## 1brbea2025001-print-pdf ## Source details **Canonical URL:** [1brbea2025001-print-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1brbea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1brbea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1brbea2025001-print-pdf.pdf.json) --- ### Executive summary — context and program implementation - Authorities implemented the home-grown economic recovery and transformation (BERT 2022) plan and an ambitious climate agenda, supported by the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) arrangements. - Economic activity was robust in 2024, driven by tourism, construction, and business services. - Inflation moderated; international reserves remained ample at US$1.6 billion (equivalent to over 7 months of import cover), supporting the exchange rate peg. - Fifth and final reviews of the EFF and RSF completed, making available remaining disbursements of SDR 14.175 million under the EFF and SDR 28.35 million under the RSF. - All quantitative performance criteria (QPCs) and indicative targets (ITs) for end-March were met; all structural benchmarks (SBs) for the fifth review were met. ### Recent developments and near-term outlook - Growth and activity - Real GDP: expanded by an estimated 4 percent in 2024. - Q1 2025 growth: estimated 2.6 percent. - Long-stay tourist arrivals: grew by 11 percent in 2024; 2.4 percent in Q1 2025. - Cruise arrivals: rose by 37 percent (YoY) in Q1 2025. - Construction growth: 7 percent in 2024. - Business and other services: expanded by 4.6 percent in 2024. - Labor market - Unemployment rate: declined to 7.1 percent through Q3 2024 from 8.3 percent in Q3 2023. - Labor force participation: 65.8 percent (up 4 percentage points relative to Q3 2023). - Unemployment claims: fell by 19 percent in 2024; rose 3.1 percent in Q1 2025. - Inflation and prices - Inflation (12-month average): 1.4 percent at end-2024; 0.9 percent at end-February 2025. - Financial sector - Credit to the non-financial private sector: grew by around 5 percent in 2024 and 1.4 percent in Q1 2025. - Foreign currency deposits: surged 20 percent in 2024. - Finance companies and credit unions NPLs: declined to 9 percent and 10.8 percent, respectively. - External position - Current account deficit: narrowed to 4.5 percent of GDP in 2024 from 8.8 percent in 2023. - Gross international reserves: US$1.6 billion at end-2024; US$1.7 billion at end-March 2025 (equivalent to over 7 months of imports). - Sovereign ratings (end-April): S&P B (positive outlook); Moody’s B2 (stable outlook; upgrade in April 2025); Fitch B+ (stable outlook). - Sovereign debt spreads: increased to the 450-500 basis points range. ### Fiscal performance and composition (FY2024/25 and FY2025/26) - FY2024/25 outcomes - Primary surplus: B$621 million (4.3 percent of GDP). - Overall fiscal balance: deficit of 0.9 percent of GDP. - Revenues overperformed budget projections by 2.8 percent of GDP, driven primarily by CIT receipts. - One-off “solidarity” allowance prepaid: B$300 per eligible person (0.4 percent of GDP). - Public debt (including government guaranteed SOE debt): declined below 105 percent of GDP at end-March, from around 111 percent at end-FY2023/24. - Cash buffers: 4 percent of GDP at end-March 2025 (equivalent to about 2 months of expenditures). - FY2025/26 budget targets and medium-term path - Targeted primary fiscal surplus: 4.4 percent of GDP. - FY2025/26 capital investment: projected to reach 2.8 percent of GDP. - Real increase in critical social spending: 5 percent (including additional B$8 million). - Overall fiscal balance projected: – 0.3 percent of GDP. - Medium-term commitment: bring public debt down to 60 percent of GDP by FY2035/36; primary balance projected to remain at a steady state of 4.4 percent of GDP. ### Drivers of revenue overperformance and risks - Main driver: corporate income tax (CIT) collections (overperformance of CIT: B$411 million). - Policy and behavioral drivers: - Increase in the CIT rate to 9 percent for most companies (from sliding scale of 1 to 5.5 percent). - Early realization of profits by some firms. - Implementation of IFRS17 for insurance companies affecting deductible assets. - Temporary vs. permanent assessment: - Authorities estimate around one third of the overperformance could be permanent. - Around two-thirds (1.8 percent of GDP) expected to be temporary. - Upside/downside risks: - Upside: domestic minimum top-up-tax (DMTT) bringing effective tax rate to 15 percent for MNEs not incorporated into projections. - Downside: changes to adoption of Pillar II in some jurisdictions. ### Public debt, sustainability, and financing plans - Recent levels and trajectory - Public debt: 104.8 percent of GDP at end-FY2024/25, down from 111.5 percent at end-FY2023/24 and from peak 138.2 percent in FY2020/21. - Under program baseline, public debt expected to reach 60 percent of GDP by FY2035/36 with sustained primary surpluses and nominal GDP growth. - SRDSF assessment: overall risk of sovereign stress remains moderate; fanchart indicates moderate risk though with wide uncertainty. - Financing and market re-access - Disbursements from other IFIs: around US$155 million in FY2024/25; expected on average to remain at this level through FY2026/27. - Total loans and grants projected to reach around US$200 million (including South Coast Water Reclamation project grants). - With about US$45 million (0.6 percent of GDP) of 2029 Eurobonds maturing in April 2025, authorities preparing to re-access international capital markets in H2 2025 (contingent on global financial conditions). - Domestic issuance notable: B$250 million 20-year debenture issued (B$245 million subscription); T-bill stock about B$800 million. - Domestic interest rates: 2 percent on short tenors; 4.5 percent on BOSS bonds; 7.75 percent for the debenture. - IMF exposure and capacity to repay - Total Fund credit outstanding beginning to decline but near peak of around 500 percent of quota (345 percent of quota excluding the RSF) or about 8.3 percent of GDP in 2025. - Obligations to the Fund would peak at 3.8 percent of exports of goods and services in 2026 and 6.9 percent of projected reserves in 2028. - Gross international reserves expected to remain well above 100 percent of the Fund’s reserve adequacy metric throughout the projection period. ### RSF-supported climate and resilience actions; climate financing - RSF achievements - Completion of all 10 RSF policy reform measures covering mainstreaming climate change in the budget, introduction of ‘green PFM’, and measures to incentivize private and official investment in resilient infrastructure and renewable energy projects. - CBB included physical climate risk analysis in bank stress testing (RM#10). - Key elements to integrate climate into PFM (RM#5) delivered: project appraisal guidelines, deeper fiscal risk analysis, and PPP framework. - Climate financing and projects - Debt-for-climate conversion completed in December 2024; guarantees from IDB and EIB. - Savings used to service new IDB and Green Climate Fund (GCF) loans; US$40 million of GCF grants to finance South Coast Water Reclamation Project. - South Coast Water Reclamation Project: design and procurement completed; construction expected to begin in late-2025. - Blue Green Bank: legislation approved June 2024; government capital contribution US$15 million; regional investment ceiling US$250 million; expected operational in H2 2025. - World Bank Disaster Risk Management Development Policy Loan: US$30 million secured in April to boost disaster preparedness. ### Structural reforms, PFM, and tax administration - PFM and fiscal risk management - Project appraisal guidelines completed in March; rollout planned for all new government projects this fiscal year. - Fiscal risk register and heatmap produced; fiscal risk statement presented with FY2025/26 budget. - PPP framework prepared (SB #13) and adopted by Cabinet in May. - Tax and customs administration - BCED human resource needs assessment completed (SB #5); roadmap to fill vacancies in implementation. - Single registration process and single identifier project: portal went live for new taxpayers in May 2025. - Stock of approved waivers exceeds 7,000 with foregone revenues of 5.8 percent of GDP per year; recertification process to commence in 2025. - Central government arrears fell from $1.2 billion (end-June 2018) to $187.5 million (end-March 2025); SOE arrears declined from $755 million to $19 million over same period. - BRA developing a tax arrears management strategy with Fund TA. ### SOE reforms and public sector restructuring - SOE landscape and recent actions - By 2019, number of SOEs reached 58 with annual government transfers around 5.9 percent of GDP; transfers reduced and reforms pursued since 2018. - Recent mergers and restructurings: - Merger at beginning of FY2025/26: National Petroleum Corporation, Barbados National Oil Company Ltd., and Barbados National Terminal Company Ltd. - Amalgamation of Child Care Board, National Assistance Board, Welfare Department, and National Disabilities Unit into the Social Empowerment Agency. - Restructuring of Transport Board and National Housing Corporation ongoing. - FY2024/25 transfers to TMU SOEs were below program ceiling. - Policy emphasis: continue SOE rationalization, strengthen monitoring and governance, adhere to ex ante rules to reduce quasi-fiscal practices. ### Monetary policy framework, financial stability, and payments modernization - Exchange rate and reserves - Exchange rate peg maintained since 1975; CBB maintains ample reserves (205 percent of the Fund’s reserve adequacy metric at end-2024). - The 2 percent foreign exchange fee (introduced 2017) currently raises around 0.7 percent of GDP in revenue; IMF suggests considering removal with compensatory revenue measures. - Monetary framework enhancements - Daily liquidity forecasting framework developed (SB #18, end-March 2025). - CBB exploring a benchmark monetary policy rate and medium-term elements: reserve requirements, mid-rate corridor, standing facilities, and OMOs. - CBB intends to recapitalize per 2021 plan. - Payments modernization - Payments System Modernisation Project launched October 2024 with World Bank; objective to operationalise an instant payments system by March 31, 2026. - Financial safety net and resolution - ELA framework and collateral policy updated; CBB designated resolution authority to develop a resolution framework. - Work to strengthen Barbados Deposit Insurance Scheme ongoing, including potential expansion to credit unions. ### AML/CFT, data, and capacity development - AML/CFT - Barbados removed from the FATF “grey list” in February 2024. - Continued focus on effective implementation, supervision, law enforcement, and asset recovery; update National AML/CFT Risk Assessment by 2027. - Data and statistics - GDP rebased to 2016 in July 2024; BSS developing a SUT for 2023. - Ongoing BPM6-based BOP estimates for 2018-2021 and IIP statistics for 2017-2021 following IMF TA. - Cyberattack in late 2024 affected data; BSS capacity and timeliness improvements ongoing with IMF TA. - Capacity development priorities (2022–2025) - Focus on PFM, tax/customs reform, monetary policy operations, financial sector supervision (including climate stress testing), and national accounts rebasing to 2023. ### Risks, contingency planning, and staff recommendations - Risks (tilted to the downside) - External: trade policy and investment shocks in key source countries, tighter global financial conditions, geoeconomic fragmentation, regional conflicts, commodity price volatility. - Domestic: natural disasters, fiscal impacts from disasters, possible deceleration of reform momentum, cyberthreats. - RAM highlights (selected) - Trade policy and investment shocks — Likelihood: High; Impact: High. - Deepening geoeconomic fragmentation — Likelihood: High; Impact: Medium. - Natural disaster stress test (default shock of 4.5 percent of GDP): debt path remains below 75th percentile, consistent with “moderate” mechanical signal. - Contingency policy options suggested - Broadening the tax base (e.g., revamp VAT for tourism sector, introduce corrective excise taxes). - Reform property tax regime. - Further streamline current expenditures to create space for critical social and capital expenditure. - Staff appraisal and policy recommendations (selected) - Maintain strong fiscal surpluses to ensure debt sustainability; FY2025/26 target primary surplus: 4.4 percent of GDP. - Use additional revenue windfalls for critical capital spending or to rebuild fiscal buffers; avoid untargeted transfers. - Strengthen revenue administration, implement tax exemptions framework, develop tax arrears strategy, advance PFM and public investment management reforms. - Continue policies to sustain the exchange rate peg; build on CBB’s initial steps to strengthen monetary policy framework. - Advance digital payments infrastructure with target early 2026 for full digital payments system. - Continue structural reforms to improve business environment, digitalization, and talent attraction. ### Program monitoring, completion, and next steps - Staff recommends completion of the fifth review under the EFF and RSF arrangements; full purchase under the EFF (SDR 14.175 million) and RSF disbursements (SDR 28.35 million) requested to be made available as budget support. - All end-March 2025 QPCs and ITs met; all end-December 2024 program ITs met. - Authorities expressed interest in a follow-up program; if no successor arrangement within six months, staff will reconsider the case for a Post-Financing Assessment (PFA) given outstanding Fund credit exceeds 200 percent of quota. - Proposed shortening of Article IV consultation cycle back to 12 months; next Article IV expected by December 2025. *Source: 1brbea2025001-print-pdf (IMF staff report excerpts and annexes).