably met.
  - Monetary QPCs on net domestic assets (NDA) and net international reserves (NIR) were met with considerable margin.
  - ITs on central government domestic arrears, social spending, and arrears of public institutions were met.
  - All end-June 2024 program ITs were also met.
  - Program ITs/QPCs for December 2024 and March 2025 are unchanged from the third review.

*Source: 1brbea2024002-print-pdf - 26. The authorities are continuing to implement Barbados’ ambitious climate policy*

### Box 4. Barbados’ Debt-for-Climate Conversion

### Box 4. Barbados’ Debt-for-Climate Conversion

### Overview
- The debt-for-climate conversion exchanges existing high interest domestic debt for newly issued low interest domestic debt to generate savings and create fiscal room for climate change-related investment.
- The operation is described as generally neutral to the stock of public debt but expected to produce significant interest savings and enable upfront financing for climate resilience projects.

### Mechanics of the conversion
- Government plans to issue around US$295 million (4.1 percent of FY2024/25 GDP) of new domestic Barbadian dollar-denominated debt to domestic banks.
- The new issuance will be backed by an IDB/EIB guarantee (AAA rating) and issued at a low interest rate (still to be determined).
- Proceeds from the issuances will be used to repurchase higher interest domestic bonds (with coupon rates of up to 8 percent) from the NISSS and the private sector.
- The authorities are considering a private sector guarantee of up to US$75m that could take the overall deal up to US$375m (4.5 percent of FY2024/25 GDP).
- Debt serviced with savings from the debt conversion.

### Expected savings and fiscal impact
- Interest savings are expected to be significant at up to US$130 million (1.8 percent of FY2024/25 GDP) over the next 15-20 years, not accounting for the time value of money.
- The conversion is intended to create fiscal room for new loans for critical climate change-related investment while being generally neutral to the public debt stock.

### Financing and the South Coast Water Reclamation (SCWR) Project
- Total cost of the SCWR project is estimated by the IDB to be around US$110 million (1.5 percent of FY2024/25 GDP).
- Project scope includes construction of a new water treatment plant to improve water management and associated facilities to ensure water quality is suitable for agricultural irrigation and aquifer recharge.
- To frontload the project, the government has taken new loans from:
  - IDB: US$40 million
  - GCF: US$30 million
- These loans will be serviced with the savings from the debt conversion.
- These loans, together with an additional US$40 million of grants from the GCF, will fund the cost of the entire project.

### Key statistics (from the Box)
- New domestic debt issuance planned: US$295 million (4.1 percent of FY2024/25 GDP)
- Potential total deal with private guarantee: US$375m (4.5 percent of FY2024/25 GDP)
- Estimated interest savings: up to US$130 million (1.8 percent of FY2024/25 GDP) over 15-20 years (time value of money not accounted for)
- SCWR total cost: US$110 million (1.5 percent of FY2024/25 GDP)
- IDB loan for SCWR: US$40 million
- GCF loan for SCWR: US$30 million
- GCF grants for SCWR: US$40 million

*Source: 1brbea2024002-print-pdf - Box 4. Barbados’ Debt-for-Climate Conversion*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### 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,
  - “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.

### Global Risks — Identified risks, likelihood, impact, and policy responses
- Intensification of regional conflict(s).
  - Likelihood: High
  - Impact: Medium
  - Risk description: Escalation or spread of the conflict in Gaza and Israel, Russia’s war in Ukraine, and/or other regional conflicts or terrorism disrupt trade (e.g., energy, food, tourism, supply chains), remittances, FDI and financial flows, payment systems, and increase refugee flows.
  - Policy Response:
    - Move ahead with transition to a fully renewable economy to reduce reliance on fuel imports; raise domestic capacity for food and other goods supply; and diversify import sources.
    - Continue with efforts to strengthen the fiscal position, backed by structural reforms to maintain fiscal sustainability and improve the business / regulatory environment, thereby increasing investors’ confidence.

- Commodity price volatility.
  - Likelihood: High
  - Impact: Medium
  - Risk description: Supply and demand fluctuations (e.g., due to conflicts, export restrictions, OPEC+ decisions, and green transition) cause recurrent commodity price volatility, external and fiscal pressures and food insecurity in EMDEs, cross-border spillovers, and social and economic instability.
  - Policy Response:
    - Move ahead with transition to a fully renewable economy to reduce reliance on fuel imports; raise domestic capacity for food and other goods supply; and maintain fiscal and external sustainability.
    - If risk materializes, reprioritize government spending to provide targeted support to the most vulnerable.

- Global growth surprises — Slowdown.
  - Likelihood: Medium
  - Impact: Low
  - Risk description: Growth slowdown in major economies, including due to supply disruptions, tight monetary policy, rising corporate bankruptcies, or a deeper-than-envisaged real estate sector contraction, with adverse spillovers through trade and financial channels, triggering sudden stops in some EMDEs.
  - Policy Response (Slowdown):
    - Implement structural measures to improve competitiveness of the tourism sector; diversify tourist source countries beyond the UK, Canada, and the US; diversify the economy to reduce dependence on the tourism sector; and steadily execute climate-resilient investment to support domestic demand.

- Global growth surprises — Acceleration.
  - Likelihood: Low
  - Impact: High
  - Risk description: Positive supply-side surprises, monetary easing, productivity gains from AI, and/or stronger EMDE performance raise global demand and trade, and ease global financing conditions.
  - Policy Response (Acceleration):
    - Continue prudent fiscal policy backed by structural reforms to maintain fiscal sustainability, thereby increasing investors’ confidence; and enhance monetary policy framework by introducing appropriate monetary policy tools.

- Monetary policy calibration.
  - Likelihood: Medium
  - Impact: Medium
  - Risk description: Amid high uncertainty and data surprises, major central banks’ stances turn out to be too loose, hindering disinflation, or too tight for longer than warranted, which stifles growth and triggers increased capital-flow and exchange-rate volatility in EMDEs.
  - Policy Response:
    - Continue with efforts to strengthen the fiscal position backed by structural reforms to maintain fiscal sustainability, thereby increasing investors’ confidence; and enhance monetary policy framework by introducing appropriate monetary policy tools.

- Systemic financial instability.
  - Likelihood: Medium
  - Impact: Medium
  - Risk description: High interest rates and risk premia and asset repricing amid economic slowdowns and elevated policy uncertainty (including from elections) trigger market dislocations, with cross-border spillovers and an adverse macro-financial feedback loop affecting weak banks and NBFIs.
  - Policy Response:
    - Monitor financial system and stand ready to provide liquidity assistance if needed to maintain financial stability; and continue with efforts to strengthen the fiscal position backed by structural reforms to maintain fiscal sustainability and improve business / regulatory environment, thereby increasing investors’ confidence.

### Country-Specific Risks — Identified risks, likelihood, impact, and policy responses
- Deceleration of reform momentum.
  - Likelihood: Medium
  - Impact: High
  - Risk description: Delays in fiscal reforms generate market concerns about the fiscal consolidation and debt sustainability, undermining the private sector confidence necessary for investment.
  - Policy Response:
    - Adhere to the fiscal strategy under the program to generate high primary surpluses on a sustained basis and facilitate the programmed reduction in public debt to 60 percent of GDP by 2035/36.
    - Sustain the planned increase in investment and implement structural reforms to boost resilience and enhance growth prospects.
    - Maintain social spending measures to protect the vulnerable and maintain the consensus for reform.

- Loss of tourism competitiveness.
  - Likelihood: Medium
  - Impact: High
  - Risk description: Failure to maintain the upgrading of tourism assets and infrastructure leads to loss of attractiveness as a tourist destination and a decline in tourism revenue and FX earnings.
  - Policy Response:
    - Implement structural measures to increase competitiveness and boost private investment into the tourism sector.

- Extreme climate events.
  - Likelihood: Medium
  - Impact: High
  - Risk description: Extreme climate events cause damage to infrastructure and loss of human lives and livelihoods.
  - Policy Response:
    - Accelerate investment into climate resilient infrastructure that could mitigate disaster risk; and continue seeking financial arrangements to safeguard from natural disaster shocks (e.g., hurricane clauses in government debt and insurance, such as CCRIF).

*Source: Annex I. Risk Assessment Matrix (from the provided IMF content).*

### Annex III. Table 1. Barbados: Risk of Sovereign Stress

### Annex III. Table 1. Barbados: Risk of Sovereign Stress

### DSA Summary Assessment and Overall Signal
- Overall risk of sovereign stress: Moderate
- Near term: n.a.
- Medium term: Moderate
- Long term: Moderate
- Mechanical signal: (reported as consistent with medium- and long-term moderate signals)
- Commentary:
  - Barbados’ overall risk of sovereign stress is assessed to be moderate.
  - Under the baseline scenario underpinned by steadfast implementation of the proposed EFF policy measures and reforms, and the favorable debt service schedule, Barbados' public debt is assessed as sustainable.
  - Under the current baseline based on the recently-rebased GDP, the 60 percent-of-GDP debt anchor is projected to be reached by FY2035/36 with envisaged primary surpluses backed by the economic recovery and structural reforms.
  - Medium-term risks are assessed as moderate consistent with a mechanical moderate signal predicated on the projected primary balance path.
- Sustainability assessment: Sustainable (public debt continues to be assessed as sustainable under baseline with consistent implementation of the EFF and macroprudence)
- Note on pensions: Implementation of the authorities’ pension reforms is expected to make the National Insurance and Social Security financially sustainable for 25-30 years with no additional financing needs from the budget.

*Source: Fund staff.*

### Key Debt Stocks and Memo Items (end-FY2023/24)
- Total public debt (US$ million): 7,590.7
- Total public debt (percent of GDP): 110.9
- External debt (US$ million): 2,999.2
- Multilateral creditors (US$ million): 2,106.4
  - IMF (US$ million): 548.3
  - World Bank (US$ million): 220.0
  - IADB (US$ million): 924.6
  - Other Multilaterals (US$ million): 413.5
  - o/w: CDB (US$ million): 220.8
- Bilateral creditors (US$ million): 192.5
  - Paris Club (US$ million): 24.8
  - Non-Paris Club (US$ million): 167.7
- Bonds (US$ million): 546.6
- Commercial creditors (US$ million): 153.6
- Domestic debt (US$ million): 4,591.5
- Short-term debt (incl. T-Bills) (US$ million): 411.5
  - Held by central bank (US$ million): 181.2
  - Held by local banks (US$ million): 216.5
  - Held by local non-banks (US$ million): 13.8
- Long-term debt (incl. Bonds) (US$ million): 4,180.1
  - Held by central bank (US$ million): 313.4
  - Held by local banks (US$ million): 1,104.0
  - Held by local non-banks (US$ million): 2,762.7
- Contingent liabilities (US$ million): 181.6
  - Public guarantees (US$ million): 181.6
- Nominal GDP (US$ million): 6,844.1; 6,844.1; 7,292.4; 7,685.6