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - Authorities implemented the home-grown economic recovery and transformation (BERT 2022) plan and an ambitious climate agenda, supported by the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) arrangements. - Economic activity was robust in 2024, driven by tourism, construction, and business services. - Inflation moderated due to easing global commodity prices and prices of domestic goods and services. - The external position strengthened: international reserves remained ample at US$1.6 billion (equivalent to over 7 months of import cover), supporting the exchange rate peg. - Near-term outlook remains stable but risks are tilted to the downside given the highly uncertain external economic environment and Barbados’ vulnerability to external shocks and natural disasters. ### Program Implementation - The fifth and final reviews of the EFF and RSF arrangements were completed, making available remaining disbursements of SDR 14.175 million under the EFF and SDR 28.35 million under the RSF. - Macroeconomic stability reinforced through: - Sustained increase in primary fiscal surpluses. - Continued decline in public debt. - Improvement in the external position. - Initial steps to enhance the monetary policy framework and strengthen financial safety nets. - Structural reforms implemented to boost fiscal sustainability, enhance growth and competitiveness, build resilience, and bolster balance of payments stability. - EFF specifics: - All quantitative performance criteria (QPCs) for the fifth review met. - Primary balance recorded a surplus of 4.3 percent of GDP in FY2024/25, exceeding the program target. - Public debt declined below 105 percent of GDP at end-FY2024/25 from 111.5 percent of GDP at end-FY2023/24. - The FY2025/26 budget targets a primary surplus of 4.4 percent of GDP. - Updated medium-term projections remain consistent with authorities’ commitments to bring public debt down to 60 percent of GDP by FY2035/36. - All three structural benchmarks (SBs) for this review were met: - Assessment of human resource needs at the Barbados Customs and Excise Department completed (SB #5). - Draft public-private partnership (PPP) framework prepared (SB #13). - Central Bank of Barbados (CBB) developed a daily liquidity forecasting framework (SB #18). - RSF specifics: - Both reform measures (RMs) for the fifth RSF review completed with IMF technical assistance. - Key elements to strengthen integration of climate concerns into public financial management (RM#5) delivered: development of project appraisal guidelines, deepening of fiscal risk analysis, and preparation of a PPP framework. - CBB included physical climate risk analysis in its bank stress testing exercise (RM#10). ### Box — Achievements Under the EFF / RSF Programs (summary) - EFF: - EFF and RSF approved in December 2022 in amounts of SDR 85.05 million and SDR 141.75, respectively. - Achievements included a gradual and sustained increase in primary fiscal surpluses (primary surplus increased by 2 percentage points of GDP), tax and customs administration strengthening, PFM improvements, parametric pension reforms, SOE rationalization, and growth-enhancing measures including digitalization. - Initial reforms to enhance monetary policy framework: daily liquidity forecasting framework and completion of the Emergency Liquidity Assistance framework. - RSF: - Completion of all 10 policy reform measures (RMs) covering mainstreaming climate change in the budget, introduction of ‘green PFM’, and measures to incentivize private and official sector investments in resilient infrastructure and renewable energy projects. - Mobilization of significant climate financing, including: establishment of a Blue Green Bank to support climate projects of up to US$250 million across the region; and the world’s first debt-for-climate conversion to finance upfront climate investment. ### Recent Developments and Outlook — Recent Developments - Economic growth: - Real GDP expanded by an estimated 4 percent in 2024, driven by tourism, construction, and business services. - Long-stay tourist arrivals grew by 11 percent due to increased airlift and the International Cricket Council Men’s T20 World Cup. - Construction growth reached 7 percent, driven by hotels and public sector infrastructure projects. - Business and other services expanded by 4.6 percent. - In Q1 2025, growth reached an estimated 2.6 percent, supported by further expansion in construction and tourism. - Long-stay arrivals grew by 2.4 percent in Q1 2025; cruise arrivals rose by 37 percent (YoY) to reach historic levels. - Labor market: - Unemployment rate declined to 7.1 percent through Q3 2024 from 8.3 percent in Q3 2023. - Labor force participation rose to 65.8 percent, up 4 percentage points relative to Q3 2023. - Unemployment claims fell by 19 percent in 2024 but rose slightly in Q1 2025 (3.1 percent), reflecting temporary layoffs in March linked to hotel renovations. - Inflation: - Inflation slowed to an estimated 1.4 percent (12-month average) at end-2024, and further to 0.9 percent at end-February 2025. - Lower cereal prices offset higher prices of some local agricultural products affected by unfavorable weather conditions. - International freight costs declined in H2 2024 from previously elevated levels. - Financial sector: - Credit to the non-financial private sector grew by around 5 percent in 2024 and a further 1.4 percent during Q1 2025, led by hotels and restaurants, real estate, and professional services. - Banking system NPLs continued to decline while capital, liquidity, and provisioning remain well above required levels. - Deposits grew significantly, driven by a 20 percent increase in foreign currency deposits, on the back of a surge in inflows to the tourism and construction sectors. - Financial soundness indicators: finance companies and credit unions saw NPLs decline to 9 percent and 10.8 percent, respectively, while capital-to-asset ratios remained stable. - Authorities announced measures to increase access to mortgage financing for low- and middle-income households, notably by expanding the Mortgage Indemnity Insurance Act to cover all qualified lenders. *Source: EXECUTIVE SUMMARY, 1brbea2025001-print-pdf* ### 7. Fiscal performance remained strong. The FY2024/25 primary surplus reached B$621 ### 7. Fiscal performance remained strong. The FY2024/25 primary surplus reached B$621 ### Fiscal performance and composition - Primary surplus in FY2024/25: B$621 million (4.3 percent of GDP), comfortably exceeding the program target. - Overall fiscal balance in FY2024/25: deficit of 0.9 percent of GDP. - Revenues overperformed budget projections by 2.8 percent of GDP, driven primarily by higher corporation income tax (CIT) receipts. - Public investment in Q4 increased to around 2.5 percent of GDP (1 percentage point above the Q4 average in recent years). - One-off “solidarity” allowance prepaid by government: B$300 for all citizens and legal residents over 18 years of age (0.4 percent of GDP). - Current transfers to SOEs rose in Q4, covering one-off restructuring costs, hospital salaries, and operating costs for the new GovTech entity. - Total public debt—including government guaranteed SOE debt—declined below 105 percent of GDP at end-March, down from around 111 percent of GDP at end-FY2023/24. - At end-March, authorities paid down Series B and D debt by B$38 million. - Cash buffers: 4 percent of GDP at end-March 2025 (equivalent to about 2 months of expenditures). ### Box 2 — Factors behind revenue overperformance - Main driver: corporate income tax (CIT) collections (overperformance of CIT: B$411 million). - Key policy and behavioral drivers: - Increase in the CIT rate to 9 percent for most companies (from the previous sliding scale of 1 to 5.5 percent). - Early realization of profits by some firms to avoid a higher CIT rate. - Implementation of IFRS17 accounting framework for insurance companies, rendering some assets no longer deductible for tax purposes. - Temporary vs. permanent assessment: - Authorities estimate around one third of the overperformance could be permanent. - Around two-thirds (1.8 percent of GDP) of the overperformance is expected to be temporary. - One third attributed to the increased CIT rate and therefore expected to remain permanent. - Risks to CIT collection: - Upside: domestic minimum top-up-tax (DMTT), which brings the effective tax rate up to 15 percent for multinational enterprises, has not been incorporated into revenue projections and thus presents some upside. - Downside: changes to the adoption of Pillar II in some jurisdictions present important downside risks. ### External position and market sentiment - Current account deficit narrowed to 4.5 percent of GDP in 2024 from 8.8 percent in 2023, supported by tourism receipts, declining import prices, and one-off current transfers. - Gross international reserves: - US$1.6 billion at end-2024. - US$1.7 billion at end-March 2025 (equivalent to over 7 months of imports of goods and services). - Q1 2025 current account (YoY) widened slightly by 0.3 percent of GDP, driven by higher goods imports including construction-related machinery. - Sovereign ratings at end-April: - S&P: B with a positive outlook. - Moody’s: B2 with a stable outlook (upgrade in April 2025). - Fitch: B+ with a stable outlook. - Sovereign debt spreads increased to the 450-500 basis points range, tracking EMBIG movements. ### Outlook and risks - Near-term growth projection for 2025: 2.7 percent (versus 3 percent at the fourth review), supported mainly by construction and government investment; modest downgrade reflects worsening global growth outlook and expected weakening of tourism demand (-2 percent). - Medium-term growth: expected to stabilize around 2 percent as tourism-related projects are completed. - Inflation: expected to pick up to around 2.6 percent (12-month average) by end-2025; stabilize at long-term historical average of 2½ percent in the medium term. - Current account projections: - Projected to widen to around 6.4 percent of GDP in 2025 as current transfers normalize and lower export receipts combine with higher construction imports. - Expected to converge to around 5 percent of GDP over the medium term. - FDI projection: around 6 percent of GDP (broadly in line with the 20-year historical average). - Gross international reserves expected to remain at US$1.6 billion over the medium term (around 175 percent of the Fund’s ARA metric). - Risks (tilted to the downside): - External: trade policy and investment shocks in key source countries (US, UK, Canada), tighter global financial conditions, geoeconomic fragmentation, regional conflicts, and commodity price volatility. - Domestic: natural disasters, fiscal impacts from disasters, and potential deceleration of reform momentum. - Contingency planning: authorities stand ready to consider contingency policies; suggested additional measures include: - Broadening the tax base (e.g., revamping the VAT regime for the tourism sector, introducing corrective excise taxes). - Reforming the property tax regime. - Further streamlining current expenditures to create space for critical social and capital expenditure. ### Policy discussions — FY2025/26 budget and medium-term fiscal strategy - FY2025/26 budget targets: - Primary fiscal surplus: 4.4 percent of GDP (in line with program commitments). - CIT revenues expected to moderate from FY2024/25, stabilizing around 1 percent of GDP higher than anticipated at the fourth review. - Additional current spending targeted on education, healthcare, and police services (public sector wages and goods and services). - Capital investment projected to reach 2.8 percent of GDP (broadly unchanged from the fourth review). - Real increase in critical social spending: 5 percent (includes an additional B$8 million for elderly care, human and social development programs, and the youth entrepreneurship scheme). - Overall fiscal balance projected to improve to – 0.3 percent of GDP. - Medium-term fiscal path: - Primary balance projected to remain at the steady state of 4.4 percent of GDP (slightly above the fourth review level), consistent with achieving the 60 percent debt target by FY2035/36. - Projections underpinned by higher CIT collections and commitments to maintain prudent expenditure management. - Additional CIT revenues create space to boost capital spending by roughly 1 percent of GDP per year, relative to the fourth review. - Guidance: use additional revenue windfalls for critical capital spending or to rebuild fiscal buffers; enhanced social support could be considered but avoid further untargeted transfers. ### Strengthening revenue collection and public financial management (PFM) - Compliance and staffing: - Barbados Customs and Excise Department (BCED) needs sufficient human resources; study completed in March assessing workload and staffing with roadmap to fill vacancies (end-March 2025 SB); implementation underway. - Framework in development to implement review and appeal procedures set out in the Customs Act, supported by Fund TA. - Tax waivers and exemptions: - Implementing updated governance framework for tax concessions with a time-bound transition for pre-existing waivers to seek requalification. - Creating a comprehensive tax expenditure inventory (direct and indirect concessions) with Fund TA support and developing methodology to improve costing of tax expenditures. - Tax arrears strategy: - Stock of tax arrears rising; substantial portion deemed uncollectible due to outdated records and ineffective debt management. - Barbados Revenue Authority (BRA) developing a robust tax arrears management strategy with Fund TA support. - Mobilizing private resources: - Public-private partnership (PPP) framework prepared (end-March 2025 SB), adopted by Cabinet in May; complements legal framework for PPPs in the 2023 Public Procurement Act. - Strengthening PFM: - Project appraisal guidelines completed in March with FAD assistance; rollout planned for all new government projects this fiscal year. - Development of rigorous appraisal methodology and prioritization/selection process to follow. - Fiscal risk analysis advanced: fiscal risk register and heatmap produced after a Fund TA workshop in December to inform the fiscal risk statement (FRS) presented with the FY2025/26 budget. ### State-owned enterprise (SOE) reforms (Box 3) - SOE reform context: - By 2019, number of SOEs reached 58 with annual government transfers around 5.9 percent of GDP, prompting rationalization and reform. - Reforms since 2018 under BERT: commercialization, introduction of user fees, staff headcount reductions, privatization, mergers, closures, renegotiation of supplier contracts, tariff adjustments, and new levies. - Oversight strengthened via Public Finance Management Act 2019: all SOE borrowing must be approved by the Minister of Finance. - Financial health dashboard for SOEs developed under the 2018 EFF (end-March 2021 SB). - Recent and ongoing steps: - Focus on restructuring the Transport Board and the National Housing Corporation; amalgamation of Rural Development Commission and Urban Development Commission operations. - Merger at beginning of FY2025/26: National Petroleum Corporation, Barbados National Oil Company Ltd., and Barbados National Terminal Company Ltd. - Amalgamation underway of Child Care Board, National Assistance Board, Welfare Department, and National Disabilities Unit into the Social Empowerment Agency. - Transfers to TMU SOEs in FY2024/25 were below the program ceiling. - Policy emphasis: maintain momentum on SOE reforms, improve SOE monitoring, adhere to ex ante rules and procedures, and strengthen governance to transition SOEs away from quasi-fiscal practices and improve service delivery. *Source: IMF staff report (chapter 7 and accompanying boxes) contained in the provided PDF content.* ### 17. Public debt continues to be assessed as sustainable. Public debt continued to decline to ### 17. Public debt continues to be assessed as sustainable. ### Public debt trajectory and sustainability assessment - Public debt continued to decline to 104.8 percent of GDP at end-FY2024/25, from 111.5 percent of GDP at end-FY2023/24, driven by robust growth and strong fiscal performance. - Under the program baseline, public debt is expected to continue declining, achieving the 60 percent of GDP debt target by FY2035/36, supported by sustained primary surpluses and nominal GDP growth. - The Sovereign Risk and Debt Sustainability Framework (SRDSF) suggests that Barbados’ overall risk of sovereign stress remains moderate and confirms that public debt is sustainable. - The fanchart tool indicates moderate risk, an improvement from the fourth review, although the wide fan chart continues to indicate a high degree of uncertainty, reflecting Barbados’ history of macroeconomic volatility. - Key risk factors: - Domestic risks to maintaining large primary surpluses persist but have fallen somewhat given consistent strong fiscal performance. - External risks to the baseline remain high, including from trade policy and investment shocks, tighter financial conditions, deepening geoeconomic fragmentation, and natural disasters. - Mitigating factors: - Strong track record of reform implementation. - Favorable debt service schedule following the 2018-19 restructuring. - Expected further development of domestic capital markets. - Policy implication: - Policy reforms and investments in adaptation, supported by the RSF, will be essential to increase macroeconomic resilience and mitigate risks to debt sustainability. ### External financing and plans to re-access international capital markets - Authorities remain focused on mobilizing external financing, including re-accessing international capital markets in FY2025/26. - Under the medium-term debt strategy (MTDS), the authorities have continued to rely on multilateral financing, including from the IMF. - Disbursements from other IFIs reached around US$155 million in FY2024/25 in the form of policy and project loans and on average are expected to remain at this level through FY2026/27, slightly below fourth review projections. - Total loans and grants are projected to reach around US$200 million, reflecting grants associated with the South Coast Water Reclamation project. - With around US$45 million (0.6 percent of GDP) of 2029 Eurobonds maturing in April 2025, the authorities have stepped up preparations to re-access international capital markets in H2 2025, though this remains contingent on evolving global financial conditions. ### Domestic debt issuance, maturities, and financing needs - Domestic debt issuances have continued to increase; gradual lengthening of maturities is intended to smooth gross financing needs. - Developments: - The Barbados Optional Savings Scheme (BOSS) Plus program launched in 2022; 90-day and 180-day Treasury bill issuances restarted in 2023. - In FY2024/25, net financing from commercial banks reached 4.7 percent of GDP, higher than projected at the fourth review, reflecting the completion of the debt-for-climate conversion. - Authorities issued a B$250 million 20-year debenture, with B$245 million of subscriptions largely from the National Insurance and Social Security Service (NISSS) and to a lesser extent from private pension funds. - The stock of T-Bills remained stable at about B$800 million, mainly held by commercial banks and the central bank. - Interest rate structure: - Domestic interest rates remain low, ranging from 2 percent on short tenor maturities, to 4.5 percent on BOSS bonds, and 7.75 percent for the debenture. - Fiscal plan: - The FY2025/26 budget envisages net domestic issuances of around 0.8 percent of GDP. - Over the medium term, authorities aim to continue increasing issuances while gradually extending maturities to smooth financing needs and mitigate refinancing risks. ### Monetary policy framework and financial stability measures - Exchange rate regime: - The exchange rate peg has been in place since 1975 and continues to enjoy broad support; it remains a critical anchor for macroeconomic stability. - The CBB maintains ample gross international reserves (205 percent of the Fund’s reserve adequacy metric at end-2024). - The authorities maintain the 2 percent foreign exchange fee introduced in 2017; the IMF suggests considering removal of the fee to reduce market distortions and support trade and investment, noting the fee currently raises around 0.7 percent of GDP in revenue and that alternative revenue sources would be needed to mitigate the fiscal impact of its removal. - Enhancements to the monetary policy framework: - The revised Central Bank Act of 2020 enhanced CBB autonomy, governance, and limited monetary financing. - In the context of persistent structural excess liquidity, the CBB has developed a daily liquidity forecasting framework (end-March 2025 SB) and begun internal research on a benchmark monetary policy rate. - Intended long-run elements of a modernized framework (to be implemented gradually, with consultations) include: - Using reserve requirements on domestic currency deposits to mop up structural excess liquidity. - A mid-rate interest rate corridor, with a policy rate to signal the policy stance. - Standing deposit and lending facilities anchored to the policy rate. - Open market operations (OMOs) to anchor short-term interbank rates around the policy rate. - The CBB intends to recapitalize in line with the plan established in 2021. - In collaboration with the World Bank, the CBB launched a payments modernization project aiming to transition to a digital payments system by March 2026. - Financial safety net and resolution: - The 2020 CBB Act provides a legal basis for the CBB to provide emergency liquidity assistance (ELA) to systemically important banks (SIBs) and systemically important non-bank financial institutions (SIFIs) supervised by the Financial Services Commission (FSC). - Authorities have established an ELA framework with proactive liquidity and collateral scanning, in-depth testing of funding plans, and periodic simulations. - The CBB completed a review of the collateral policy and plans updates to differentiate collateral for monetary policy and ELA and refine valuation methods. - As the designated resolution authority under the Financial Institutions Act, the CBB should begin work on developing a resolution framework for financial institutions. - Following US Treasury technical assistance, work to strengthen the Barbados Deposit Insurance Scheme is ongoing, aiming for revised legislation over the next few years, including expansion of coverage to credit unions. ### AML/CFT and integrity of the financial sector - Barbados was removed from the Financial Action Task Force (FATF) “grey list” in February 2024 following significant strengthening of its AML/CFT framework. - Improvements include monitoring of non-profit organizations, requirements on tipping off and confidentiality when reporting suspicious transactions, and enhancements to the asset recovery regime (such as confiscation in the event of flight and enforcement of external orders for asset recovery). - Recommendation: - Having strengthened the legal framework, authorities should continue efforts on effective implementation and enforcement, particularly in supervision, law enforcement and asset recovery. ### Growth, structural reforms, and climate resilience (high-level linkages to debt sustainability) - Growth strategy (BERT 2022 Plan) targets potential growth of 3-5 percent through measures to: - Increase climate resiliency and facilitate transition to renewable energy. - Invest in skills training and education. - Improve the business environment to support trade and investment. - Mobilize domestic savings and promote digital technologies. - Establish Barbados as a logistics hub and diversify into knowledge-based, niche activities. - Digitalization and trade facilitation efforts to improve the business environment: - Deployment of 5G Communications Technology in partnership with the private sector. - Establishment of a data center for data storage, processing, global digital services, and disaster recovery. - Launch of a new e-conveyancing property transfer platform. - Creation of a Cyber Security Operations Center; a Cybercrime Bill is proceeding through Parliament. - Transition to ASYCUDA 5 for customs automation with a targeted launch date of early 2026. - Installation of two new cranes at Bridgetown Port and planned construction of Berth 6 to increase cargo handling capacity. - Skills and talent attraction: - With IDB TA support, the government is studying key skills gaps and plans a national program on artificial intelligence, process automation, data analytics, and emerging digital technologies. - A Talent Attraction and Retention Strategy will include Fast-Track Work and Residency programs, Global Talent Visas and Incentives, and a Diaspora Engagement and Return Program. - Climate and resilience agenda supported by RSF: - RSF supports embedded reform measures and long-term financing to catalyze resilient infrastructure and the transition to renewable energy, aiming to strengthen growth and external position and mitigate debt and balance of payments risks. - Renewable energy progress and targets: - Joint IFC onshore wind farm project doubled to 60 megawatts (MW), reaching over 15 percent of current total installed electricity capacity. - Government aiming to reach 125 MW of battery storage in the near term. - FY2025/26 budget includes about 0.4 percent of GDP for battery storage and grid expansion. - First procurement project for Battery Energy Storage Systems (BESS) planned with request for proposals expected in mid-2025; request for information closed in November 2024. - Energy Smart Fund will offer a Loan Refinancing Facility for SMEs at an interest rate of 3.75 percent. - Integration of climate into public financial management (PFM): - Implemented measures include project appraisal guidelines integrating climate considerations, deepened fiscal risk analysis including environmental risks feeding into the FY2025/26 fiscal risk statement, and preparation of a PPP framework promoting environmental sustainability and climate resilience. - Disaster risk management and Resilience and Regeneration Fund (RRF): - Catastrophe Fund to be repurposed into a Resilience and Regeneration Fund (RRF) with an expanded role including financial aid post-catastrophe, mitigation/remedies, financing for resilience-building activities and regeneration. - Funding sources for RRF: - From April 2025, increased contribution rates from 0.1 percent to 0.25 percent for employees and the self-employed, with a matching contribution by employers. - Intention to set aside 0.25 per cent of the previous year’s GDP annually into the RRF. - Use of up to 50 percent of unclaimed (idle) assets in dormant accounts of commercial banks, credit unions and other deposit-taking institutions. - Grants and donations from other agencies and organizations; potential to finance activities through issuance of securities subject to permission from MFEI. - Governance note: - Maintaining strong governance, oversight and reporting of the RRF will be key given its expanded role. - Additional support: - In April, authorities secured a US$30 million World Bank Disaster Risk Management Development Policy Loan to boost disaster preparedness, including a fast-access credit line in the event of an emergency. *IMF Staff Report excerpt (chapter 17).* ### 31. Meanwhile, Barbados is continuing to mobilize climate financing. Attracting investment ### 1brbea2025001-print-pdf - 31. Meanwhile, Barbados is continuing to mobilize climate financing. Attracting investment ### Climate financing, projects, and institutions - Completed an innovative debt-for-climate conversion in December 2024, with guarantees from the IDB and European Investment Bank. - Savings from the swap will be used to service new IDB and Green Climate Fund (GCF) loans, which along with US$40 million of GCF grants, will finance the South Coast Water Reclamation Project. - South Coast Water Reclamation Project objectives: - Enhance water supply resilience and reliability. - Focus on environmental sustainability and food security. - Design and procurement phases completed; construction is expected to begin in late-2025. - Established the Blue Green Bank to support investment projects across the region up to US$250 million, initially focusing on resilient housing and renewable energy. - Legislation approved in June 2024. - Government capital contribution of US$15 million to be made in the coming months. - Contributions from CAF and other bilateral partners expected soon thereafter. - Appointment of the Board of Directors is underway; the bank is expected to become operational in H2 2025. ### Data issues and statistical improvements - Authorities committed to improving quality and timeliness of economic data, supported by IMF TA. - Following the rebasing of GDP statistics to 2016 last year, the Barbados Statistical Service (BSS) is developing a supply and use table (SUT) for 2023, with IMF support. - An updated SUT will provide a comprehensive benchmark for the national accounts and expand coverage and scope of GDP estimates. - Ongoing work to improve external sector statistics, including estimation of BPM6-based balance of payments for 2018-2021 and IIP statistics for 2017-2021, following IMF TA. - BSS continues to face challenges with data quality and timeliness, reflecting limited capacity and issues created by a cyberattack in late 2024. ### Program performance and modalities - All quantitative performance criteria (QPCs) and indicative targets (ITs) for end-March were met. - End-March 2025 fiscal QPCs on the central government primary balance, external debt arrears, transfers to public institutions, and public debt were 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-December 2024 program ITs were also met. - Structural performance: timely implementation of all SBs for the fifth review. - Assessment of human resource needs at the BCED completed (SB #5). - Draft PPP framework finalized and adopted (SB #13) with Fund TA support. - CBB developed a daily liquidity forecasting framework (SB #18). - Reform measures for the fifth review implemented, including key elements to strengthen integration of climate concerns into PFM (RM#5) and inclusion of physical climate risk analysis in CBB bank stress testing (RM#10). - Authorities requested full purchase under the EFF (SDR 14.175 million) and the RSF disbursements related to RM#5 and RM#10 (SDR 28.35 million) for the fifth review to be available as budget support. - A Memorandum of Understanding completed defining CBB and MFEI roles for servicing Fund obligations under EFF and RSF. - Other IFIs have committed US$180 million of financial support through policy loans in 2025-2026, ensuring the program is fully financed. ### Capacity to repay, reserves, and safeguards - Debt outstanding and debt service to the IMF projected to stay relatively high in the near term. - Total Fund credit outstanding beginning to decline but remaining close to the peak of around 500 percent of quota (345 percent of quota excluding the RSF) or about 8.3 percent of GDP in 2025. - Obligations to the Fund would peak at 3.8 percent of exports of goods and services in 2026 and 6.9 percent of projected reserves