### Baseline Debt Dynamics and Projections (selected series)
- Public debt (percent of GDP) — selected fiscal years:
  - Actual 2023: 111.4
  - 2024: 102.8
  - 2025: 97.4
  - 2026: 92.2
  - 2027: 87.1
  - 2028: 82.2
  - 2029: 77.7
  - 2030: 73.9
  - 2031: 70.1
  - 2032: 66.3
  - 2033: 63.0
  - 2034: 59.6
  - 2035: 56.3
  - 2036: 53.8
- Change in public debt (percent of GDP) — selected:
  - 2024: -8.6
  - 2025: -5.4
  - 2026: -5.2
  - 2027: -5.1
  - 2028: -4.8
- Primary deficit (percent of GDP) — selected:
  - Actual 2023: -3.5
  - 2024: -3.8
  - 2025 onward (baseline path): -4.3 (persisting through much of medium term, then improving to -3.9 and -3.0 by later years)
- Noninterest revenues (percent of GDP): 26.6; 26.6; 26.0; 25.9; 25.9; 25.9; 25.9; 25.9; 25.9; 25.9; 25.9; 25.9; 26.0
- Noninterest expenditures (percent of GDP): 23.1; 22.8; 21.7; 21.6; 21.5; 21.6; 21.6; 21.6; 21.6; 21.6; 22.0; 22.0; 22.0; 22.9
- Automatic debt dynamics (percent of GDP): -1.6; -1.3; -0.5; -0.3; -0.1; 0.1; 0.2; 0.7; 0.7; 0.6; 0.8; 0.7; 0.7; 0.6
- Real interest rate and relative inflation (percent): 2.2; 2.6; 2.4; 1.9; 1.7; 1.8; 1.8; 2.2; 2.1; 2.0; 2.1; 1.9; 1.8; 1.7
- Real GDP growth (percent): -4.4; -3.9; -2.8; -2.1; -1.8; -1.7; -1.6; -1.5; -1.4; -1.4; -1.3; -1.2; -1.2; -1.1
- Gross financing needs (percent of GDP): 11.9; 13.4; 11.3; 10.0; 10.2; 12.3; 10.1; 9.4; 8.9; 9.7; 11.0; 9.4; 8.9; 9.3
  - of which: debt service (percent of GDP): 14.6; 17.2; 15.7; 14.4; 14.6; 16.6; 14.5; 13.7; 13.3; 14.1; 15.0; 13.4; 12.8; 12.4
  - Local currency debt service (percent of GDP): 10.8; 12.9; 10.0; 9.3; 9.3; 11.7; 9.8; 10.0; 9.8; 10.5; 11.4; 9.6; 9.2; 8.9
  - Foreign currency debt service (percent of GDP): 3.8; 4.3; 5.6; 5.0; 5.2; 4.9; 4.7; 3.7; 3.5; 3.6; 3.8; 3.6; 3.6; 3.5
- Memo macro indicators:
  - Real GDP growth (percent): 4.0; 3.6; 2.8; 2.2; 2.0; 2.0; 2.0; 2.0; 2.0; 2.0; 2.0; 2.0; 2.0; 2.0
  - Inflation (GDP deflator; percent): 2.2; 2.8; 2.5; 2.8; 2.9; 2.9; 2.8; 2.5; 2.5; 2.5; 2.5; 2.5; 2.5; 2.5
  - Nominal GDP growth (percent): 6.3; 6.6; 5.4; 5.1; 5.0; 4.9; 4.8; 4.5; 4.5; 4.5; 4.5; 4.5; 4.5; 4.5
  - Effective interest rate (percent): 4.8; 5.2; 4.6; 4.4; 4.5; 4.7; 4.7; 5.2; 5.3; 5.3; 5.6; 5.5; 5.5; 5.5
- Staff commentary: Public debt has been put on a downward debt trajectory after a temporary increase during the COVID-19 pandemic. It is projected to continue declining to meet the long-term target of 60 percent of GDP by FY2035/36, thanks to the recent revisions to GDP statistics and driven by prudent fiscal policies and steady economic growth.

### Debt Composition and Structure
- Composition remains broadly unchanged over the projection period; financing from domestic and external financial markets is expected to increase over the medium and long term.
- Debt by holder highlights (percent of GDP; end-FY trends shown in figures):
  - Domestic central bank, domestic commercial banks, domestic other creditors, external official creditors, external private creditors
- Debt by instruments: marketable debt vs nonmarketable debt; short-term (≤1 year), 1-5 years, >5 years
- Residual maturity (reported): 6. years (as shown in figure)
- Commentary: Central government is the chosen coverage for the DSA; State-Owned Enterprise debt guaranteed by the central government and the Central Bank of Barbados' debt to the Fund are added to central government debt in the analysis.

### Coverage, Disclosure, and Reporting
- Coverage in SRDSA: central government (Barbados has no state or local governments); CG-guaranteed SoE debt included; Central bank debt to IMF added.
- Subsector inclusion flags:
  - Budgetary central government: Yes
  - Extra-budgetary funds (EBFs): No
  - Social security funds (SSFs): No
  - State governments: No
  - Local governments: No
  - Public nonfinancial corporations: No (CG-guaranteed SoE debt included)
  - Central bank: Yes (Not consolidated; CB's debt (BoP support) to IMF is added)
- Reporting on intra-government debt holdings: central government is the primary reporting unit; other subsectors not consolidated in coverage.

### Realism of Baseline Assumptions (selected diagnostic findings)
- Commentary: The degree of a decline in public debt-to-GDP ratio over the past five years has decreased from the third review due to the recent revision to nominal GDP. The composition of public debt-creating flows has also changed, with greater debt-increasing effect from real exchange rate depreciation and real interest rates due to downward revisions to GDP deflator growth.
- Realism tools suggest the projected debt reduction is ambitious but staff view it as feasible given authorities’ commitment to fiscal discipline and structural reforms.
- Distribution diagnostics (percentile and comparative signals shown in figures): indicators for public debt to GDP, primary deficit, r - g, exchange rate depreciation, and historical output gap revisions are reported in figure diagnostics.

### Medium-Term Risk Analysis (MTI) — Key Indicators
- Fanchart width: 85.0
- Probability of debt not stabilizing (pct): 8.1
- Terminal debt level x institutions index: 36.9
- Debt fanchart index: 2.1
- Average GFN in baseline: 11.2
- Bank claims on government (pct bank assets): 13.0
- Change in claims on govt. in stress (pct bank assets): 2.5
- GFN financeability index: 8.9
- Prob. of missed crisis, 2024-2029 (if stress not predicted): 18.2 pct.
- Prob. of false alarm, 2024-2029 (if stress predicted): 25.0 pct.
- Mechanical medium-term signal: Moderate
- Commentary: The large width of the fanchart points to a high level of risk reflecting Barbados' history of high macroeconomic volatility, while the GFN Financeability Module suggests a lower yet still moderate level of risk. Triggered stress tests suggest natural disasters would not pose large enough shocks to warrant a change in the overall assessment.

### Long-Term Risk Analysis (selected points)
- Analysis conducted for scenarios including Large Amortization and a Custom Scenario.
- Baseline assumptions (selected long-run inputs shown in figure):
  - Real GDP growth: 2.0%
  - Primary Balance-to-GDP ratio: 4.3% (2029), 4.2% (2033 to 2037 average), 3.3% (Custom Scenario)
  - Real depreciation: -2.7%; -2.4%; -2.5% (respective columns in figure)
  - Inflation (GDP deflator): 2.8%; 2.5%; 2.5%
- Commentary: The long-term analysis shows gradual declines in GFN and debt relative to GDP both under the baseline and custom scenarios.

### Policy-Relevant Conclusions (drawn from commentary in source)
- Continued steadfast implementation of the proposed EFF policy measures and reforms is central to sustaining the downward debt trajectory.
- Prudent macroeconomic management and structural reforms are key to meeting the long-term debt anchor of 60 percent-of-GDP by FY2035/36.
- Pension reform implementation supports medium-term fiscal sustainability by making National Insurance and Social Security financially sustainable for 25-30 years without additional budget financing.

*Source: IMF staff (Annex III, Table 1 and associated figures).*

### Annex III. Figure 6. Barbados: Long-Term Risk Analysis (Continued)

### Annex III. Figure 6. Barbados: Long-Term Risk Analysis (Continued / Concluded)

### Demographics: Pensions
- Time horizons analyzed: 30 years, 50 years, Until 2100.
- Pension financing needs and total benefits paid shown in percent of GDP per year with highlighted values:
  - 0.0% (30 years)
  - 0.6% (50 years)
  - 1.0% (Until 2100)
- Graphic indicators referenced:
  - Pension Financing Needs (pp of GDP per year)
  - Total Benefits Paid (per cent of GDP)
  - GFN-to-GDP Ratio
  - Total Public Debt-to-GDP Ratio
- Commentary:
  - "The recent pension reforms are expected to make the National Insurance Scheme financially sustainable for 25-30 years."
- Projections and scenarios indicated:
  - Baseline: Custom
  - With pension cost increase
  - Long run projection and Projection series displayed over fiscal year timelines (labels include years like 20 24, 20 30, 20 36, …, 20 96 in the figures).

### Demographics: Health
- Indicators shown:
  - GFN-to-GDP Ratio
  - Total Public Debt-to-GDP Ratio
- Scenarios presented:
  - Baseline: Custom
  - Health (Demographics)
  - Health (Demographics + ECG)
- Commentary:
  - "The current healthcare expenditure policies would not pose significant sustainability risks."
- Projections displayed across long-run fiscal year timelines (figures include values from -10.0 to 16.0 and year labels such as 20 16 through 20 52).

### Climate Change: Adaptation
- Indicators shown:
  - GFN-to-GDP Ratio
  - Total Public Debt-to-GDP Ratio
- Scenarios presented:
  - Baseline: Custom
  - With climate adaptation (standardized scenario)
  - With climate adaptation (customized scenario)
- Commentary:
  - "Adaption expenditures would not significantly impact debt sustainability in the long run."
- Projections displayed across long-run fiscal year timelines (figures include values from -10.0 to 50.0 and year labels such as 20 16 through 20 52).

### Climate Change: Mitigation
- Indicators shown:
  - GFN-to-GDP Ratio
  - Total Public Debt-to-GDP Ratio
- Scenarios presented:
  - Baseline: Custom
  - With climate mitigation (standardized scenario)
  - With climate mitigation (customized scenario)
- Commentary:
  - "Mitigation expenditures would not significantly impact debt sustainability in the long run. While Barbados is not a large GHG emitter, the authorities are working to transition to a fully-renewable based economy."
- Projections displayed across long-run fiscal year timelines (figures include values from -10.0 to 50.0 and year labels such as 20 16 through 20 52).

---

### Annex IV. Reform Measures Supported by the RSF Arrangement

### Build Resilience to Natural Disasters and Climate Change
- RM1 (March 2023)
  - Measures:
    - (i) Approve the Planning and Development Act to improve the climate resilience of roads through improved drainage and other interventions.
    - (ii) Table in Parliament the Water Re-use Bill, incorporating the new water re-use policy.
    - (iii) Fully operationalize the National Environmental and Conservation Trust.
  - IMF CD Input: March 2023 (timing shown)
  - Expected Outcome:
    - (i) Incorporate climate adaptation priorities into road infrastructure planning and construction.
    - (ii) Enhance the use of rainwater and treated wastewater, reducing dependence on groundwater supplies.
    - (iii) Support projects enhancing marine protection and protect Barbados’ natural assets.
  - Development Partner Role:
    - World Bank Green and Resilient Recovery Development Policy Loan.