in 2028. - Ample international reserves expected to remain well above 100 percent of the Fund’s reserve adequacy metric throughout the projection period. - CBB has implemented all but one recommendation of the 2023 safeguards assessment; implementation of the outstanding recommendation is at an advanced stage. - Safeguards framework enhanced with adoption of an ELA framework, updated collateral policy, and guideline on treatment of systemically important financial institutions. ### Risks to the outlook - Risks remain tilted to the downside: - External: highly uncertain environment, vulnerability to global shocks and natural disasters, potential negative impacts on growth, inflation, FDI, and borrowing costs from trade policy and investment shocks, geoeconomic fragmentation, tightening global financial conditions, and systemic instability. - Domestic: sustaining high primary surpluses could be challenging, though mitigated by authorities’ program track record and reform commitment. ### Staff appraisal and policy recommendations - Progress and outcomes: - Since 2022, growth rebounded, unemployment fell, and inflation moderated. - External position strengthened, fiscal balances improved, and public debt declined. - Structural reforms advanced to increase fiscal sustainability, boost investment, and foster inclusive and resilient growth. - Fiscal policy guidance: - Maintain strong fiscal surpluses to ensure debt sustainability and secure more inclusive and resilient growth. - FY2025/26 budget targets a primary surplus of 4.4 percent of GDP, underpinned by higher CIT collections and prudent expenditure management. - Authorities committed to maintaining a primary surplus of 4.4 percent of GDP over the medium term, consistent with achieving the 60 percent debt target by FY2035/36. - Additional revenue windfalls should be used for critical capital spending or to rebuild fiscal buffers if needed. - Further social support enhancements should be targeted to the most vulnerable. - Structural fiscal reforms to prioritize: - Strengthen revenue administration. - Implement the new tax exemptions framework. - Develop a tax arrears strategy. - Advance PFM and public investment management reforms, including rollout of the PPP framework and project appraisal guidelines, deepen fiscal risk analysis, and strengthen the budget process. - Finalize and follow up on the SOE reform agenda to improve SOE monitoring and financial reporting. - Monetary and financial sector recommendations: - Continue policies to sustain the exchange rate peg as a critical anchor for macroeconomic stability. - Build on CBB’s initial steps to strengthen monetary policy framework, including daily liquidity forecasting. - Advance digital payments infrastructure with a target of moving to a digital payments system by early 2026. - Continue work to enhance bank supervision, develop a resolution framework for financial institutions, and strengthen the AML/CFT framework with increased enforcement focus ahead of the updated National Risk Assessment due in 2027. - Growth and structural reforms: - Continue reforms to improve the business environment, facilitate trade and investment, and diversify the economy. - Maintain progress on digitalization of government services, deployment of 5G, establishment of a data center, launch of an e-conveyancing platform, and creation of a cyber security operations center. - Invest in skills and education; implement the national Talent Attraction and Retention Strategy. ### Key statistics and dates (as reported) - December 2024: debt-for-climate conversion completed; cyberattack in late 2024 affected data. - June 2024: Blue Green Bank legislation approved. - US$40 million: GCF grants contributing to South Coast Water Reclamation Project. - US$250 million: regional investment support ceiling for Blue Green Bank. - US$15 million: government capital contribution to Blue Green Bank. - H2 2025: Blue Green Bank expected to become operational. - 2016: GDP statistics rebased to 2016. - SUT for 2023: under development by BSS. - BPM6 balance of payments estimates for 2018-2021; IIP statistics for 2017-2021: ongoing improvements. - End-March 2025: all QPCs and ITs met. - End-December 2024: all program ITs met. - SDR 14.175 million: full purchase under the EFF requested. - SDR 28.35 million: RSF disbursements related to RM#5 and RM#10 requested. - US$180 million: IFI policy loan commitments in 2025-2026. - Around 500 percent of quota (345 percent of quota excluding the RSF): total Fund credit outstanding peak. - About 8.3 percent of GDP in 2025: Fund credit outstanding level. - 3.8 percent of exports of goods and services in 2026: peak Fund obligations as share of exports. - 6.9 percent of projected reserves in 2028: Fund obligations share of reserves. - Well above 100 percent of the Fund’s reserve adequacy metric: projected international reserves stance. - FY2025/26: budget year targeting a primary surplus of 4.4 percent of GDP. - 4.4 percent of GDP: targeted primary surplus. - 60 percent debt target by FY2035/36. - Early 2026: target for moving to a digital payments system. - 2027: updated National Risk Assessment due. *Source: 1brbea2025001-print-pdf (IMF).* ### 49. Staff recommends the completion of the fifth review under the EFF and RSF ### 49. Staff recommends the completion of the fifth review under the EFF and RSF arrangements ### Program recommendation and procedural items - Staff recommends completion of the fifth review under the EFF and RSF arrangements. - Staff assess that RM5 and RM10 under the RSF have been implemented. - The authorities remain committed to implementing program objectives and their ambitious reform agenda. - It is proposed that Barbados’ Article IV consultation cycle be shortened back to 12 months. - The next Article IV consultation is expected to be held by December 2025. - The authorities have expressed interest in a follow-up program. - In the absence of a successor arrangement within six months, staff will reconsider the case for a Post-Financing Assessment (PFA), as Barbados’ outstanding credit to the Fund exceeds the 200 percent of quota threshold. ### Real sector developments - Economic growth remained robust in 2024, driven by a continued rebound in tourist arrivals and other related activities. - Labor market: rising employment and unemployment at historic lows. - Inflation continued to moderate, driven by easing prices of energy, food, and hospitality. - Select macro indicators (calendar year / program references): - CY Real GDP: 17.8 (2022); 4.1 (2023); 3.8 (2024) [Table 6 entries]. - CPI inflation (average): 4.4 (2022); 3.2 (2023); 2.3 (2024) [Table 6 entries]. ### Fiscal sector developments and projections - General assessment: - Barbados' primary surplus improved considerably in FY2024/25, owing to a surge in collection of CIT. - Expenditures increased, largely driven by capital spending. - The interest bill remained elevated due to higher costs of variable-rate external debt and step-up coupons. - Gross financing needs edged up slightly, reflecting higher debt service and the increased and regularized issuance of T-bills. - Selected fiscal figures and projections (central government, fiscal year April–March): - Total revenue: 28.1 (2020/21); 26.0 (2021/22); 27.5 (2022/23); 26.6 (2023/24) — percent of FY GDP [Table 2b]. - Total expenditure: 32.6 (2020/21); 30.4 (2021/22); 29.4 (2022/23); 28.3 (2023/24) — percent of FY GDP [Table 2b]. - CG Fiscal balance: -4.5 (2020/21); -4.3 (2021/22); -1.9 (2022/23); -1.7 (2023/24) — percent of FY GDP [Table 2b]. - Interest expenditure: 3.6 (2020/21); 3.5 (2021/22); 4.3 (2022/23); 5.2 (2023/24) — percent of FY GDP [Table 2b]. - CG Primary balance: -0.9 (2020/21); -0.8 (2021/22); 2.4 (2022/23); 3.5 (2023/24) — percent of FY GDP [Table 2b]. ### External sector developments and projections - Current account strengthened substantially due to rising tourism receipts and one-off current transfers, and savings from reduced fuel and food import prices. - Financial inflows remain relatively strong, driven by sustained private flows. - FX reserves and coverage: - FX reserves rose slightly to US$1.6 billion, with import coverage at over 7 months. - Gross international reserves (GIR, with RSF) reported as US$1,616 million in program projections [Table 4a; memorandum items]. - Selected balance of payments figures (US$ millions): - Current account balance: -258 (2020); -541 (2021); -619 (2022); projected -480 (2025) [Table 4a]. - Exports of goods and services (credit): 1,419 (2020); 1,482 (2021); 1,999 (2022); projected 3,291 (2028) [Table 4a]. - Services (travel credit): 602 (2020); 623 (2021); 935 (2022); projected 1,842 (2028) [Table 4a]. - External financing: - Capital and financial account (with RSF) projections shown; RSF replaces part of other financing in projections. - Gross financing requirements and sources are reported in US$ millions (see aggregated Table 8 and Table 4a). ### Monetary and financial sector developments - Lending rates continued to decline in 2024. - Real credit to the private and public sectors rose in 2024; public-sector increase partly reflects the debt-for-climate swap. - Excess cash liquidity in the banking system remained sizable, despite recent moderation. - Nonperforming loan ratios continued to decline, reflecting favorable economic conditions; bank profitability remained high and capital buffers strong. - Selected monetary indicators: - Broad money (M2 liabilities to private sector): 12,501 (2020); 13,249 (2021); 13,954 (2022); projected 18,695 (2030) — in millions of Barbados dollars [Table 5]. - Net domestic assets and credit series detailed in Table 5. ### Public debt, Fund credit, and financing risks - Public sector debt trajectory (percent of FY GDP; selected years from Table 6 and Table 3): - Public sector debt: 138.2 (2020); 121.6 (2021); 113.7 (2022); 111.5 (2026); 102.8 (2027); 104.8 (2028); 97.4 (2029); 99.5 (2030). - Central government debt (BDS$ millions, selected): 12,822 (2020/21); 13,302 (2021/22); 14,222 (2022/23); and projected levels through 2030/31 in Table 3. - IMF financing and program access: - Schedule of EFF purchases and RSF disbursements summarized: EFF availability and review-linked purchases of 14.175 million SDR per tranche (15.0 percent of quota) across listed review dates; total EFF access listed as 85.050 million SDR (90 percent of quota) in Table 9 / Table 10 listings. - Stock of existing and prospective Fund credit and obligations are detailed in Table 11 (disbursements, stock, principal repayments, charges). - Fund credit outstanding is high relative to quota (noted as exceeding the 200 percent of quota threshold for PFA consideration). - External debt service and financing metrics: - External debt service (PPG, USD millions, memorandum items Table 8): 438 (2020); 439 (2021); 455 (2022); projected series through 2030. - Gross international reserves (program memos): 1,330 (2020); 1,529 (2021); 1,385 (2022); projected 1,616 (2028) — US$ million. ### Key policy-relevant points and near-term considerations - Completion of the fifth review supports continued EFF/RSF program engagement and associated disbursements linked to review conditions (RM implementation). - Shortening Article IV cycle to 12 months implies heightened surveillance and a scheduled Article IV by December 2025. - Authorities’ interest in a follow-up program should be pursued; if no successor arrangement is in place within six months, staff will reconsider a Post-Financing Assessment (PFA) given Fund credit exposure exceeding the 200 percent of quota threshold. - Monitoring priorities: - Continued implementation of reform measures under the RSF (including RM5 and RM10 implementation, which staff assesses as completed). - Fiscal consolidation to sustain the improved primary balance and manage interest expenditure pressures from variable-rate external debt and step-up coupons. - Reserve and external financing management to preserve import coverage (noting GIR and months-of-imports metrics). - Financial sector vigilance given evolving credit growth, liquidity, and NPL trends. *Source: IMF staff report excerpt for the fifth review under the EFF and RSF arrangements (text and tables provided).* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Global Risks - Trade policy and investment shocks - Likelihood: High - Impact: High - Description: Higher trade barriers or sanctions reduce external trade, disrupt FDI and supply chains, and trigger further U.S. dollar appreciation, tighter financial conditions, and higher inflation. - Policy Response: - Move ahead with transition to a fully renewable economy to reduce reliance on fuel imports; raise domestic capacity for food production and other goods supply. - If risk materializes, reprioritize government spending to provide targeted support to the most vulnerable. - Deepening geoeconomic fragmentation - Likelihood: High - Impact: Medium - Description: Persistent conflicts, inward-oriented policies, protectionism, weaker international cooperation, labor mobility curbs, and fracturing technological and payments systems lead to higher input costs, hinder green transition, and lower trade and potential growth. - Policy Response: - Move ahead with transition to a fully renewable economy to reduce reliance on fuel imports; raise domestic capacity for food production and other goods supply; and maintain fiscal and external sustainability. - Continue efforts to improve the business environment, with a key focus on advancing digitalization efforts. - Tighter financial conditions and systemic instability - Likelihood: Medium - Impact: Medium - Description: Higher-for-longer interest rates and term premia amid looser financial regulation, rising investments in cryptocurrencies, and higher trade barriers trigger asset repricing, market dislocations, weak bank and NBFI distress, and further U.S. dollar appreciation, which widens global imbalances, worsens debt affordability, and increases capital outflow from EMDEs. - Policy Response: - Monitor financial system and stand ready to provide liquidity assistance if needed to maintain financial stability. - Utilize some of the ample fiscal cash buffers and increase domestic financing, in the event that global conditions delay a return to international capital markets. - 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. - Regional conflicts - Likelihood: Medium - Impact: Medium - Description: Intensification of conflicts (e.g., in the Middle East, Ukraine, Sahel, and East Africa) or terrorism disrupt trade in energy and 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 production and other goods supply. - Continue with efforts to strengthen the fiscal position backed by structural reforms to enhance fiscal sustainability and improve the business / regulatory environment, thereby increasing investors’ confidence. - Commodity price volatility - Likelihood: Medium - Impact: Medium - 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 production 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 acceleration - Likelihood: Low - Impact: Medium - Description: Easing of conflicts, positive supply-side surprises (e.g., oil production shocks), productivity gains from AI, or structural reforms raise global demand and trade. - Policy Response: - Continue prudent fiscal policy backed by structural reforms to maintain fiscal sustainability, thereby increasing investors’ confidence. ### Country-Specific Risks - Deceleration of reform momentum - Likelihood: Medium - Impact: High - 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 to sustain high primary surpluses and facilitate the 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 - 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 - 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). - Cyberthreats - Likelihood: Medium - Impact: High - Description: Cyberattacks on physical or digital infrastructure (including digital currency and crypto assets), technical failures, or misuse of AI technologies trigger financial and economic instability. - Policy Response: - Monitor and evaluate the scope of cyber security vulnerabilities, guided by the recently enhanced cyber risk supervisory frameworks and leveraging the new Cyber Security Operations Center. ### Risk Assessment Matrix Notes and Mechanics - The RAM shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). - Likelihood classification: “low” indicates a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent. - The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. - Non-mutually exclusive risks may interact and materialize jointly. --- ### Annex II. Debt Sustainability Analysis ### Overall assessment and risk classification - Barbados’ public debt is assessed to be sustainable, and the overall risk of sovereign stress is assessed to be moderate, consistent with the medium-term mechanical signals of the Fund’s Sovereign Risk and Debt Sustainability Framework (SRDSF). - The fanchart tool indicates moderate risk, an improvement from the fourth review. - The Gross Financing Needs (GFN) financeability tool indicates moderate risk due to relatively low financing needs, which are projected to decline steadily over the projection horizon. - Under the current baseline, with a further improvement in primary surpluses and medium-term annual real GDP growth of 2 percent, supported by structural reforms, the 60 percent-of-GDP debt anchor is projected to be reached by FY2035/36. ### Recent debt developments (facts and figures) - Public debt declined to 104.8 percent of GDP at end FY2024/25, from 111.5 percent of GDP at end-FY2023/24 and the peak of 138.2 percent in FY2020/21. - Drivers of decline: economic recovery, progress in strengthening the fiscal position, and the recent retirement of US$77.6 m (1.1 percent of GDP) of Eurobonds in FY2024/25. - Public debt is 2 percentage points higher than projected at the fourth review, mostly reflecting a larger-than-anticipated issuance of short-term debt and a correspondingly smaller-than-projected drawdown of cash buffers, which remain sizable at around 4 percent of GDP at end-FY204/25. - Valuation effects from the weaker-than-expected US dollar against the SDR also impacted foreign debt levels. ### Baseline projections and assumptions - Macroeconomic assumptions: - Real GDP growth: 2.7 percent in 2025, moderating to 2 percent in 2026 and the steady state thereafter. - Average inflation: increase from 1.4 percent at end-2024 to 2.6 percent in 2025, and remain at around 2½ percent from 2026 onwards. - Growth drivers: construction (ongoing tourism-related projects and government investment), expansion of tourism-related capacity (e.g., airlift, hotels), investment in resilient infrastructure, and ongoing structural reforms. - Fiscal assumptions: - Primary surplus: expected to increase slightly from 4.3 percent of GDP in FY2024/25 to a steady state of 4.4 percent of GDP in FY2025/26, consistent with achieving the 60 percent of GDP long-term debt target. - The three-year fiscal adjustment under the baseline scenario is described as modest in a cross-country comparison and compared to Barbados’ own experience. ### Financing and market access - Gross financing needs expected to be met with IFI loans, increased domestic borrowing, and a gradual return to international capital markets. - Short-term profile of public debt service poses limited risks, reflecting: - Improving primary balance. - Favorable repayment schedule from the 2018-19 debt restructuring and the recent debt-for-climate conversion. - Long-term borrowing from IFIs, higher cash buffers, expected development of domestic capital markets, and planned gradual return to international capital markets. - Short-term debt held by commercial banks assumed to be automatically rolled over per the 2018-19 agreement. - Domestic market activity and issuances: - Stock of issuances since September 2023 standing at about B$785 million (5.4 percent of GDP) by end-March 2025. - Government issued a 20-year debenture for B$250 million (1.8 percent of GDP) with a subscription of B$245.2 million by end-March 2025. - Sovereign ratings and spreads: - Upgrades: S&P and Fitch in late 2024; Moody’s in April 2025. - Ratings at end-April: S&P B with a positive outlook; Moody’s B2 with a stable outlook; Fitch B+ with a stable outlook. - Sovereign debt spreads: risen to the 450-500 basis points, tracking movements in the EMBIG. - Authorities preparing to re-access international capital markets in H2 2025, contingent on evolving global financial conditions. ### Risk analysis results - Overall risk of sovereign debt stress: moderate. - Medium term: - Debt fanchart index: moderate risk, improved relative to last review due to a stronger institutions index score. - Probability of debt not stabilizing: around 6 percent. - Natural disaster stress test (default shock of 4.5 percent of GDP): debt path remains below the 75th percentile, consistent with “moderate” mechanical signal. - GFN financeability index: moderate risk with a declining path. - Long term: - Large debt amortizations module: gradual decline in GFN and debt relative to GDP under the baseline based on 10-year historical debt drivers. - Climate-related expenditure: manageable; even under a customized scenario with expenditure 1 percent of GDP higher than the baseline, debt sustainability not significantly affected. - Current healthcare expenditure policies: would not pose significant sustainability concerns. - Pension reforms: recent implementation expected to make the National Insurance Scheme financially sustainable for 25-30 years, mitigating risks of additional financing needs from the budget. ### Conclusion - Barbados’ public debt is assessed as sustainable and on a sustainable downward trajectory, consistent with reaching the long-term debt target of 60 percent of GDP by FY2035/36. - Domestic risks related to maintaining high primary balances over a prolonged period remain but have declined given the authorities’ sustained strong fiscal performance. - External risks to the baseline include spillovers from trade policy and investment shocks, deepening geoeconomic fragmentation, tightening of global financial conditions and systemic instability, and shocks from natural disasters. - Mitigating factors include Barbados’ track record under Fund-supported programs, commitment to fiscal improvements and structural reforms, and a favorable debt service schedule from the 2018-19 debt restructuring and recent debt-for-climate conversion. *Source: Annex I and Annex II, 1brbea2025001-print-pdf.* ### 4. Accounting principles: ### 4. Accounting principles: ### Debt consolidation across sectors - Coverage in the SRDSA comprises the central government given that Barbados has no state or local governments. - State-Owned Enterprise (SOE) debt amounting to 2.5 percent of GDP guaranteed by the central government and the Central Bank of Barbados' debt to the Fund are added to the central government's debt in this analysis. - The central government's expenditure arrears amounting to 1.3 percent of GDP, most of which were recognized in 2022, are included. - Non-guaranteed SOE debt amounting to 3.2 percent of GDP is not included. - Residual maturity: 6. years ### Reporting and recording notes - IPSGSs 3/ referenced for government employee pension liabilities. - Basis of recording notes include: - Non-cash basis 4/ (Includes accrual recording, commitment basis, due for payment, etc.) - Loans recorded at Nominal value 5/ (Nominal value defined as the amount the debtor owes to the creditor; reflects value at creation and subsequent economic flows) - Face value 6/ and Market value 7/ definitions reproduced in source. - Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. ### Realism of baseline assumptions (Annex II. Figure 2) - Commentary: Stronger primary surpluses compared to the past are expected to continue driving debt down in the next five years but the decline will be mitigated by rising interest rates on external debt coupled with slowing growth as it returns to its long run steady state. While the realism tools suggest that the projected debt reduction is ambitious, staff see it as feasible given the authorities’ strong commitment to fiscal discipline and structural reforms. - Comparator group metrics shown for: Public debt to GDP, Primary deficit, r - g. - Forecast track record vintage: Projections made in the October and April WEO vintage. - Laubach (2009) rule note: assumes bond spreads increase by about 4 bps in response to a 1 ppt increase in the projected debt-to-GDP ratio. - Distribution and percentile indicators: - 3-year adjustment above 75th percentile (2 ppts of GDP) — percentile rank 71 - 3-year debt reduction above 75th percentile (5.9 ppts of GDP) — percentile rank 91.1 ### Baseline scenario and public debt structure (Annex II. Figures 3–5) - Commentary: The composition of the debt remains broadly unchanged over the projection period. Over the medium and long term, financing from domestic and external financial markets is expected to increase. - Debt by currency: projection shows split between Foreign currency and Local currency (perimeter shown is central government). - Public debt by holder: External private creditors, External official creditors, Domestic other creditors, Domestic commercial banks, Domestic central bank. - Public debt by governing law, 2024: Domestic law, Foreign law ex. multilateral, Multilateral. - Public debt by instruments: Marketable debt and Nonmarketable debt. - Public debt by maturity (Percent of GDP): ≤ 1 year, 1-5 years, > 5 years. ### Medium-term risk analysis (Annex II. Figure 5) - Overall mechanical signal for the medium-term risk analysis is moderate due to moderate risk ratings on both the debt fanchart and the GFN financeability indices. - Key numeric indicators (preserved exactly as in source): - Fanchart w idth80.41.2 - Probability of debt not stabilizing (pct)6.30.1 - Terminal debt level x institutions index36.30.8 - Debt fanchart index...2.0 - Average GFN in baseline10.53.6 - Bank claims on government (pct bank assets)14.04.5 - Chg. in claims on govt. in stress (pct bank assets)1.30.4 - GFN financeability index...8.6 - Triggered stress test finding: even with a natural disaster shock the medium-term index would remain within the moderate risk threshold. - Prob. of missed crisis, 2025-2030 (if stress not predicted): 18.2 pct. - Prob. of false alarm, 2025-2030 (if stress predicted): 26.1 pct. ### Long-term risk analysis (Annex II. Figure 6) - Commentary: The analysis shows gradual declines in GFN and debt relative to GDP both under the baseline and custom scenarios. - Projections shown for: - Baseline with t+5 - Baseline with t+5 and DSPB - Historical 10-year average - Pension demographics and sustainability: - Recent pension reforms are expected to make the National Insurance Scheme financially sustainable for 25-30 years. - Recent parametric changes between 2022 and 2023 boosted contributions while slowing the growth of pension benefits. - As a result, the pension Fund is expected to deplete its assets by 2063. - Pension financing needs and total benefits paid trajectories are shown under baseline and with pension cost increase scenarios. - Health and demographics: - Commentary: The current healthcare expenditure policies would not significantly impact GFNs or the long-term debt path as population aging over the next 25 years is expected to be gradual. - Climate change adaptation and mitigation: - Commentary: Adaptation expenditures would not significantly impact GFNs and the long-term debt path. Adaptation expenditure is expected to be financed within the budget and, with the creation of the Resilience and Regeneration Fund, through additional revenue measures. - Commentary: Mitigation expenditures would not significantly impact GFNs or the long-term debt path. While Barbados is not a large GHG emitter, the authorities are working to transition to a fully-renewable based economy. ### Reform measures supported by the RSF Arrangement (Annex III) — selected implemented measures and expected outcomes - Pillar 1: Build resilience to natural disasters and climate change - RM1: - 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. - Implementation status: Implemented. Parliament approved the Planning and Development Act in March 2023. Water Re-use Bill tabled in March 2023 and approved in May 2023. The Barbados Environmental Sustainability Fund (BESF) was fully operationalized and started receiving savings from a debt-for-nature swap in September 2022. - Expected outcomes: Improved external, financial, and fiscal resilience to natural disasters; strengthened fiscal and external sustainability; reduced ex-ante exposure to disaster risks. - RM2: - 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 sustainable/green public procurement framework; (iv) Cabinet to approve guidelines for climate/green budget tagging and mandate publication in an annex in the annual budget. - Implementation status: Implemented. Fiscal risk statement included in FY2023/24 budget. In September 2023 Cabinet approved the new Procurement Act regulations, the sustainable/green procurement framework and guidelines for climate/green budget tagging. - Expected outcomes: Greater coverage and comprehensiveness in identification and quantification of fiscal risks related to climate events; enhanced procurement efficiency and facilitation of green/sustainable procurement; facilitation of climate finance mobilization. Prospective BoP risk reduction: Reduced external and fiscal financing needs following materialization of a climate-related risk. - RM3: - Measures: Government to table the National Comprehensive Disaster Risk Management Policy. - Implementation status: Implemented. Policy tabled by September 2023; implementation began in FY2024/25. MDAs with emergency functions required to submit continuity plans to Cabinet each year and financing requirements to the budget planning process. - Expected outcomes: Strengthened community readiness, increased number of MDAs with Operations Continuity Plans. - RM4: - Measures: Table an amended Prevention of Floods Act incorporating the new Stormwater