- RM2 (September 2023)
  - Measures:
    - (i) Include a fiscal risk statement focusing on climate change risks in the budget for FY2023/24;
    - (ii) Cabinet to approve Procurement Act regulations;
    - (iii) Cabinet to approve a sustainable/green public procurement framework;
    - (iv) Cabinet to approve guidelines for climate/green budget tagging and publish results in an annex in the annual budget.
  - Expected Outcome:
    - (i) Greater coverage and comprehensiveness in identification and quantification of fiscal risks related to climate events.
    - (ii) Enhance efficiency and effectiveness of public procurement and enable green/sustainable procurement considerations.
    - (iii) Provide information to formulate and assess impact of climate policies and facilitate mobilization of climate finance.
  - Development Partner Role:
    - IDB TA support on procurement and sustainable/green procurement framework and guidelines for climate/green budget tagging.
    - World Bank Green and Resilient Recovery Development Policy Loan, and World Bank TA on climate/green budget tagging.

- RM3 (September 2023)
  - Measure: Government to table the National Comprehensive Disaster Risk Management Policy.
  - Expected Outcome: Strengthen community readiness; increase number of ministries and agencies with an Operations Continuity Plan.
  - Development Partner Role: World Bank Green and Resilient Recovery Development Policy Loan.

- RM4 (March 2024)
  - Measure: Table amended Prevention of Floods Act incorporating the new Stormwater Management Plan.
  - Expected Outcome: Reduce the impact of floodings and increase overall water resilience.

- RM5 (March 2025)
  - Measure: Implement reforms to strengthen integration of climate concerns into the PFM process, based on a comprehensive diagnostic evaluation.
  - IMF CD Input: PIMA/C-PIMA assessment.
  - Expected Outcome: Improve integration of climate into all aspects of the budget cycle; strengthen budget preparation, execution, fiscal reporting, oversight and auditing.

### Reduce Green House Gas Emissions
- RM6 (September 2023)
  - Measures:
    - (i) Extend the tax holiday on electric vehicles;
    - (ii) Close remaining regulatory gaps in licensing policy/approvals framework to increase investments into battery storage technologies.
  - Expected Outcome: Promote private investment to support and accelerate transition to renewable energy sources.

- RM7 (March 2024)
  - Measure: Cabinet approval for the Energy Efficiency and Conservation Policy Framework to reduce energy use of all government agencies and develop efficient public lighting.
  - Expected Outcome: Improve energy efficiency and conservation in the public sector.

- RM8 (September 2024)
  - Measure: Table in Parliament the New Electricity Supply Bill to enhance competition and introduce local participation in renewable energy investment.
  - Expected Outcome: Regulate generation, storage, transmission, distribution, dispatch, supply, and sale of electricity; promote local participation, competition, and sustainable energy practices.
  - Development Partner Role: World Bank Green and Resilient Recovery Development Policy Loan.

### Mitigate Transition Risks
- RM9 (September 2024)
  - Measure: The CBB to adopt a strategy with time-bound guideposts for building capacity to monitor and assess climate change risks, build data collection mechanism and join the Network for Greening the Financial System.
  - IMF CD Input: Fund to provide TA support, including through CARTAC.
  - Expected Outcome: Refine the assessment of financial sector risks arising from climate change.

- RM10 (March 2025)
  - Measure: The CBB to include climate change risk in their bank stress testing exercise.
  - IMF CD Input: Fund to provide TA support, including through CARTAC.
  - Expected Outcome: Refine stress testing methodologies to include climate related risks.

---

### Annex V. Capacity Development Strategy: Updated Country Strategy Note

### Context and Collaboration
- Context:
  - "A three-year EFF arrangement along with an RSF were approved by the Executive Board in December 2022."
  - CD priorities include: institutional and analytical capacity development; strengthening the governance framework, notably in AML/CFT; supporting implementation of Barbados’ fiscal rules; enhancing tax administration and PFM; strengthening central bank market operations framework and financial sector supervision and regulation.
- Collaboration:
  - IMF CD historically covered fiscal issues, tax and customs reform, PFM legislation, fiscal rule frameworks, SOE oversight, restructuring of the MFEI, and pension reform.
  - LEG and MCM provided advice in Central Bank Law reform, debt management, modernization of the National Payment System, and CBB’s monetary policy toolkit.
  - STA (with CARTAC assistance) ongoing TA to strengthen capacity in national accounts and price statistics and to implement the e-GDDS framework.
  - The IMF’s resident representative office will remain a key channel of CD engagement; coordination with CARTAC and other CD providers at headquarters emphasized.
  - Collaboration with external partners highlighted:
    - World Bank on climate change adaptation and business climate.
    - IDB on Debt Swap Initiatives and Blue Bond issuance, climate change adaptation, sustainable/green procurement, climate budget tagging, and road infrastructure PPPs.
    - OECD on strengthening AML/CFT framework.

### CD Priorities and Integration
- Main CD objectives:
  - Operationalizing PFM and custom reforms.
  - Strengthening macro-fiscal analytical and forecasting capacity.
  - Maintaining a stable financial sector with improved risk-based supervision, including financial stress testing for climate related risks.
  - Strengthening monetary policy operations.
  - Improving national accounts and macroeconomic statistics.
- Integration:
  - CD delivery aligned with authorities’ reform objectives during 2018-22 EFF and continues under current EFF and RSF arrangements.
  - Country team coordination, mission participation, appropriate sequencing of CD across reform streams, and continued role of resident representative office emphasized.

### Implementing Fiscal Reforms to Ensure Debt Sustainability (Summary from Table 1)
- Objectives: Ensure debt sustainability by improving tax collections, fiscal institutions, analytical capacity, and strengthening social protection.
- Revenue Administration outcomes and achievements:
  - Improved customs administration core functions; modernization of legislative framework in line with international requirements.
  - Establishment of a Trusted Trader Program.
  - Creation of a 2021-25 Strategic Plan, compliance units and programs.
  - Strengthened core tax administration functions; operationalization of the Large Taxpayer Unit (LTU) and stepped-up audit program using third-party data.
- Public Financial Management outcomes and achievements:
  - Progress toward comprehensive, credible, and policy-based budget preparation (BPR) with partially achieved results; further TA planned.
  - Cash Management/Cashflow/Treasury Function: detailed TA provided; results partially achieved with further work required.
  - Asset and liability management (ALM): Partially achieved; support to SOEs and preparation of consolidated IPSAS financial statements ongoing.
  - Internal audit and oversight: IAC established and will meet formally from April 2023; movement toward central IA unit; risk-based internal audit functions progressing.

*Source: Annex III–V content from the provided IMF PDF content unit.*

### Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Continued)

### Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Continued)

### Implementing Fiscal Reforms to Ensure Debt Sustainability
- Objective: Ensure debt sustainability by improving tax collections, fiscal institutions, analytical capacity, and strengthening social protection.
- Public Financial Management (PFM)
  - TA/Training: FAD.
  - Engagement: Support provided to the New Public Finance Management Act, which was implemented in 2019, after being passed by Parliament. The authorities have put in place an action plan for public financial management reform to implement the new PFMA Act.
  - Achieved outcome: Improved laws and effective PFM institutions.
  - Future CD and program outcomes:
    - "A more comprehensive legal framework covering all stages of the public financial management cycle is enacted."
    - "The capacity of ministry of finance to plan, implement and sustain PFM reforms is enhanced."
- Public Investment Management (PIM)
  - TA/Training: FAD.
  - Engagement: Work planned for FY24 on PPP support.
  - Future CD and program outcomes: "Implementation of public investment projects is improved to deliver productive and durable public assets."
- Fiscal Risk (FRK)
  - TA/Training: FAD.
  - Engagement: The government introduced a fiscal risk assessment on the FY 2023/24 budget, discussing climate change-related risks.
  - Future CD and program outcomes: "Analysis, disclosure, and management of other specific fiscal risks are more comprehensive."
- Debt Management / MTDS
  - Objective: Formulate and implement a medium-term debt management strategy (MTDS) – MTD.
  - TA/Training: MCM.
  - Engagement: The Ministry of Finance identifies cost, risk, and other vulnerabilities in the debt portfolio through quantitative and qualitative analysis and uses this information to inform preparation of the debt management strategy.
  - Future CD and program outcomes: "Enhanced capacity in MTDS formulation and implementation."

*Source: Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Continued)*

### Maintaining Monetary and Financial Stability
- Objective: Strengthen the central bank’s autonomy and governance, and supervisory and crisis management framework, while addressing structural financial vulnerabilities.
- Central Bank Operations
  - Lender of Last Resort (LOLR)
    - TA/Training: MCM.
    - Engagement: The CBB received TA for actively sterilizing excess liquidity within the context of the exchange rate peg monetary framework, including the reconfiguration of the reserve requirement instrument. The CBB will set an implementation plan.
    - Future CD and program outcomes: "Clearly defined LOLR-related organizational arrangements."
  - Monetary policy toolkit and balance sheet
    - TA/Training: MCM.
    - Future CD and program outcomes: "The central bank’s monetary policy toolkit is effective in promoting financial and price stability."
- Financial Supervision and Regulation (Banks)
  - TA/Training: MCM.
  - Engagement/Achieved outcomes:
    - Banking legislation and regulations are aligned with Basel II/III requirements.
    - Banks have adequate capital adequacy made up of high quality capital instruments that is in line with issued regulations on Basel II/III.
    - Supervisors have the competencies to drive the implementation process of Basel II/III and to monitor bank’s compliance with the new requirements.
    - "The level of banks’ capital reflects well their risk profile, their business strategy, and their risk acceptance levels."
- Cybersecurity, Fintech, Non-bank Supervision, and RBS
  - TA/Training: MCM.
  - Outcomes and future CD:
    - "Supervisors have sufficient capacity to effectively supervise cybersecurity risk."
    - "Legal, regulatory, and supervisory frameworks for fintech are developed/strengthened."
    - "Institutional structure and operational procedures for RBS enhanced/developed."
    - "Participants exchange/acquire knowledge and skills on financial supervision and regulation."
    - "To implement a risk-based supervision (RBS) system and upgrade other supervisory processes."
    - "Strengthened institutional structure and operational and procedures for RBS implementation."
    - "Supervisors have sufficient capacity to effectively implement risk-based supervision and other supervisory processes."
- Systemic Risk Analysis
  - TA/Training: MCM.
  - Achieved outcomes:
    - "An effective organizational and inter-organizational structure for the FSU is established for financial risk."
    - "A systemic risk monitoring framework is implemented."
    - "Effective Stress Testing Model(s) are in place and being used for their intended purpose(s)."
    - "Staff capacity is enhanced in the production of the first Financial Stability Report (FSR)."
    - "The quality of data and integrity of information are ensured for financial stability analysis."

*Source: Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Continued)*

### Macroeconomic Programming and Analysis
- Objective: Stronger analytical skills and better macroeconomic forecasting and policy analysis at the Ministry / central bank / or other governmental agency(ies) to feed into the economic policymaking process – ANS.
- TA/Training: CARTAC.
- Achieved outcome: Medium-term macroeconomic framework tool (MFT) has been fully developed (subject to minor refinements) and performance is judged to be adequate for usage in policy analysis.
- Future CD and program outcomes:
  - "Sound medium-term macroeconomic framework (inclusive of GDP and inflation, commodity prices, the external and monetary sectors, and fiscal aggregates)."
  - "Strong institutional structures for macroeconomic policymaking."

*Source: Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Continued)*

### Improving Economic Statistics
- Objective: Enhance economic data to support policy design and implementation; strengthen compilation and dissemination according to internationally accepted statistical standards.
- Real Sector – National Accounts (NAC)
  - TA/Training: STA.
  - Achieved outcomes:
    - Benchmarking Barbados’ national accounts to a more recent base year (moving from 2010 to 2016) was completed.
    - New Supply Use Tables (SUT) and expenditure-based GDP series were estimated for the 2016 benchmark year in line with the 2008 System of National Accounts.
    - Data are compiled and disseminated using the concepts and definitions of the latest manual/guide.
  - Future CD and program outcomes: "Data are compiled and disseminated using the concepts and definitions of the latest manual/guide."
- Real Sector – Compilation and Dissemination Improvements
  - TA/Training: STA.
  - Achieved outcomes:
    - The authorities implemented the e-GDDS in 2021 and launched the National summary data page and adopted a machine-readable (SDMX) technology.
    - "Data are compiled and disseminated using the coverage and scope of the latest manual/guide."
    - Higher frequency data has been compiled and disseminated internally and/or to the public.
    - Metadata released internally and to the public have been strengthened consistent with the dataset to enhance interpretation and analysis.
    - "Staff capacity increased through training, especially on developing source data, compilation methods, and dissemination."
    - "A new data set has been compiled and disseminated internally and/or to the public."
- Real Sector – Prices
  - TA/Training: STA.
  - Achieved outcomes:
    - The authorities implemented the e-GDDS in 2021 and launched the National summary data page and adopted SDMX technology.
    - "Data are compiled and disseminated using the concepts and definitions of the latest manual/guide."
    - "Staff capacity increased through training, especially on developing source data, compilation of methods, and dissemination."
- Balance of Payments
  - TA/Training: STA.
  - Achieved outcome: "Data are compiled and disseminated using appropriate statistical techniques, including to deal with data sources, and/or assessment and validation of intermediate data and statistical outputs."
  - Future CD and program outcomes: "Improved timeliness of data made available internally and/or disseminated to the public (shorter delays)."
- Financial Soundness Indicators (FSI)
  - TA/Training: STA.
  - Achieved outcomes:
    - Technical assistance provided to support the compilation of core and encouraged FSIs.
    - "Compilation of core and encouraged FSIs."
    - "Improved periodicity, timeliness, and consistency of data."

*Source: Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Concluded)*

### Annex V. Table 2. Barbados: IMF Capacity Development Missions Since 2018 (Selected mission entries)
- Implementing Fiscal Reforms to Ensure Debt Sustainability (selected missions)
  - Customs Administration: Workload assessment – Human Resources needs; FAD; Apr – May-24.
  - Developing a Single ‘Omnibus’ Guarantee for Suspended Regime Management; CARTAC; Mar-24.
  - Belize Assistance to Barbados in Risk Scoring; FAD; Jun-23 and Sep-23.
  - Customs Modernization; FAD; Apr-23.
  - Strengthening Risk Management Capacity/Strengthening the Trusted Trader Program 2; CARTAC; Feb-23 and Nov-22.
  - Customs - Valuation Administrative Policy Suite and Valuation Audit; CARTAC; Oct-22.
  - Exemption Control Follow Up Mission; FAD and CARTAC; Sep-Oct-22.
  - Customs Cargo Clearance and Traceability; CARTAC; Jun-22.
  - Guidance on Audit; FAD; Jun-22.
  - Valuation Workshop for Customs to Post-Clearance Audit; FAD; Jun-22.
  - Development of the Exemption Control Capacity; FAD; Mar-22.
  - Strengthening Management of Goods in Bond or Suspensive Regimes; CARTAC; Mar-22.
  - Trade Policies and Compliance: Strengthening PCA; FAD; Nov-21.
  - Mapping and Modelling Core Cargo Clearance Processes; CARTAC; Jun-21.
  - FAD Led Diagnostic Mission; FAD; May-21.
  - Customs Administration; FAD; Apr-21.
  - TAX and Customs Follow up Diagnostic Mission; CARTAC; Apr-21.
  - Regional Seminar on Performance Management in Customs; CARTAC; Apr-21.
  - Reviewing the Customs Legislation; CARTAC; Mar-21.
  - Customs Administration; FAD; Mar-21, Feb-19, Mar-19.
  - Strengthening Risk Management Capacity in Customs; CARTAC; Jan-20, Oct-20, Jan-21, Nov-21.
  - TA in Risk Management and Post Clearance Audit (PCA); CARTAC; Nov-20.
  - To Design and Deliver Training to Middle Managers Customs (Remote); CARTAC; Aug-20.
  - Strengthening Resilience (Management Capacity); CARTAC; Jun-20.
  - Strategic Risk Management Training; CARTAC; Jun-20.
  - Strengthening Post Clearance Audit Capacity; CARTAC; Mar-19, Jan-20.
  - Installation Mission; CARTAC; Jan-20.
- Debt Management
  - Debt Portfolio Analysis (mission); CARTAC; Oct-21.
- Tax Administration and Policy (selected)
  - Enhancing Compliance Programs; CARTAC; Jan-Feb-23.
  - Organizational Arrangements - Compliance Risk Management Unit; CARTAC; Jun-22.
  - Developing a Data Warehouse; CARTAC; Oct-21.
  - Strengthening HQ Functions - Data Analytics; CARTAC; Aug-21.
  - Strengthening HQ Functions - Performance Management; CARTAC; Jul-21.
  - Tax and Customs Follow Up; FAD; Apr-21.
  - Follow-up missions and workshops listed through 2018–2024 (see mission dates including planned end of FY24).
- Public Financial Management (selected)
  - Fiscal risk analysis; FAD; Dec-24.
  - Budget Preparation; FAD; Oct-24.
  - Supporting the Transition to a Modern Treasury; FAD; Nov-23.
  - PIMA/C-PIMA; FAD; Sep-Oct-23.
  - Missions on treasury function reform, cashflow model review, and establishment of Cash Management Unit across FY22–FY23 with CARTAC involvement.
- Central Bank Operations and Financial Stability (selected)
  - Systemic Liquidity Management and ELA; MCM; Sep-24.
  - Refinancing Operations and ELA Framework; MCM; Feb-24.
  - Monetary Policy Toolkit and CBB Balance Sheet Assessment; CARTAC; Apr-23.
  - Systemic Liquidity Management and ELA On-Site; MCM; Feb-23.
  - Accounting and Auditing virtual TA entries in 2020.
  - Banking supervision and regulation; MCM; Nov-24.
  - Climate Risk Analysis; MCM; Jul-24.
  - Stress Testing; CARTAC; Jun-24.
  - Enhancing the Joint Financial Stability Report (FSR) of the CBB and FSC.; MCM; Sep-23.
  - Strengthening Cyber Security in Financial Institutions; MCM; Nov-22, Dec-22-Feb-23, Nov-23.
  - Workshops and training on cyber risk, fintech, climate risk supervision, and RBS spanning 2018–2024.
- Improving Macroeconomic Statistics (selected)
  - Barbados-External Sector Statistics (follow up); CARTAC; Mar-25.
  - National Statistics-GDP revision; STA; Jun-24.
  - Barbados-External Sector Statistics; CARTAC; Mar-24.
  - Barbados –TA-GDP- Review of Administrative Data; STA; Feb-24.
  - Barbados-TA- GDP Rebasing and measurement of informal activity; STA; Mar-23.
  - TA – CPIS/CDIS – Improve Timeliness; CARTAC; Oct-22.
  - TA - CPI - Updating CPI FY22; CARTAC; Apr-22.
  - Training - External Debt Statistics; CARTAC/STA; Apr-22.
  - Training - Introduction to GDP; CARTAC/STA; Mar-22.
  - TA - GDP - Improving GDP; CARTAC; Mar-22.
  - TA-HQ-GDP-Rebase; CARTAC; Jan-22.
  - TA – BOP/IIP – Improve Timeliness; CARTAC; Sep-21.
  - Barbados - TA - FSI - Improve FSIs compilation; STA; Sep-21.
  - TA-HQ-GDP-Benchmark Supply and Use; CARTAC; May-21.
  - Balance of Payments; STA; May-21.
  - (Remote TA) CARTAC: Enhance BOP and IIP Source Data; CARTAC; Mar-21.

- Note: Many mission entries include multiple dates or indicate missions planned or completed through FY24; the table entries explicitly note "[1]Refers to missions planned end of FY24."

*Source: Annex V. Table 2. Barbados: IMF Capacity Development Missions Since 2018*

*Source: 1brbea2024002-print-pdf - Annex V. Table 1. Barbados: Capacity Development Integration Matrix (Continued)*

### Annex V. Table 2. Barbados: IMF Capacity Development Missions Since 2018 (Concluded)

### Annex V. Table 2. Barbados: IMF Capacity Development Missions Since 2018 (Concluded)

### Improving Macroeconomic Statistics
- (Remote TA) National Accounts (Canada and CARTAC) — CARTAC — Nov-20
- (Remote TA) e-GDDS — STA — Sep-20
- (Remote TA) National Accounts (Canada Funded) — STA — Jul-20
- Monetary Data Reported in SRF — CARTAC — Apr-19
- National Accounts — CARTAC — May-18

### Maintaining Monetary and Financial Stability
- CARTAC: Measurement of the Informal Economy — CARTAC — May-23
- CARTAC: Balance of Payments Statistics — CARTAC — Mar-19
- CARTAC: National Accounts - Improve GDP-P estimates — CARTAC — Feb-19
- CARTAC: Consumer Price Index - Finalizing the Rebased Series for Dissemination — CARTAC — Oct-18

### Program context, objectives, and recent progress
- EFF: Extended Fund Facility approved on October 1, 2018, provided 341 percent of quota in the amount of SDR 322 million.
- Successor arrangements: joint 36-month EFF and Resilience and Sustainability Facility (RSF) approved by the Fund’s Executive Board on December 7, 2022.
- Augmentations under the 2018 EFF arrangement totaling SDR 114 million.
- External financing and development support:
  - Nearly US$1 billion in support in the form of policy-based loans from other international development institutions.
  - About US $300 million in project-based loans from other international development institutions.
- International reserves increased to US$1.6 billion at end-September 2024, from US$220 million in 2018.
- The Government requests:
  - Completion of the fourth review of the arrangement under the EFF, with the full purchase of SDR 14.175 million to be made available as budget support.
  - Completion of the fourth review of the RSF arrangement and the disbursement of SDR 28.35 million to be made available.

### Fiscal outcomes and anchors
- Debt anchor: debt-to-GDP path that converges to 60 percent by FY2035/36.
- Primary fiscal performance:
  - Primary surplus of 2.4 percent of revised GDP for FY2022/23.
  - Primary surplus target for FY2024/25 of 3.8 percent of GDP, calculated using revised GDP.
  - Primary surplus in FY2021/22 and FY2020/21 was a deficit of about 1 percent of GDP.
  - A margin of a further 0.5 percent of GDP dedicated to early repayment of public debt (FY2022/23 context).
- Near-term fiscal stance:
  - Strong primary surplus in the first half of FY2024/25 supported by robust fiscal revenues.
  - Policy goal in the second half of FY2024/25: accelerate capital spending while maintaining prudent controls over current spending, consistent with meeting the year’s primary surplus target of 3.8 percent of GDP.

### Structural reforms and climate resilience measures
- Fiscal and public sector reforms:
  - Implementation of mandatory use of a unique tax identification number for importers and exporters.
  - Establishment of an integrated online platform for government services and a platform for monitoring public sector investment.
- RSF-supported measures:
  - New Electricity Supply Bill tabled in Parliament to enhance competition in the electricity market and promote local participation in renewable energy investment.
  - Central Bank adopted a strategy for building capacity to monitor and assess climate change risks and joined the Network for Greening the Financial System.
  - Plans to establish a new Blue Green Bank, supported by RSF fiscal space, to finance green investments (affordable homes, hurricane-resilient roofs, electrification of transport, and other Paris-aligned investments).
  - Engagement has coincided with a debt-for-climate swap/operation (led by the IDB and EIB with support from the GCF) with proceeds supporting climate-resilient improvements to the South Coast sewage treatment plant.
- Recent climate-related shock: experience with Hurricane Beryl in July underscored the immediate importance of building resilience to climate change.