Management Plan. - Implementation status: Implemented. Stormwater Management Plan tabled in March 2024 and approved by the House in April 2025. New act requires storm drainage/planning, prohibits stormwater disposal and establishes tougher penalties and remediation for non-compliance. - Expected outcome: Reduce the impact of floodings and increase overall water resilience. - RM5: - Measures: Implement reforms to strengthen integration of climate concerns into the PFM process, based on a comprehensive diagnostic evaluation. - Implementation status: Implemented. By end-March 2025 authorities developed public investment project appraisal guidelines; deepened fiscal risk analysis for FY2025/26 budget; and prepared a PPP framework. - Expected outcome: Improved integration of climate into budget cycle, budget preparation, execution, fiscal reporting, and oversight. - Pillar 2: Climate mitigation reform measures - RM6: - Measures: (i) Extend the tax holiday on electric vehicles; (ii) Close regulatory gaps to increase investments into battery storage technologies. - Implementation status: Implemented. The excise and value added tax holiday for electric vehicles was extended first to April 2024, and then again to March 2026. In September 2023, authorities updated tariffs for renewable energy and provided a regulatory framework for energy storage; established a licensing system and guidance for investors. Licensed RE generators are compensated for each unit of energy provided to the grid. - Expected outcomes: Promote private investment in renewable energy; strengthened fiscal and external sustainability; reduced long-term reliance on expensive fossil fuel imports. - RM7: - Measures: Cabinet approval for the Energy Efficiency and Conservation Policy Framework to reduce energy use of all government agencies and develop efficient public lighting. - Implementation status: Implemented. Cabinet approved the framework in March 2024; measures include mandatory periodic audits for building consuming 50.000 k/w or more; responsibility assigned to the Energy Conservation and Renewable Energy Unit and appointment of Local Energy Managers. - Expected outcomes: Improve energy efficiency in the public sector; support investor confidence and attraction of new investments. - RM8: - Measures: Table in Parliament the New Electricity Supply Bill to (i) enhance competition in the electricity market and (ii) introduce local participation in renewable energy investment. - Implementation status: Implemented. The bill was tabled in September 2024 and approved by Parliament in February (source text ends mid-sentence). *Source: 1brbea2025001-print-pdf - 4. Accounting principles:* ### 2025. The bill establishes an overarching ### 1brbea2025001-print-pdf - 2025. The bill establishes an overarching ### Renewable energy and electricity sector framework - The bill establishes an overarching framework for renewable energy investment, regulating the generation, storage, transmission, distribution, dispatch, and sale of electricity. - Key provisions included: - (i) the creation of microgrids to enable more decentralized energy systems; - (ii) the underground placement of power lines to enhance grid resilience in the event of climate-related disasters; - (iii) a requirement for BLPC to notify the Ministry of Energy in the event of major system failures – an obligation not present in the existing legislation; and - (iv) enhanced regulatory oversight to balance corporate interests with consumer needs. ### Grid characterization, storage, and microgrids - In February 2025, the government completed a “grid characterization study”, fully mapping the electricity transmission and distribution network to identify ideal locations for energy storage integration. - A feasibility study for micro-grids will be conducted in the coming months to support decision making and enable strategic development of renewable projects while ensuring grid stability. ### Mitigating transition and climate-related financial risks (Pillar 3) - RM 9: The CBB to adopt a strategy with timebound guideposts for building capacity to monitor and assess climate change risks, including building data collection mechanism and joining the Network for Greening the Financial System. - Expected outcome: Refine the assessment of financial sector risks arising from climate change. - Implementation status: Implemented. In September 2024, the CBB adopted a strategy to: - (i) ensure its staff have the capacity to understand and utilize datasets and tools for climate analysis; - (ii) deepen the understanding of climate hazards, exposures, and vulnerabilities; and - (iii) 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. - The strategy establishes key milestones in each area, with the goal of achieving a fully integrated climate risk framework by 2026. - Expected outcomes/benefits: - Improved financial sector resilience. - Reduced financial sector losses when climate risks materialize, lowering recapitalization needs for banks. - Investment Promotion: Clarification of climate-related exposures attracts investments by reducing uncertainty. - RM 10: The CBB to include climate change risk in their bank stress testing exercise. - Expected outcome: Refine the stress testing methodologies to include climate related risks. - Implementation status: Implemented. The CBB finalized its first climate risk assessment exercise in December 2024, following IMF TA support. - Additional actions and status: - An updated stress testing exercise is expected to be included in the 2024 Financial Stability Report. - The CBB is in early stages of upgrading its information management system and modernizing its data collection to continue strengthening its climate risk analysis and working to extend the analysis to transition risks. - The CBB has adopted NGFS short-term transition risk scenarios. - The FSC has collected localized damage data in collaboration with the Coastal Zone Management Unit and is conducting climate risk analysis for the insurance sector. ### Capacity Development Strategy: updated country strategy note — context and collaboration - Context: - Three-year arrangements under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) were approved by the IMF Executive Board in December 2022. - The EFF/RSF arrangements aim to support efforts to improve fiscal and debt sustainability, continue the structural reform agenda, and increase resilience to natural disasters. - Collaboration: - Fund CD engagement has focused on: (i) fiscal issues including tax and customs reform and PFM (FAD / CARTAC); (ii) central bank operations, monetary policy toolkit, liquidity assistance and risk-based financial sector supervision (MCM / CARTAC); (iii) statistical capacity including national accounts and price statistics (STA / CARTAC). - Coordination with other multilateral and bilateral donors includes: - (i) the World Bank on debt management, disaster risk financing, climate change adaptation, and the business climate; - (ii) the IDB on debt swap initiatives, climate adaptation, sustainable/green procurement, climate budget tagging, and public-private partnerships. ### CD priorities 2022–2025 and near-term focus areas - Main CD objectives: - Operationalizing PFM and tax and custom reforms. - Reviewing the corporate income tax framework. - 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. - Increasing the effectiveness of the AML/CFT regime. - Specific CD areas and recent actions: - Revenue and customs administration: - TA priorities include strengthening compliance and risk management, modernizing duty and tax exemptions framework, reducing tax arrears, and assessing human resources needs at the BCED. - Planned CD: developing a robust tax arrears management strategy at the BRA; advancing the roadmap for filling critical vacancies at the BCED; establishing a risk management exemptions control framework to improve compliance, especially in the fuel sector. - Public Financial Management (PFM): - Continued CD support in fiscal risks, cash management, and budget preparation. - A PIMA/C-PIMA mission in 2023 supported integration of climate into budget cycle aspects, fiscal reporting, oversight, and auditing. - Support for developing a PPP framework and preparing project appraisal guidelines. - Tax policy: - Recent CD advised on rationalizing tax expenditures. - Further CD to support creation of a comprehensive tax expenditure inventory and implementation of a methodology to improve costing of tax expenditures. - Systemic risk analysis: - CBB received CD to develop a strategy with time-bound guideposts for monitoring and assessing climate change risks, including data collection mechanisms and joining the Network for Greening the Financial System. - CD included support in developing stress testing models and enhancing capacity to produce the Financial Stability Report with the FSC. - Further Fund CD planned to support extension of analysis to transition risks. - Financial supervision and regulation: - TA on reorganization of the Supervision Department and review of FSC organization structure. - CD on cybersecurity risks in financial institutions, climate risk supervision, and supervision of cyber risks in Fintech firms. - Central Bank Operations: - CD supported modernization of the CBB monetary policy toolkit, including balance sheet assessment. - CBB developed a daily liquidity forecasting framework and explored establishment of a benchmark monetary policy rate. - TA on Emergency Liquidity Assistance (ELA) supported establishment of a framework to anticipate ELA needs. - Real and external sector statistics: - BSS received TA to support CPI updating, re-launch of the Producer Price Index and the Index of Industrial Production. - CD for rebasing GDP and better measuring informal activity; further CD to rebase GDP statistics to 2023. - CARTAC and STA provided TA to improve external debt statistics and the timeliness of BOP and IIP data. - Macroeconomic frameworks: - Support for building capacity in medium-term macro-fiscal frameworks, including staff training. ### CD priorities going forward (near term) - Continued CD support will focus on: - BRA: improving compliance and reducing tax arrears. - BCED: implementing the roadmap to address human resource challenges and establishing the exemptions control framework based on risk management. - Tax and expenditure policy: improving monitoring and costing of tax expenditures. - CBB: follow-up CD on risk-based supervision and support in climate stress testing, including extension to transition risks. - BSS: assistance to rebase GDP to 2023 and improve BOP and IIP data quality and timeliness. *Source: 1brbea2025001-print-pdf - 2025. The bill establishes an overarching framework for renewable energy investment, regulatory and capacity development content as presented in the PDF chapter/section.* ### Appendix I. Letter of Intent ### Appendix I. Letter of Intent ### Program context and objectives - Government came to office in 2018 confronted with fiscal and external imbalances that threatened public sector sustainability and the viability of the currency peg; BERT 2018 and a 2018-22 EFF arrangement were implemented to restore macroeconomic stability. - Successor strategy BERT 2022 focuses on inclusive and sustainable growth while maintaining fiscal and debt sustainability and building resilience through climate adaptation and mitigation. - The EFF and RSF arrangements were approved on December 7, 2022, and are the basis for a joint 36-month program supporting BERT 2022. ### Performance under the EFF and RSF (results and requests) - EFF: All quantitative program targets for end-December 2024 and end-March 2025 were met. - Fiscal outturns: - FY2024/25 primary surplus: 4.3 percent of GDP (above the 3.8 percent target under the EFF arrangement). - FY2025/26 budget target: primary surplus of 4.4 percent of GDP. - Medium-term commitment: bring public debt down to 60 percent of GDP by FY2035/36. - External buffers and financing: - International reserves: US$1.7 billion at end-March 2025, from US$220 million in 2018. - IMF support under 2018 EFF: provided 341 percent of quota in the amount of SDR 322 million (approved on October 1, 2018). - Augmentations under the 2018 EFF totaled SDR 114 million. - Additional support from other development institutions: nearly US$1 billion in policy-based loans and about US $300 million in project-based loans. - RSF: Both measures targeted for the current review have been completed. RSF-supported measures include increased policy space to invest in resilient infrastructure and the transition to renewable energy. - Disbursement requests for program completion: - Request completion of the fifth and final review of the arrangement under the EFF, with full purchase of SDR 14.175 million to be made available as budget support. - Request completion of the fifth and final review of the RSF arrangement and disbursement of SDR 28.35 million to be made available. ### Macroeconomic and debt framework - Debt anchor and medium-term path: - Debt-to-GDP path converging to 60 percent by FY2035/36. - Requires strong primary surpluses while accommodating capital expenditure for climate resilience and growth. - Historical fiscal outcomes: - FY2022/23 primary surplus: 2.4 percent of revised GDP (up from a deficit of about 1 percent of GDP in FY2021/22 and FY2020/21); includes a margin of 0.5 percent of GDP dedicated to early repayment of public debt. - FY2023/24 primary surplus: 3.5 percent of revised GDP. - FY2024/25 primary surplus: 4.3 percent of GDP. - GDP statistics note: - Based on new GDP statistics published by the Barbados Statistical Service (BSS) in July 2024; new GDP statistics are based on reference year 2016, rebased from 2010. ### Fiscal strategy and policy priorities - Two-pronged fiscal strategy under BERT 2022: - (i) Strengthen tax and customs administration. - (ii) Streamline and enhance the efficiency of expenditures, including SOE reform to reduce Central Government subventions. - Revenue policy and administration priorities: - Modernize tax administration systems and increase audit capacity via the Barbados Revenue Authority (BRA). - Use of third-party data and enhanced electronic filing/digital payments to boost compliance and minimize leakage. - Continued focus on strengthening compliance, risk management, and audit capacities across BRA and Barbados Customs and Excise Department (BCED). - Specific administrative and reform actions completed or underway: - Memorandum of Understanding between BRA and BCED to enhance information sharing established in March 2021. - Data-matching project with BRA, BCED, and the National Insurance and Social Security Service (NISSS) completed (structural benchmark for end-March 2023); highlighted possible duplication in BCED’s ASYCUDA system. - BRA developed a compliance risk management dashboard integrating BRA, BCED, and NISSS data. - Data-matching for trusted traders within BCED’s ASYCUDA system completed and incorporated into the dashboard; refinements ongoing. - Single registration process completed (structural benchmark