### Commitments and assurances
- The Government affirms that:
  - The policies in the attached MEFP are adequate to achieve the objectives underpinning the EFF and RSF arrangements and stands ready to take additional measures if necessary.
  - It will consult with the Fund in advance of any substantive revisions to the policies in the MEFP.
  - It will observe standard performance criteria regarding foreign exchange currency restrictions, multiple currency practices, and will not conclude bilateral payment agreements inconsistent with Article VIII of the Fund’s Articles of Agreement, nor impose or intensify import restrictions for balance of payments reasons.
  - It intends to publish this letter on the websites of the Ministry of Finance, Economic Affairs and Investment and the Central Bank of Barbados and authorizes the Fund to publish the letter, the Staff Report and attachments.

*Source: Annex V. Table 2. Barbados: IMF Capacity Development Missions Since 2018 (Concluded) and accompanying Letter of Intent and Supplementary Memorandum of Economic and Financial Policies (excerpts).*

### 3.2 percent of revised GDP, supported by continued economic expansion as well as reforms to

### 1brbea2024002-print-pdf - 3.2 percent of revised GDP, supported by continued economic expansion as well as reforms to

### Fiscal strategy and policy priorities
- Primary surplus of 3.2 percent of revised GDP achieved, supported by continued economic expansion and reforms to reduce transfers to SOEs, unwinding of exceptional COVID and Hurricane Elsa emergency-support programs, and continued prudent expenditure management.
- FY2024/25 budget aims for a primary surplus of 3.8 percent of GDP, enabled by prudent expenditure management and revenue gains including buoyant economic activity and mostly one-off gains from recent corporate income tax (CIT) reforms and a shift to IFRS17 for the insurance sector.
- Public investment assumed to increase to 3.4 percent of GDP in FY2024/25, up from 2.7 percent of GDP executed in FY2023/24.
- Primary surpluses are targeted to strengthen further over the medium term consistent with projected debt path.
- Government committed to fiscal and structural reforms: strengthen tax administration, further SOE reform to structurally reduce Central Government (CG) subventions, bolster public financial management (PFM) (including pension and social security sustainability), and enhance the enabling environment for growth and climate resilience.

### Revenue policy and administration
- Barbados Revenue Authority (BRA) modernization priorities:
  - Develop and implement Large Taxpayer Unit compliance improvement plan, scale up audit activity, expand electronic filing and digital payments to improve ‘on-time’ filing and payments compliance rates.
  - Increased use of third-party data to improve taxpayer base accuracy.
- Inter-agency initiatives and milestones:
  - Memorandum of Understanding between BRA and BCED established in March 2021 to enhance information sharing.
  - Data-matching project among BRA, BCED, and NISSS completed (structural benchmark end-March 2023); identified possible taxpayer duplication from BCED’s ASYCUDA system.
  - BRA completed development of a compliance risk management dashboard integrating BRA, BCED, and NISSS data to provide taxpayer risk ratings.
  - Single registration process completed to ensure mandatory use of the tax identification number (TIN) for importers and exporters (structural benchmark end-September 2024).
- Ongoing initiatives:
  - Single identifier project (BRA, BCED, NISSS) to clean historical data and facilitate compliance-risk-management reviews.
  - Single-registry portal launched and testing ongoing for new taxpayers; portal to be housed on Government and agency websites.
  - BRA Business Intelligence tool implementation completed; Phase 2 to include compliance risk management aspects; final demonstrations in May 2024 and work begun with Fiscal Risk Unit.
- Arrears and refunds:
  - Central government arrears fell from $1.2 billion at end-June 2018 to $217.8 million at end-September 2024.
  - SOE arrears declined from $755 million to $20.4 million over the same period.
  - Total legacy tax refund arrears discovered and verified amounted to $296.9 million at end-April 2022 (inclusive of legacy arrears).
  - BRA vetted stock of taxpayer arrears estimated at more than 10 percent of GDP; notifications sent to non-compliant taxpayers.

### Customs administration and trade facilitation
- BCED reforms and modernization:
  - Strengthened Internal Audit Division with terms of reference and risk-based work plan.
  - Developed KPIs for all units and operational dashboards for Trade Operations and Compliance and Enforcement Directorates.
  - Assessment of human resource needs underway with CARTAC and Caribbean Customs Law Enforcement Council; roadmap to fill critical vacancies (structural benchmark end-March 2025).
- Trade facilitation measures implemented:
  - ASYCUDA World upgraded with new modules; modernized Customs Act passed November 2021; Harmonized Commodity Description and Coding System 2022 version operational.
  - Eleven compliance plans developed; Trusted Trader Program expanded since 2020.
  - Single use of TIN for exporters and importers commenced; increased electronic forms and move toward paperless process.
- Near- and medium-term Customs priorities:
  - Operationalize Exemption Management Program, outreach, governance, and internal controls.
  - Implement BCED strategic plan, compliance framework, integrated risk management strategy, and enforcement manual.
  - Overhaul warehousing and duty-free shop system; risk classification for warehouses begun with CARTAC assistance.
  - Implement appeals mechanism and create Policy and Planning unit; operationalize compliance action plan for vehicle and auto parts imports.

### Tax and customs exemption regime
- Stock of approved waivers exceeds 6,000, with a significant cost in foregone revenues of 6 percent of GDP per year.
- Two-phase waiver modernization:
  - Phase 1: New legislative and regulatory provisions for duty and tax exemptions adopted by Cabinet and approved in Parliament (structural benchmark end-December 2022). Requirements: exemptions be “in the public interest”, approval by Minister of Finance and/or independent committee above thresholds, and revocation if recipients breach laws.
  - Phase 2: Time-bound recertification process requiring pre-existing waivers to re-qualify under modernized framework (structural benchmark end-March 2024); modernization implemented and recertification to commence.

### Public Financial Management (PFM) and budget process
- Modernized PFM Act introduced in 2019; tightened SOE borrowing approval and reporting with sanctions for non-compliance.
- Budget formulation enhancements:
  - Strengthen strategic phase via annual updates of fiscal strategy, multi-year expenditure ceilings, and binding spending ceilings informed by Cabinet instructions (procedural fiscal rule).
  - Align budget calendar with PFM Act and issue budget circular following fiscal framework publication.
- Documentation and reporting:
  - Mid-year budget review tabled by October 15 annually; from FY2023/24 Annual Budget Document includes assessment of budget alignment with fiscal objectives and comprehensive description of revenue/expenditure measures.
- Fiscal risk management and governance:
  - Fiscal Risk Unit created (structural benchmark end-June 2023) to prepare fiscal risk reports and annual fiscal risk statements, including climate change risks (reform measure end-September 2023).
  - NISSS cleared backlog and submitted financial statements covering 2010 to 2023 for audit by Auditor General (structural benchmark end-March 2024).
  - Procurement law approved December 2021; Procurement Regulations and green procurement framework approved (reform measure end-September 2023). Standard contracts for routine procurements developed (structural benchmark end-September 2024).
  - Cash Management Unit established within the Treasury (structural benchmark end-March 2024) to manage Consolidated Account, monthly cash plans, and bank reconciliations.
  - Public investment management reforms driven by 2023 PIMA recommendations; IMF TA scheduled for December 2024; public investment appraisal guidelines targeted by end-March 2025 to achieve objective of boosting public investment to 5 percent of GDP per year over the medium term.
  - PPP framework to be prepared by MFEI (structural benchmark end-March 2025) with IDB and IMF support and staff training beginning late 2024.

### Fiscal rule and fiscal council
- Procedural fiscal rule approved by Parliament in December 2021:
  - Government commits to prepare an annual monitorable fiscal strategy/framework over the medium term, regularly publish outcomes, and take remedial action when required.
  - Minister of Finance to table fiscal framework annually in August and a mid-year review report in October.
  - Deliberations over a numerical fiscal rule to resume once PFM systems strengthened.
- Fiscal Council established end-May 2023 to promote accountability and transparency; terms of reference and work plans advancing though regular operations delayed. Fiscal Council focus: slimming public expenditure (especially SOE reform) and institutionalizing Medium-Term Fiscal Strategy.

### Debt management and arrears
- Target for debt-to-GDP ratio below 60 percent set for FY2035/36; medium- and long-term macro framework consistent with achieving this target.
- 2024-25 to 2025-26 Medium Term Debt Management Strategy (MTDS) approved by Cabinet and to be laid in Parliament; objective to meet financing needs at lowest possible cost consistent with prudent risk.
- Domestic market re-engagement:
  - Regular issuance of Treasury Bills with optional non-competitive window for individual investors.
  - Reverse auction of Series D bonds concluded March 8, 2024; approximately 12 percent of outstanding bonds offered for repurchase; Government accepted lowest priced offers up to $2 million.
- Domestic arrears reduced from $1.9 billion at program start to approximately $260.1 million as of September 2024.
  - Central Government trade payables largely settled; residual $0.2 million to be cleared.
  - Commitment not to run new expenditure arrears.

### Public sector reform, pensions, and SOEs
- Public pension reform:
  - Legislation tabled May 2023 (structural benchmark end-March 2023) and attained Parliamentary approval August 2023 (structural benchmark end-March 2024).
  - Reform pillars: introduction of employee contributions for new public sector employees; parametric reforms to pension benefit calculations; NISSS to administer pension arrangements from January 1, 2024.
- NISSS recapitalization and reform:
  - Phase i: Infusion of $143 million from Consolidated Fund to restore Unemployment Benefit Account over three to five years; completed ahead of schedule with full disbursement end-March 2023.
  - Phase ii: Cabinet endorsed reform plan end-2022; Parliament approved NIS Revitalization Plan in December 2023, including gradual increases in pensionable age (from 67 to 68) and minimum contribution period for eligibility (from approximately 10 years to approximately 15 years) to be phased in over the next decade; eased participation for self-employed persons.
- SOE reform objectives and actions:
  - Unwind transitory support: transfers peaked at 8.3 percent of GDP in FY2020/21 and returned to near pre-pandemic levels of 6.8 percent of GDP in FY2023/24 (SOE transfers were 4.8 percent of GDP in FY2023/24 excluding earmarked revenues).
  - Mergers and rationalizations approved mid-to-late 2023: amalgamation of RDC and UDC and reform of NHC; reform of BAMC and shift away from subsidizing traditional sugar industry (structural benchmarks end-December 2023).
  - Comprehensive stocktaking of SOE financial performance undertaken (structural benchmark end-June 2023); health dashboard developed to identify risks and target reforms.
  - Modernization principles: shift commercial activities to private sector, modernize user-fees, enfranchisement in service delivery, eliminate inefficiencies via mergers/rationalizations.

### Monetary and financial sector policies
- Exchange rate peg to the US dollar since 1975 maintained as central policy objective; commitment across Social Partners to support peg.
- Central Bank of Barbados (CBB) reforms:
  - Amended Central Bank Law passed December 2020 to enhance autonomy, limit CBB financing to Government in line with best practice, reduce Ways and Means limit to 7.5 percent of CG revenues (from 10 percent at end-2017), and restrict purchases of Government securities to 3 percent of GDP on primary market in declared national emergency.
  - Gradual relaxation of exchange controls since August 1, 2019: allow Barbadians to open foreign-currency accounts, repatriate or keep foreign-currency proceeds, eliminate 70 percent surrender requirement, increase limits on personal travel facilities, and increase delegation to foreign-exchange dealers.
  - CBB recapitalization plan to address capital shortfall via gradual approach; recapitalization initially through profit retention and transition over approximately seven years to a predetermined payment plan until authorized capital fully paid-up.
- Safeguards and oversight:
  - 2023 Safeguards Assessment mission completed March 2023 found strong safeguards framework; gaps in internal audit, internal controls, cyber security and risk management to be addressed; Emergency Lending Assistance framework targeted by end-2024 with IMF TA.
  - Updated Memorandum of Understanding between MFEI and CBB clarifying responsibilities for servicing obligations under EFF/RSF arrangements.
- Financial sector monitoring and macroprudential framework:
  - CBB, FSC, and Barbados Deposit Insurance Corporation participate in Financial Oversight Management Committee (FOMC).
  - Effective banking regulatory framework: Basel II; financial statements prepared under IFRS.
  - CBB and FSC produce Financial Stability Report and sub-sector health-checks; CBB compiled quarterly core FSIs for deposit takers in line with IMF TA 2019.
  - Banking sector well capitalized with systemwide capital adequacy ratio more than twice regulatory minimum.
- Monetary toolkit and liquidity management:
  - CBB reviewed balance sheet capacity and monetary toolkit with IMF TA (structural benchmark end-November 2023).
  - Established liquidity-forecasting unit; active daily liquidity forecasting framework to be set up (end-March 2025 structural benchmark).
  - Exploring introduction of benchmark monetary policy rate anchored to exchange rate peg and target reserves, and new liquidity management instruments; internal research paper due end-March 2025.
  - Enhanced stress testing with satellite models linking macroeconomy to banking sector and preliminary climate stress tests.

### AML/CFT and international assessments
- February 2024 FATF assessment (on-site January 2024) concluded Barbados completed action plan to strengthen AML/CFT effectiveness; reforms included risk-based supervision, sanctions, timely beneficial ownership information, enhanced financial intelligence use, and repatriation/sharing of confiscated assets.
- Barbados removed from FATF grey list.
- National AML/CFT Risk Assessment to be updated by 2027; ongoing updates to licensee risk profiles.

### Growth-enhancing reforms
- BERT 2022 growth objective: increase productive potential to between 3.0 to 5.0 percent per annum.
- Growth pillars:
  - Incentivize small-scale private-sector investment in green transition.
  - Incentivize low- and middle-income housing.
  - Invest in skills training and education.
  - Preserve financial stability and mobilize domestic savings for local investment.
  - Make Government an enabler for productivity, competitiveness, and investment.
  - Establish Barbados as a logistics hub with strengthened regional and international linkages, particularly with Africa.
  - Implement targeted public investments for sectoral integration and climate-resilient infrastructure.
  - Promote a high-skilled, tech-heavy, carbon-neutral, marine-conscious economy.
  - Adopt open labour market policies to expand population base and improve productivity.
- Population and human capital:
  - Barbados Population Policy 2023–2024 approved May 2024 to promote sustainable development and quality of life.
  - National First Jobs Initiative and Apprenticeship Scheme introduced; return to free tertiary education at vocational, technical, and undergraduate levels.
  - Education Act to modernize teaching and system management; replace 11-plus exam; promote STEAM subjects.
  - Youth Advance Corps and National Transformation Initiative to provide training and access to courses, with objective of making Barbados world-class within seven (7) years.
- Business environment and digitalization:
  - Doing Business Sub‑Committee stocktaking (structural benchmark end-March 2023) identified priorities: finalize CAIPO second phase, broaden Trusted Trader program, fully operationalize ESAW by 2025.
  - Business Barbados to begin operations in FY2024/25 as a State-Owned Enterprise to champion customer-first business model.
  - GovTech agency established (structural benchmark end-September 2023); central online platform for government services and digital PSIP monitoring platform planned (structural benchmark end-September 2024).
- Competitiveness, finance access, and logistics:
  - Establish collateral registry, factoring program, and micro-leasing to enhance SME access to finance; Fair Credit Reporting (FCR) Act proclaimed May 2022.
  - Aviation strategy to establish Barbados as southern aviation hub; construct new cargo berth; expand flight training and maintenance capacity.
  - Food Terminal collaboration with Guyana and Suriname to reduce regional food import bill by 25 percent by 2025.
  - Electronic single window for trade to be fully operational by early 2026.
  - Review and update Companies Act; improve CAIPO efficiency via digital strategy.

### Sustainability and resilience to climate crisis
- RSF reform measures grouped into three pillars: (i) addressing immediate adaptation and resiliency priorities; (ii) reducing greenhouse gas emissions; and (iii) mitigating transition risks.
- Disaster risk management and contingency instruments:
  - Participation in Caribbean Catastrophe Risk Insurance Facility (CCRIF); natural disaster clauses introduced into domestic and external bonds to capitalize interest and defer amortization for two years following a major disaster.
  - IDB contingent credit facility up to US$80 million secured for natural disasters.
  - National Comprehensive Disaster Risk Management (DRM) Policy adopted (reform measure end-September 2023).
- Renewable energy and mitigation measures:
  - Commitment to 100 percent renewable energy target by 2035.
  - FTC published Feed-in Tariffs for IPPs; licensing system for IPP renewable energy projects established March 2022.
  - Closed regulatory gaps in FITs to promote storage technologies (reform measure end-September 2023).
  - Electricity Supply Bill tabled to modernize electricity regulation and facilitate renewable integration (reform measure end-September 2024).
  - Tax incentives and two-year excise and VAT holiday for electric vehicles introduced April 1, 2022 and extended with end date March 2026; reduction in tariff rates for alternative energy vehicles.
  - Largest electric bus fleet in region: 59 electric buses (65 percent of available bus fleet); plan to increase electric vehicle share in public transportation to about 85 percent by end-2025.
- Housing and Roof-to-Reef (R2R) initiative:
  - Housing agenda: build 10,000 houses in five years financed in part through rooftop solar (HOPE project); models include Government-provided land and contractor-led construction, infrastructure provision for small contractors, and rent-to-own NHC units for lowest-income households.
  - R2R initiative: island-wide integrated investment program including rapid roof replacement, water mains/reservoir upgrades, coral reef protection, conversion of outdoor toilets, re-siting utility infrastructure underground, national storage capacity for seven days of generators/water/food/medicine, and hurricane shelter upgrades.
  - Water reuse agenda advanced with Water Re-use Bill passed May 2023; Barbados Environmental Sustainability Fund (BESF) operational receiving funds from debt-to-nature swap as of end-FY2022/23.
  - Stormwater Management Plan to replace Prevention of Floods Act tabled (reform measure end-March 2024).
  - Energy Efficiency and Conservation Policy Framework approved to reduce energy use across government (reform measure end-March 2024).
- Green PFM and climate mainstreaming:
  - Fiscal risk statement including climate crisis risks included in FY2023/24 budget (reform measure end-September 2023); successor published for FY2024/25 in March 2024; commitment to sustain fiscal risk analysis in budgets.
  - Sustainable/green public procurement framework approved (reform measure end-September 2023).
  - Guidelines for climate/green budget tagging developed and pilot conducted; results published in annex of approved Estimates for FY2024/25 (reform measure end-September 2023).
  - Reforms to integrate climate concerns into PFM based on C-PIMA diagnostic; reforms targeted by end-March 2025.
- Financial sector climate risk capacity:
  - CBB to adopt strategy with time-bound guideposts for building capacity to monitor climate risks, build data collection mechanism, and join Network for Greening the Financial System (reform measure end-September 2024).
  - CBB to include climate risk in bank stress testing with MDB support (reform measure end-March 2025).
  - FSC developed climate stress tests for local insurance industry; CBB conducted preliminary climate physical risk stress testing for commercial banks with MDB support.

### Program monitoring, structural benchmarks, and quantitative targets
- Program implementation monitored via quantitative performance criteria, indicative targets, structural benchmarks, and reform measures; detailed in Tables 1–3 and TMU.
- Joint EFF-RSF arrangement subject to semi-annual reviews; fifth review on or after May 15, 2025.
- Selected structural benchmarks and reforms (status highlights as reported):
  - Revenue and administration: new exemption procedures (End-December 2022 – Met); data matching project (End-March 2023 – Met); formal transition requiring pre-existing exemptions to requalify (End-March 2024 – Met); mandatory use of TIN for border transactions (End-September 2024 – Met); assessment of BCED human resource needs (End-March 2025 – expected).
  - Public sector reform: NIF recapitalization plan (End-December 2022 – Met); public pension law tabled (End-March 2023 – Not Met/Implemented with delay); fiscal risk unit set up (End-June 2023 – Not Met/Implemented with delay); NIS financial statements submitted for audit (End-March 2024 – Not Met/Implemented with delay); Cash Management Unit established (End-March 2024 – Met).
  - SOE reform: amalgamation/reforms and BAMC reforms (End-December 2023 – Met); comprehensive SOE stocktaking (End-June 2023 – Met).
  - Central bank: review of balance sheet and toolkit (End-November 2023 – Met); active daily liquidity forecasting framework (End-March 2025 – target).
  - Growth/digital: GovTech agency established (End-September 2023 – Met); central online platform and PSIP digital platform (End-September 2024 – Met/Rephased).
- Quantitative performance and indicative targets summarized in Table 3 (selected program figures, in millions of Barbados dollars unless otherwise indicated):
  - Floor on the CG Primary Balance targets and actuals shown for multiple test dates (e.g., Target End September 2024: 210581; Actual End September 2024: ...).
  - Ceiling on Public Debt targets and actuals for multiple dates (e.g., Target End September 2024: 15,101; Actual End September 2024: 14,894).
  - Floor on Net International Reserves target: 1,200 with actuals above target in multiple periods (e.g., Actual End September 2024: 2,021).
  - Ceiling on Net Domestic Assets of the CBB target: 2,350 with actuals below target in multiple periods (e.g., Actual End September 2024: 1,577).
  - Targets extending to end-December 2024 and end-March 2025 include: Floor on the CG Primary Balance target End March 2025: 418558; Ceiling on Public Debt target End March 2025: 15,173; Ceiling on CG Domestic Arrears target End March 2025: 211201; Floor on Social Spending target End March 2025: 89119; Ceiling on Net Domestic Assets of the CBB End March 2025: 2,350; Floor on Net International Reserves End March 2025: 1,200.
- Technical Memorandum of Understanding (TMU) defines program exchange rates (as of 10/31/2022):
  - Barbadian dollar to the US dollar: 2.00000
  - Barbadian dollar to the SDR: 0.3896225
  - Barbadian dollar to the euro: 2.03052
  - Barbadian dollar to the Canadian dollar: 1.49308
  - Barbadian dollar to the British pound: 2.36763
  - Barbadian dollar to the East Caribbean dollar: 0.74445
  - Barbadian dollar to the Belizean dollar: 1.00000
- Definitions for program metrics and institutional coverage provided (e.g., Central Government consists of institutions covered under state budget including transfers to SOEs; fiscal year April 1 to March 31).