for end-September 2024) to mandate use of the tax identification number (TIN) as the unique identifier for importers and exporters and as a requirement for border transactions. - Single identifier project launched to provide a single identifier for current and new taxpayers and clean historical data for compliance reviews. - New single-registry process developed with CARTAC assistance to allow tax, NISSS and customs registration in a single sitting; portal went live for new taxpayers in May 2025. - BRA’s Business Intelligence tool implementation completed; Phase 2 includes compliance risk management aspects. Final demonstrations made in May 2024; work begun with the Fiscal Risk Unit to analyze related data. ### Structural reforms, institutional strengthening, and climate resilience - Structural reform highlights: - Completion of an assessment of human resource needs at the Barbados Customs and Excise Department. - Preparation of a Public Private Partnerships (PPPs) framework by the Ministry of Finance, Economic Affairs, and Investment with CARTAC technical assistance. - Central Bank of Barbados set up an active daily liquidity forecasting framework with Fund technical assistance. - Accelerated reforms to state-owned enterprises to increase efficiency, safeguard fiscal sustainability, and improve public service provision. - RSF-supported climate and resilience measures: - Integration of climate concerns into public financial management via development of the PPP framework, preparation of public investment appraisal guidelines, and deepening of fiscal risk analysis. - Central Bank of Barbados incorporated physical climate change risk into its bank stress testing toolkit with IMF technical support. - Establishment of a new Blue Green Bank, supported by RSF fiscal space, to finance green investments in affordable homes, hurricane-resilient roofs, electrification of transport, and other Paris-aligned investments. - Engagement with other institutions on green finance, including 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. ### Policy commitments and transparency - The Government will: - Maintain close policy dialogue with Fund staff and stand ready to take additional measures as necessary to meet EFF and RSF objectives. - Continue to observe standard performance criteria against imposing or intensifying foreign exchange currency restrictions and against introducing or modifying multiple currency practices. - 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. - Publish this letter on the websites of the Ministry of Finance, Economic Affairs and Investment and the Central Bank of Barbados and authorize the Fund to publish the letter together with the Staff Report and attachments. - Forward outlook: - Government intends to decide on the specific form of future engagement with the Fund after developing the third phase of the home-grown BERT plan. *Source: Appendix I. Letter of Intent (1brbea2025001-print-pdf).* ### 12. The BRA is updating its IT systems and processes to ensure the timely processing and ### 12–17: Tax Administration, Customs Modernization, Exemptions, and Public Financial Management Reforms ### Tax administration, legacy arrears, and tax arrears management - The BRA is updating its IT systems and processes to ensure the timely processing and issuance of tax refunds and to retire the stock of legacy arrears. - Central government arrears fell from $1.2 billion at end of June 2018 to $187.5 million at the end of March 2025. - SOE arrears declined from $755 million to $19 million over the same period. - The BRA completed verification of a stock of legacy tax refund arrears discovered in its pre-TAMIS IT systems during the last half of 2021 and confirmed that the total arrears outstanding (inclusive of the legacy arrears) to taxpayers were estimated at $296.9 million at the end of April 2022. - BRA has vetted the stock of taxpayer arrears owed to Government, estimated at more than 10 percent of GDP, and notifications have been sent to those identified as non-compliant. - With Fund TA support, the BRA is developing a robust tax arrears management strategy to enhance the efficiency and effectiveness of its tax collection processes. ### Customs administration reform, governance, and capacity - Customs (BCED) administration requires reform to facilitate trade, improve risk management and stakeholders’ engagement, and strengthen revenue collection. - Governance and management progress: - Internal Audit Division strengthened with terms of reference and a risk-based work plan. - Key Performance Indicators (KPIs) developed for all units and are progressively being used. - Operational dashboards developed for Trade Operations and Compliance and Enforcement Directorates and used for management decision making. - A human resource needs assessment for the next several years was completed (structural benchmark for end-March 2025) with Caribbean Customs Law Enforcement Council assistance. - The assessment recommended retooling current staff and targeting recruits with skills in data analytics, accounting, and risk management. - Report acknowledges need to implement additional units to support business facilitation, security, and compliance with international trade agreements and conventions. - It is envisaged that existing vacancies can be utilized to implement these units. ### Trade facilitation, systems, and compliance measures - ASYCUDA World was upgraded, and new modules are being implemented. - A modernized Customs Act was passed in November 2021; regulations are being finalized, inclusive of an administrative approach document to streamline application of fines for non-compliant stakeholders. - The Harmonized Commodity Description and Coding System was implemented; the new 2022 version is now operational. - Eleven Compliance plans developed to enhance compliance and augment revenue collection. - A new unit established to manage exemptions; a policy is being built to streamline its management. - The Trusted Trader Program, introduced in 2020, continues to be expanded and is enhancing facilitation. - Measures to improve cargo processing and compliance: - Holistic risk management, standardized cargo processing in all modes (sea, air, and post), and post-clearance audit procedures introduced. - Creation and staffing of compliance units to monitor commercial activities through transactional reviews and audits, exemption and bonded warehouse monitoring. - Oversight mechanism via a Steering Committee oversaw the 2020-2023 Strategic Plan; a new plan is being conceptualized. - Use of Taxpayer Identification Numbers has commenced for all exporters and importers in collaboration with the BRA. - Electronic forms are increasingly used to facilitate a complete paperless process. - Government remains committed to Customs Modernization program prepared with IMF TA; key near- and medium-term priorities include: - Follow through on principles and services in the new Customs Act and Regulations, including the operational Exemption Management Program, outreach program and educational products, and governance and internal control improvements. - Pursue BCED reform and modernization: implement new strategic plan, compliance framework, integrated risk management strategy, and enforcement manual. - Complete overhaul of warehousing and duty-free shop system to prevent revenue leakage; risk classification for all warehouses completed with CARTAC assistance; high-risk warehouses identified for field audits. - Implement an appeals mechanism and advance rulings as required by the Customs Act and establish a Policy and Planning unit; CARTAC provided technical support for appeals mechanism and advance rulings. - Operationalize a compliance action plan for import of vehicles and auto parts; BCED finalized an action plan to minimize non-compliance risks drawing on IMF CD. - Establish an exemptions control framework based on risk management, with special emphasis on the fuel sector; a complete review and overhaul of petroleum concessions is ongoing; CARTAC conducted workshops and a final report is expected shortly. ### Tax and Customs Exemption Regime modernization - The GOB seeks to modernize its waiver regime to eliminate detrimental revenue leakage and ensure desired economic dividends. - Reform rationale: exemption regimes are prone to abuse and misallocations that can compromise public services and growth potential; a centralized, transparent, rules-based approvals framework with rigorous cost-benefit analyses, monitoring, and sunset provisions or regular re-certifications is essential. - Two-phase strengthening plan: - Phase 1: New legislative and regulatory provisions to strengthen procedures for granting and managing all duty and tax exemptions (structural benchmark for end-December 2022). - Legislation adopted by cabinet and approved in Parliament requires exemptions to: (i) be “in the public interest”; (ii) receive approval of the Minister of Finance and/or an independent deliberating committee for classes of cases/decisions above a sensible threshold; and (iii) be revoked if recipients breach the laws of Barbados. - BCED established an Exemptions Monitoring Unit that prepares and submits monthly reports to the MFEI detailing entities receiving exemptions, the quantum of the exemption, and the purpose. - Phase 2: Formal and time-bound recertification process for all pre-existing/legacy tax and customs waivers to ensure qualification under enhanced framework (structural benchmark for end-March 2024). - Modernized duty and exemptions framework implemented, requiring all pre-existing tax and customs waiver beneficiaries to submit for re-qualification in coming years. - Further review of the tax exemptions regime supported by IMF TA will inform future interventions. - Current waiver statistics and plans: - Stock of approved waivers exceeds 7,000. - Significant cost in foregone revenues of 5.8 percent of GDP per year. - Exemptions are actively being monitored and the recertification process will commence in 2025. - With Fund TA support, government is developing a comprehensive tax expenditure inventory, including direct and indirect tax concessions, and a methodology to improve costing estimates of tax expenditures. ### Public Financial Management (PFM), budget process, and fiscal governance - The modernized Public Finance Management (PFM) Act introduced in 2019 strengthened oversight and reporting mechanisms, notably for SOEs where Government pre-approval for borrowing is now required and reporting requirements tightened with sanctions for non-compliance. - Government adopted an action plan to implement the new PFM Act. Steps include: - Strengthen the strategic phase of the budget formulation process: - Annual updates of the Government’s fiscal strategy based on backward-looking expenditure and revenue reviews and forward-looking targets on revenue, expenditure and debt in line with Government priorities (see procedural fiscal rule). - Setting multi-year expenditure ceilings in accordance with the updated fiscal strategy. - Provision of clear Cabinet instructions for budget submissions based on comprehensive discussion of needs and priorities, including binding spending ceilings. - Align budget calendar to requirements of the new PFM Act and issue the budget circular soon after the fiscal framework is tabled in Parliament; budget circular to be accompanied by expenditure ceilings approved by Cabinet for each financial year covered by the medium-term budget planning horizon. - Upgrade budget documentation to include policy-oriented information: - Mid-year budget review report tabled in Parliament by October 15th of every year to report outturns against the annual budget, signal likely deviations, and identify remedial actions. - From the FY2023/24 budget onwards, Annual Budget Document includes an assessment of alignment between the budget and fiscal objectives and a comprehensive description of all revenue and expenditure measures taken. - Enhance fiscal risk management: - Establish required reporting and analytical frameworks; Ministries, SOEs and Agencies to produce annual and quarterly reports. - A health dashboard analyzing financial performance of SOEs monitored by the MFEI has been developed. - Strengthen risk management capacity within MFEI by creating a dedicated Fiscal Risk Unit (structural benchmark for end-June 2023). The Unit prepares fiscal risk reports and annual fiscal risk statements, including assessment on climate change risks that were included in budget documents from FY2023/24 (reform measure for end-September 2023). - With IMF TA, MFEI is deepening expertise of the unit and enhancing the quality of risk analyses. - Clarify fiscal vulnerabilities from National Insurance and Social Security Service (NISSS): - NISSS cleared backlog of financial statements and submitted financial statements covering 2010 to 2023 for audit by the Auditor General (structural benchmark for end-March 2024). - Auditor General concluded fact-finding assessment and is mobilizing resources to complete the audits. - Improve public procurement and governance: - New procurement law approved by Parliament in December 2021 to promote integrity, fairness, transparency, and value for money; Cabinet approved Procurement Regulations to operationalize the 2021 Procurement Act and support ‘green procurement’ processes (reform measure for end-September 2023). - Standard contracts for routine procurements developed to minimize delays in awarding contracts (structural benchmark for end-September 2024); reform benefited from IDB technical support. - 2021 Procurement Act innovations: Chief Procurement Officer to conduct procurement audits and establish/maintain a register for all suppliers; publication of all procurement contracts awarded in the year and reports on supplier performance. - Revised Integrity in Public Life Bill, revised Prevention of Corruption Act (passed both Houses in October 2021), Deferred Prosecutions Act (passed both Houses in December 2021), and Whistle-blower Protection bill (approved by Cabinet October 2021, passed Parliament December 2021) advanced anti-corruption framework. - Strengthen cash management: - Cash management unit established within the Treasury (structural benchmark for end-March 2024) to manage the Consolidated Account, Government’s bank accounts, prepare monthly cash plan, address bank reconciliation issues, and monitor MDAs’ and SOEs’ cash plans. - Training conducted for all financial controllers in central government and SOEs with University of the West Indies and White Oak; next steps include assessment program of current work streams and re-engineering processes to enhance timeliness and accuracy of cash reporting. - Improve public investment management: - Measures to strengthen public investment management drawing on 2023 PIMA recommendations. - With IMF TA in December 2024, public investment project appraisal guidelines developed for application to all new public investment; a circular expected to be issued to SOEs and MDAs to ensure application. - Next steps: develop appraisal methodology and prioritization/selection process to meet objective of boosting public investment to 5 percent of GDP per year over the medium term. - Review legal and regulatory framework for PPPs: - MFEI prepared a PPP framework to guide PPP decision-making (structural benchmark for end-March 2025), with IDB and IMF training and technical support. - Framework adopted by Cabinet and applies to all PPP projects under consideration; covers objectives for PPPs, focus areas (tourism, agriculture, renewable energy, blue economy and seaports, aviation, land use, housing and social sectors), guiding principles (value for money, affordability, risk allocation, transparency, competition, local content, conservation), and institutional arrangements (Public Investment Unit, Debt Management Unit, Fiscal Risk Unit, Management Accounting Unit). - Detailed regulations and guidelines to be published; training of MFEI staff completed in November and February 2025 with IDB and CARTAC technical assistance, including on climate-related project proposals and aligning PPPs with strategic priorities. *Source: 1brbea2025001-print-pdf (selected sections 12–17).