*Source: IMF staff report text as provided in the content unit.*

### 2020. The term “debt” will be understood to mean a current; i.e., not contingent, liability, created

### 1brbea2024002-print-pdf - 2020. The term “debt” will be understood to mean a current; i.e., not contingent, liability, created

### Definitions of "debt" and forms
- Debt is a current (i.e., not contingent) liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract.
- Primary forms of debt:
  - i) loans, including deposits, bonds, debentures, commercial loans and buyers’ credits, and temporary exchanges of assets equivalent to fully collateralized loans (such as repurchase agreements and official swap arrangements);
  - ii) suppliers’ credits, where the supplier permits the obligor to defer payments until sometime after delivery of goods or services; and
  - iii) leases, where the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding payments that cover operation, repair, or maintenance.

- Under this definition, arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

### Central Government (CG) debt classifications and contracting
- 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.
- CG guarantee: any explicit legal or contractual obligation of the CG to service a debt owed by a third-party debtor (involving payments in cash or in kind).
- CG debt is considered contracted when authorized by Barbadian law or approved by Parliament and signed or accepted by the relevant authority.

### Public institutions covered (as listed)
- Queen Elizabeth Hospital
- University of the West Indies
- Barbados Tourism Marketing Inc.
- Sanitation Service Authority
- Barbados Community College
- National Conservation Commission
- Transport Board
- Child Care Board
- Barbados Water Authority
- National Assistance Board
- 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
- Kensington Management Oval Inc.
- National Accreditation Board
- Southern Meats
- Caribbean Broadcasting Corporation

### I. Quantitative Performance Criteria — Overview
- Monitoring of various fiscal and monetary targets is specified with precise definitions and reporting frequencies.

H3 Floor on the CG Primary Balance
- CG primary balance = total revenues and grants minus primary expenditure; covers non-interest Government activities as specified in the budget; measured 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.
- Central Government primary expenditure:
  - Recorded on a cash basis; includes recurrent expenditures and capital spending; includes transfers to State-Owned Enterprises (SOEs).
  - Primary expenditures directly settled with bonds or any other form of non-cash liability will be treated as one-off adjustments, recorded as spending above-the-line, financed with debt issuance, and will affect the primary balance.
- Adjustor:
  - The primary balance target will be adjusted upward (downward) by the surplus (shortfall) in disbursements of grants relative to the baseline projection.
- Reporting:
  - Data 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).

H3 Ceiling on Stock of Net Domestic Assets (NDA) of the Central Bank of Barbados (CBB)
- NDA defined as difference between monetary base and sum of the NIR (excluding EFF/RSF disbursements used for budget support) and commercial banks’ and Part III companies’ foreign currency deposits at the CBB.
- Monetary base includes currency in the hands of the non-bank public plus vault cash, statutory cash reserve requirements, and the current account balances of commercial banks and non-bank financial institutions (Part III companies) at the Central Bank.
- Reporting:
  - Data reported monthly with a lag of no more than two weeks from the end-of-period (Section B, Table 2).

H3 Floor on Net International Reserves (NIR)
- NIR = difference between reserve assets and reserve liabilities with maturity of less than one year.
- Reserve assets include: monetary gold, SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country's reserve position at the Fund.
- Exclusions from reserve assets: sinking funds’ assets; assets pledged, collateralized, or otherwise encumbered; claims on residents; claims in foreign exchange arising from derivatives vis-a-vis domestic currency; precious metals other than gold; assets in nonconvertible currencies; illiquid assets.
- Reserve liabilities include: (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; (2) all liabilities outstanding to the IMF including EFF/RSF disbursements used for budget support.
- Adjustors:
  - NIR target adjusted upward (downward) by 75 percent of the amount of the surplus (shortfall) in program loan disbursements from multilateral institutions (CDB, IDB, CAF, IBRD) relative to the baseline projection.
  - NIR target also adjusted upward (downward) by the surplus (shortfall) in disbursements of budget support grants relative to the baseline projection.
- Reporting:
  - Data 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).

H3 Non-Accumulation of CG External Debt Arrears
- Performance criterion: The CG will not incur new arrears in payments of its external debt obligations at any time during the program.
- External arrears defined as a delay in payment beyond the grace period set in loan or debt contracts.
- Exclusions: arrears resulting from nonpayment 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.
- Reporting:
  - Data on external arrears by creditors will be reported immediately.

H3 Ceiling on CG Transfers and Grants to Public Institutions
- CG Transfers and Grants to Public Institutions include cash transfers and grants to entities listed in paragraph 2 above.
- Reporting:
  - Measured cumulative over the fiscal year and reported monthly with a lag of no more than four weeks from the end-of-period (Section C, Table 2).

H3 Ceiling on the Stock of Public Debt
- Public debt = domestic and external CG debt, SOEs debt guaranteed by the CG, and domestic CG expenditure arrears.
- Exclusions: interest and penalties arrears resulting from non-payment of debt service on external commercial debt subject to debt restructuring.
- For program purposes, stock of CG and CG guaranteed debt measured on the disbursement basis excluding valuation effects. Program FX rates in Table 1 used to value FX debt.
- Adjustors:
  - Ceiling adjusted upwards by the full amount of surplus in disbursements from multilateral institutions (CDB, IDB, CAF, IBRD) relative to baseline.
  - Ceiling adjusted downward by amount of nominal debt forgiveness in case of debt restructuring.
- Reporting:
  - CG debt and CG guaranteed debt data by issuer, creditor, maturity, and currency reported to the Fund quarterly with a lag of no more than four weeks from the end-of-period (Section D, Table 2). Data on external and domestic arrears reported as set forth elsewhere in this TMU.

### II. Indicative Targets

H3 Ceiling on the Stock of Domestic CG Expenditure Arrears
- Stock defined as sum of:
  - (a) any invoice received by a spending agency for goods, services, and capital goods delivered and verified, unpaid within the contractually agreed period (or, absent a grace period, within 60 days after the due date);
  - (b) non-contributory pension transfers (by CG only), wages and pension contributions to the NIS 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 defined as obligations on tax refunds that remain unpaid six months after the filing date.
- Reporting:
  - Data measured as stock observed as at test date and reported monthly with a lag of no more than four weeks from the end-of-period (Section C, Table 2).

H3 Floor on CG Social Spending
- Indicative floor applies only to CG expenditures on specified plans and programs, excluding operating expenditure, intended to positively impact education, health, social protection, housing and community services and recreational activities. Included programs:
  - 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.
- Reporting:
  - Data measured cumulative over the fiscal year and reported quarterly with a lag of no more than four weeks from the end-of-period (Section D, Table 2).

H3 Ceiling on the Stock of Public Institutions Expenditure Arrears
- Stock defined as sum of:
  - (a) any invoice received by a spending agency for goods, services, and capital goods delivered and verified, unpaid within the contractually agreed period (or, absent a grace period, within 60 days after the due date);
  - (b) wages and pension contributions to the NIS pending for longer than 60 days;
  - (c) arrears on Tax obligations defined as obligations on taxes in accordance with tax legislation.
- The list of public institutions covered by this indicative target is listed in paragraph 2 excluding University of West Indies (UWI).
- Reporting:
  - Data measured as stock observed as at the test date and reported monthly with a lag of no more than four weeks from the end-of-period (Section D, Table 2).

### III. Program Reporting Requirements and Data Submission (Table 2 Highlights)
- Performance monitored from data supplied to the IMF as outlined in Table 2; authorities to transmit data revisions promptly.
- Reporting frequencies and lags (selected key items preserved exactly):
  - Reporting on a daily basis, with a lag of no more than one week of the end-of-period:
    - CBB NIR, as defined in section I.
    - CBB GIR.
  - Reporting on a monthly basis, with a lag of no more than two weeks of the end-of-period:
    - CBB NDA, as defined in section I.
    - CBB survey showing composition of NFA, NCCG, CODC, COSE, OIN, and 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, with a lag of no more than four weeks of the end-of-period:
    - RPI index, its components, and weights.
    - CG budgetary accounts.
    - Net Domestic Financing and its components.
    - Net External Financing and its components.
    - Grants and transfers to public institutions listed in paragraph 2 as defined in Section I.
    - Stock of CG external arrears (interest, principal, and penalty amounts separately) by creditor (reported immediately).
    - Program loan disbursements from multilateral institutions (CDB, IDB, CAF, IBRD).
    - Budget support grants.
    - Liabilities of public-private partnerships (PPPs) (if any).
    - Stock of CG expenditure arrears by creditor and components as defined in Section II.
    - Stock of expenditure arrears of public institutions listed in paragraph 2 by creditor and components as defined in Section II.
    - BOP trade balance data.
    - CBB’s Cashflow Table deriving GIR and NIR.
  - Reporting on a monthly basis, with a lag of no more than six weeks of the end-of-period:
    - Other Depository Corporations (ODC) survey gross items for NFA, claims on the CBB, NCCG, COSE, OIN, deposits included/excluded from broad money, and liabilities to the CBB.
  - Reporting on a quarterly basis, with a lag of no more than four weeks of the end-of-period:
    - Nominal and real GDP.
    - Tourism and other real sector high frequency indicators.
    - Social expenditure and components as defined in Section II.
    - Financial position of public institutions listed in paragraph 2 including non-audited income statement, balance sheet and profit and loss accounts.
    - CG domestic and external debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity), and analogous data for CG guaranteed, and SOE non-CG guaranteed debt.
    - 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 and of any renegotiated agreement.
    - Stock of Tax Refunds and components as defined in Section II.
    - CBB Balance sheet.
    - Balance of Payments accounts.
  - Reporting on a quarterly basis, with a lag of no more than six weeks of the end-of-period:
    - Financial stability indicators by bank and by sector including regulatory capital, Regulatory Tier 1 capital, Risk-weighted assets, Total assets, Total liabilities, Nonperforming loans in BRB$ millions, and a list of additional indicators specified in Table 2.
  - 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.
    - Audited financial statements of Commercial Banks.

*Source: 1brbea2024002-print-pdf - 2020. The term “debt” will be understood to mean a current; i.e., not contingent, liability, created*

### 1.      Barbados is increasingly vulnerable to climate change related natural disasters.

### 1.      Barbados is increasingly vulnerable to climate change related natural disasters.

### Vulnerability and Recent Impacts
- Two recent hurricanes highlighted increasing vulnerabilities:
  - July 2021: Hurricane Elsa, a Category 1 storm, became the first hurricane to hit the island in over 60 years.
  - June 2024: Hurricane Beryl, a Category 3 storm, passed just forty miles south of the country.
- Economic and social impacts from Hurricane Beryl:
  - Significant damage to the agriculture sector.
  - Severe disruptions to the fishing and tourism industries.
  - Thousands of homes damaged or destroyed, displacing many in affected communities.
- Environmental degradation:
  - Rising sea temperatures and increasing terrestrial solid and chemical waste pollution degrade coastal water quality and contribute to ocean acidification.
  - More than 70 percent of the country’s coral reefs have suffered significantly from coral bleaching, primarily due to extended marine heat waves.
- Preparedness assessments:
  - World Risk Index: Barbados considered moderately prepared to face disasters.
  - Notre Dame Global Adaptation Initiative (ND GAIN) country index: ranks Barbados 30 with a moderate score of 61.1 in 2024.

### Climate Projections Cited
- Fifth Assessment Report of the United Nations Intergovernmental Panel on Climate Change findings referenced:
  - Projected air temperature rise across the Caribbean by 1–4°C with a tendency towards drier conditions in the wet season.
  - Expected annual precipitation decrease by 12 percent.
  - Projected surface water temperature increase by up to 3 °C.
  - Mean sea level rise is expected to reach 0.6 m.
  - Predicted increase in storm intensity and frequency of Category 4 and 5 hurricanes across the Caribbean over the next decades.

### Government Adaptation Policies and Resilience Priorities
- Key measures and commitments:
  - Secured guarantees totaling US$300 million from the Inter-American Development Bank and the European Investment Bank to support an innovative debt-for-climate operation.
  - Central Bank of Barbados adopted a strategy to build capacity to monitor and assess climate change risks, including building a data collection mechanism and joining the Network for Greening the Financial System.
  - Government launched a comprehensive Plan for Investment in Prosperity and Resilience as an overarching roadmap for sustainable development and climate resilience.
  - Authorities are working to incorporate climate risks into financial stability assessments and integrate climate considerations into the public financial management process.

### Climate Mitigation Policies and Energy Sector Actions
- Recent mitigation and emissions-reduction initiatives:
  - Enhanced competitive procurement methods to increase investments in battery storage technologies and support expansion and integration of renewable energy.
  - New Electricity Supply Bill passed by parliament on September 27, 2024 to promote competition in the electricity market and encourage local participation in renewable energy investments.
  - Reduced taxes on electric vehicles and development of regulations related to green procurement.
  - Cabinet approval of the Energy Efficiency and Conservation Policy Framework to reduce energy use across all government agencies and develop efficient public lighting systems.

### Pollution Control, Regulatory Developments, and Opportunities
- Regulatory progress:
  - Implementation of the Pollution Control (Discharge) Regulations and establishment of a List of Pollutants with their Prohibited Concentration levels.
  - Environmental Protection Department (EPD) finalizing the Marine Pollution Control (Discharge) Regulations with the goal of having the table of prohibited concentrations signed into law by December 2024.
  - Enactment expected to empower EPD to act against pollution discharges exceeding established standards and provide clearer requirements for wastewater treatment from development projects.
- Opportunities:
  - These regulations are intended to provide certainty to developers, planners, engineers, and architects and create opportunities for sustainable development and environmental protection.

### Climate Finance, Debt-for-Climate Operations, and World Bank Engagement
- World Bank engagement:
  - As an IBRD graduate, World Bank engagement is expanding; the Country Engagement Note with a strong focus on resilience to climate change is expected to be discussed by IBRD Board of Executive Directors on January 23, 2025.
  - Barbados Beryl Emergency Response and Recovery Project expected to be approved on November 21, 2024 to restore targeted, disaster-affected sectors, enhance climate-resilient infrastructure, and strengthen emergency preparedness and response capacities.
  - Climate Resilient Debt Clause (CRDC) would enable deferment of principal and interest payments to the Bank for up to two years in case of a natural disaster.
- Debt-for-climate operation and Sovereign Sustainability-Linked Loan (SSLL):
  - Guarantees from IDB and EIB: US$150 million each, totaling US$300 million.
  - Government secured a local-currency denominated SSLL from regional banks for around US$300 million.
  - SSLL terms:
    - Interest rate of 3.25 percent (around 4.1 percent including guarantee fees).
    - Grace period of 5 years.
    - Maturity of 20 years.
    - Includes natural disaster and pandemic clause allowing capitalization of interest and deferral of principal payments on the loan by up to two years following a qualifying event.
  - Use of proceeds:
    - Repurchased existing higher interest government bonds, most with coupons of 8 percent.
    - Authorities estimate the conversion will generate cumulative nominal interest savings of about US$125 million to maturity.
  - Ringfenced spending and linked finance:
    - Savings used to service loans from the IDB and Green Climate Fund (GCF) of US$40 million and US$30 million, respectively.
    - A US $40 million grant from the GCF will finance upgrades to the South Coast Water Reclamation (SCWR) plant and associated facilities for agricultural irrigation and aquifer recharge.
    - SSLL contains sustainability performance targets related to the volume and quality of water produced by the SCWR plant; failure to meet targets could result in financial penalties paid into the Barbados Environmental Sustainability Fund.

### Fiscal and Macro-Financial Context (IMF Staff Observations)
- Fiscal performance and debt dynamics:
  - First half of FY2024/25: primary surplus of 4 percent of GDP, exceeding program target of 1.5 percent of GDP.
  - Public debt (including government-guaranteed SOE debt) reduced to 105 percent of GDP by end-September 2024, down from 111 percent at the end of FY2023/24.
  - Public debt declined from 138 percent of GDP during the COVID period to roughly 105 percent by end-September 2024.
  - Government commitment to align with a 60 percent debt-to-GDP target by FY2035/36.
  - Sovereign Risk and Debt Sustainability Framework (SRDSF) confirms public debt is sustainable, with only a moderate risk of sovereign stress.
- Drivers of stronger fiscal outcomes:
  - Strong revenue overperformance driven by higher-than-expected collections from corporate income tax (CIT), property tax, and value-added tax (VAT).
  - Policy and administrative measures:
    - Implementation of International Financial Reporting Standards (IFRS17) for the insurance sector.
    - November 2023 CIT reform increased tax rates for certain companies and introduced monthly prepayments.
    - Early issuance of land tax bills boosted property tax collection.
  - Expenditures remained within budget despite Hurricane Beryl, enabling targeted support for affected sectors and maintaining high levels of social spending.
- Public financial management and reform measures:
  - Development of public investment appraisal guidelines supported by the 2023 Public Investment Management Assessment (PIMA/C-PIMA) recommendations.
  - Establishment of a Cash Management Unit to streamline account management and spending oversight.
  - Use of standard procurement contracts to reduce delays; progress toward a Public-Private Partnership (PPP) framework.
  - Updated Medium-Term Fiscal Framework and Mid-year Fiscal Report tabled in Parliament.
  - Fiscal Council operationalized; expansion of fiscal risk analysis to address climate and other macroeconomic risks.
  - Reforms to bolster PFM and rationalize SOEs through restructuring and efficiency improvements.
- Program performance under IMF facilities:
  - All quantitative performance criteria, indicative targets, and structural benchmarks under the EFF were met, with some exceeding targets or completed ahead of schedule.
  - Progress under the RSF includes tabling a new Electricity Supply Bill in Parliament and CBB adoption of a climate risk monitoring strategy.

*Source: IMF staff report and associated statements (December 5, 2024; December 18, 2024).*

### 2024. In October and November 2024, Fitch upgraded Barbados to B+ (Stable) and Standard

### 1brbea2024002-print-pdf - 2024. In October and November 2024, Fitch upgraded Barbados to B+ (Stable) and Standard

### Ratings and fiscal progress
- Fitch upgraded Barbados to B+ (Stable) in October and November 2024.
- Standard & Poor’s upgraded Barbados to B (Positive).
- Moody’s rating remains at B3 (Stable).
- Upgrades reflect progress in achieving large primary surpluses and reducing the public debt-to-GDP ratio.
- Upgrades follow positive adjustments in ratings and outlooks in 2023, highlighting effectiveness of efforts to strengthen public sector finances.

### Strengthening monetary policy and advancing financial sector oversight
- The Central Bank of Barbados (CBB) has maintained strong reserves to support the currency peg.
- As of September 2024, gross international reserves reached US$1.6 billion, equivalent to more than 7 months of imports of goods and services.
- Reserve support driven by improvement in the current account, FDI inflows, and disbursements from international financial institutions.
- CBB policy modernization initiatives:
  - Development of a benchmark monetary policy rate aligned with Barbados’ exchange rate peg and target reserves level.
  - Testing a daily liquidity forecasting framework.
  - Plans to implement reserve requirements, a mid-rate interest rate corridor, standing deposit and lending facilities, and open market operations.
  - Establishment of a liquidity forecasting unit to enhance capacity for managing reserve supply and monitoring banks’ demand for precautionary reserves.
- Financial sector resilience measures:
  - Establishing an emergency liquidity assistance (ELA) framework and enhancing the deposit insurance scheme.
  - New CBB Act provides legal foundation for ELA to systemically important institutions, with updated policies to manage liquidity and collateral.
  - Implementation of a robust safeguards framework addressing governance, legal, and financial reporting gaps.
- Enhanced monitoring and governance:
  - Amendments to the Central Bank Act empower the CBB to oversee systemic risks more effectively.
  - CBB collaborates with the Financial Services Commission and the Barbados Deposit Insurance Corporation to produce annual Financial Stability Reports and conduct sectoral health checks.
  - Stress testing frameworks enhanced with macroeconomic linkages and preliminary climate stress tests.

### Implementing growth-enhancing reforms
- Growth strategy aims for 3 to 5 percent annual growth under the BERT 2022 Plan.
- Central pillar: Barbados 2035 Investment Plan prioritizing tourism, renewable energy, and infrastructure development.
- Barbados Population Policy 2023 (approved in May) encourages return of the diaspora and skilled immigration to support social care and economic development.
- Business environment improvements:
  - Launch of a central online platform for government services.
  - Digital platform for monitoring public investments.
  - Single Registration Portal to streamline tax processes.
  - Business Barbados to begin operations in FY2024/25 to modernize corporate services and facilitate business growth.
- Infrastructure and competitiveness investments:
  - Bridgetown Port upgrades, expanded air routes, and a regional Food Terminal.
  - Renewable energy initiatives, affordable green housing, and education reforms to build a skilled workforce.
- Governance of reform agenda:
  - Stocktaking of execution overseen by the Doing Business Sub-Committee of Cabinet and Private Sector Committee to inform and prioritize reforms.
  - Establishment of a Growth Council to sustain reform momentum and accountability.

### Building resilience to climate change and RSF-related reforms
- Barbados recognized for advancing climate and energy transition agenda; RSF plays a pivotal role in mobilizing additional resources.
- Notable initiatives and policies:
  - Bridgetown 3.0 and a groundbreaking debt-for-climate swap.
  - Roofs to Reefs Programme emphasizing infrastructure and natural environment preservation.
  - Bridgetown Initiative advocating for IFI reform to address liquidity support while restoring debt sustainability.
  - Adoption of Water Reuse Policy, Integrated Coastal Zone Management Plan, and Comprehensive Disaster Risk Management Policy.
- Renewable energy and sector incentives:
  - Commitment to reaching 100 percent renewable energy target by 2035.
  - Temporary feed-in-tariffs and temporary tax reductions to accelerate small-scale private investment in energy generation, transport, tourism, and agriculture.
  - Electricity Supply Bill to modernize electricity sector regulation across generation, transmission, distribution, and sale.
- Climate finance and RSF support:
  - RSF arrangement supports implementation of the climate agenda, requiring significant investments in water, renewable energy, and housing.
  - IMF Climate Finance Task Force working with authorities and development partners to scale up climate finance in Barbados.
- Debt-for-climate swap outcomes:
  - Generated US$125 million in fiscal savings to fund climate adaptation projects (including upgrading the South Coast sewage treatment plant into a modern water reclamation facility and other water resource management initiatives).
  - Backed by US$300 million in guarantees from the Inter-American Development Bank (IDB) and European Investment Bank (EIB).
  - Secured a long-tenor, local currency loan under favorable terms to enhance water and food security, reduce marine and groundwater pollution, and protect ecosystems.

### Concluding remarks and Fund engagement
- Barbados has achieved significant progress in its reform agenda to restore macroeconomic stability.
- Continued support and partnership of the Fund through the EFF and RSF arrangements is expected.
- Authorities request Executive Directors’ support for the completion of the fourth reviews under the EFF and RSF arrangements.

*Source: 1brbea2024002-print-pdf - 2024.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1brbea2024002-print-pdf.pdf_