* ### 18. The Government introduced a fiscal rule to enhance fiscal transparency and lock in the ### The Government introduced a fiscal rule to enhance fiscal transparency and lock in the ### Fiscal rule and fiscal transparency - A procedural fiscal rule was approved by Parliament in December 2021 and is aligned with IMF TA recommendations. - Under the fiscal rule the Government commits to: - (i) annually prepare a monitorable fiscal strategy/framework over the medium term; - (ii) regularly publish outcomes against this strategy; - (iii) take remedial action when required. - Minister of Finance reporting requirements: - (i) table in Parliament a fiscal framework annually in August that includes projections for revenue, expenditure, and debt for the current and forthcoming three fiscal years; - (ii) an annual mid-year review report in October that details the half-year outturn against the fiscal framework established for the current fiscal year; - (iii) take remedial action when required. - Deliberations over a numerical fiscal rule are expected to resume once supporting PFM systems have been sufficiently strengthened. ### Fiscal Council - A Fiscal Council was established at end-May 2023 to promote sound fiscal management. - Operational start has been delayed, but terms of reference and work plans have advanced. - Fiscal Council functions and focus: - Promote accountability and transparency in implementation of the fiscal strategy. - Focus on slimming public expenditure with emphasis on SOE reform. - Maintain fiscal discipline and sustainability by institutionalizing the Medium-Term Fiscal Strategy. - Promote realignment of government spending for effectiveness and efficiency and the streamlining of expenditure. ### Debt management objectives and operations - Target: bring the debt-to-GDP ratio below 60 percent by FY2035/36. - Commitment to generate needed primary surpluses to meet the target. - 2024-25 to 2026-27 Medium Term Debt Management Strategy (MTDS) approved by Cabinet and laid in Parliament. - Debt management objective: meet Government financing needs at the lowest possible cost over the medium- to long-term, consistent with a prudent degree of risk. - Planned actions: - Review debt management practices, auction mechanism effectiveness for long-term debt, and debt legislation toward a comprehensive debt law. - Strengthen Debt Management Unit structure and build investor-relations function (activities slated to commence in FY 2025/26). - Market re-engagement and operations: - Regular issuance of Treasury Bills including an optional non-competitive window for individual investors (allocated at a rate that is the average of successful competitive bidders). - February 2024: Government launched a reverse auction of its Series D bonds; auction concluded on March 8, 2024 with approximately 12 percent of the outstanding bonds offered for repurchase. Government accepted the lowest priced offers of up to $2 million (consistent with the amount pre-approved by Cabinet). - Subsequent tender for repurchase of Series B and additional Series D bonds issued on November 11, 2024. - Government issued a 20-year debenture for $250 million, with $245.2 million of subscriptions largely from the NISSS and other private pension funds. - Objectives of these operations: aid debt reduction, create a yield curve for new medium-to-long term securities, and support gradual extension of maturities. ### Domestic arrears - Total public sector domestic arrears: - $1.9 billion at the beginning of the BERT 2018 program; - reduced to approximately $236.9 million as of March 2025. - Central Government trade payables (non-tax arrears) largely settled, residual amount of $0.2 million to be cleared. - System developed to monitor SOE arrears on an ongoing basis. - Legislation introduced requiring all borrowing by SOEs to receive approval of the Minister of Finance; currently only commercial SOEs are allowed to borrow with pre-approval of Central Government. - Commitment: not to run new expenditure arrears. ### Public sector reform: pensions, NISSS, and SOEs - Reform priorities: - Safeguard sustainability of public pension scheme and wider national insurance and social security system. - Re-energize transformation of the SOE sector. - Public Pension Reform: - Key pillars: introduction of employee contributions for new public sector employees; parametric reforms on calculation of pension benefits; administration of pension arrangements by the NISSS from January 1, 2024. - Public pension reform legislation tabled in May 2023 (structural benchmark for end-March 2023). - Parliamentary approval attained in August 2023 (structural benchmark for end-March 2024). - Recapitalization and Reform of the NISSS: - Two-phase reform: - i. Restore the Unemployment Benefit Account through an infusion of $143 million from the Consolidated Fund over a three to five-year period; completed ahead of schedule with full disbursement at end-March 2023. - ii. Cabinet endorsed a reform plan at end-2022; December 2023 Parliament approved reforms from the National Insurance Scheme (NIS) Revitalization Plan, including gradual increases in the pensionable age (from 67 presently to 68) and minimum contribution period for eligibility (from approximately 10 years presently to approximately 15 years), to be phased in over the next decade; reform eases ability of self-employed persons to participate. - SOE Reform: - Rationale: high subventions to public entities pose fiscal risks; many SOEs are loss-making and inefficient. - Recent outcomes: - Unwound temporary support to SOEs and Ministries; transfers returned to near pre-pandemic levels: after peaking at 8.3 percent of GDP in FY2020/21, transfers were 6.1 percent of GDP in FY2024/25. - Note: SOE transfers were 4.5 percent of GDP in FY2024/25, excluding those related to earmarked revenues. - Mergers, rationalizations, and structural changes: - Cabinet approved in mid-to-late 2023: amalgamate RDC and UDC; reform National Housing Corporation (NHC); reform Barbados Agriculture Management Corporation (BAMC) and shift operations away from subsidizing traditional sugar industry (structural benchmarks for end-December 2023). - April 1, 2025: Barbados National Oil Company Limited (BNOCL) and Barbados National Terminal Company Limited (BNTCL) transitioned to Barbados National Energy Company Limited (BNECL). National Petroleum Corporation (NPC) to be merged with new entity pending legislative work. - Caribbean Broadcasting Corporation (CBC) restructured with transformation of labor force and business model. - Social Empowerment Agency to be launched, amalgamating Child Care Board, National Disabilities Unit, National Assistance Board, and Welfare Department. - Planned transport sector reform: restructure Transport Authority into Barbados Mass Transit Authority (BMTA); convert current Transport Board into a special purpose vehicle (SPV) to allow off boarding of public sector bus fleet to private drivers under lease where operational costs borne by lessees. - Risk assessment and targeted reforms: - A health dashboard analyzing financial performance of public entities developed by the MFEI (with IMF assistance) to identify risks and elaborate targeted measures. - Comprehensive stocktaking of SOE financial performance undertaken (structural benchmark for end-June 2023); reports show improvement but indicate most entities are structurally unprofitable. - Modernization principles guiding SOE reforms: (i) shift commercial activities to private sector; (ii) ensure adequate and modern user-fee structures; (iii) provide enfranchisement opportunities in delivery of public services; (iv) identify further efficiencies. ### Monetary and financial sector policies - Exchange rate and monetary framework: - Barbados’ exchange rate peg to the US dollar maintained since 1975 and remains a central policy objective with strong commitment to the peg. - Fiscal and structural policies to support the peg and sustain adequate international reserves balances. - Amended Central Bank Law (passed December 2020) enhanced CBB autonomy, mandate, and decision-making; limits CBB financing to Government in line with international best practice. - Reduced limit on the Ways and Means account to 7.5 percent of CG revenues (from 10 percent at end-2017). - Restricted purchases of Government securities to 3 percent of GDP on the primary market in the case of a declared national emergency. - Exchange control liberalization measures: - Effective August 1, 2019: - Allowed all Barbadians to open foreign-currency denominated accounts. - Allowed foreign-currency proceeds from sale of assets to be repatriated in foreign currency or kept locally in a foreign-currency account. - Eliminated the surrender requirement of 70 percent of foreign exchange brought into Barbados. - Increased select foreign-exchange limits such as the limit on personal travel facilities. - Increased delegation of authority to foreign-exchange dealers to approve transactions without referral to the Central Bank. - CBB recapitalization and safeguards: - A gradual recapitalization approach preferred given magnitude of capital shortfall; initial growth of capital through profit retention with aim of transitioning to a gradual predetermined payment plan until authorized capital fully paid up. - Recapitalization intended to provide balance sheet space for sterilizing excess liquidity to support the fixed exchange rate regime. - 2023 Safeguards Assessment mission completed in March 2023 highlighted a strong safeguards framework at the CBB. - CBB implemented prior recommendations from the 2018-2022 EFF arrangement and significantly strengthened legal framework, governance arrangements, and financial reporting practices. - CBB committed to addressing gaps in internal audit and internal controls including cyber security and risk management. - Approved an Emergency Lending Assistance framework in 2024 with IMF TA support. - MFEI and CBB prepared an updated Memorandum of Understanding clarifying responsibilities for servicing financial obligations to the Fund under the EFF/RSF arrangements. - Financial sector monitoring and macroprudential capacity: - Amended Central Bank Law establishes promotion of financial stability as a secondary objective and attributes formal macroprudential powers to the CBB. - Oversight shared by CBB, Financial Services Commission (FSC), and Barbados Deposit Insurance Corporation; these authorities participate in the Financial Oversight Management Committee (FOMC). - Effective banking regulatory framework: Basel II standardized approaches for calculation of risk-weighted assets; financial statements prepared according to IFRS. - CBB designs reporting forms and schedules for banks and Part III companies; FSC monitors insurance corporations, pension funds, mutual funds, and credit unions and is revising reporting forms and increasing reporting frequency. - CBB and FSC release an annual Financial Stability Report and health-check reports for sub-sectors. - CBB compiles and disseminates quarterly core financial stability indicators (FSIs) for deposit takers (excluding credit unions) in line with IMF TA guidance in 2019. - On balance, Barbados’ financial system remains well capitalized; stress tests by CBB and FSC indicate a low risk of a systemic crisis. Commercial banks’ systemwide capital adequacy ratio is more than twice the regulatory minimum. - Enhancements to monetary policy toolkit and analytics: - CBB reviewed balance sheet capacity and monetary toolkit with IMF TA (structural benchmark for end-November 2023). - Established a liquidity-forecasting unit and enhanced forecasting framework including daily data analysis (end-March 2025 structural benchmark). - Set up active daily liquidity forecasting to monitor reserve supply and estimate banks’ demands for precautionary reserves. - Internal research paper explored introduction of a benchmark monetary policy rate anchored to Barbados’ exchange rate peg and target reserve adequacy levels; new liquidity management instruments contemplated. - Research concluded that in absence of an active secondary market, fiscal policy remains the primary tool for economic adjustment; pervasive excess liquidity renders benchmark policy rate changes largely ineffective. - CBB can implement macroprudential measures and has enhanced stress testing with satellite models linking macroeconomy to banking sector; conducted preliminary climate risk analysis focusing on physical risks. - New indicators being constructed (e.g., real estate price indices) and credit-to-GDP gap analysis initiated. *IMF staff summary, chapter on fiscal, debt, public sector reform, and monetary/financial policies.* ### 28. Work to introduce a National Digital Payments System is progressing. The Central Bank ### 1brbea2025001-print-pdf - 28. Work to introduce a National Digital Payments System is progressing. The Central Bank ### National digital payments modernization - The Central Bank of Barbados, in collaboration with the World Bank, officially launched Barbados’ Payments System Modernisation Project in October 2024. - Objective: procure and operationalise a modern instant payments system application to foster more efficient, effective, interoperable, and consumer-friendly payments. - Engagement covers five broad areas: legal and regulatory support; payments oversight development; instant payments system (IPS) and interoperability operationalisation; payments system usage; and digital financial literacy. - National payments system act regulations are being refined to enhance the legal and regulatory framework governing digital financial services. - A new payments oversight framework is being implemented, consistent with international best practices for both payment system operators and payment service providers. - A comprehensive digital financial literacy campaign and communication plan is being developed to support these efforts. - The new IPS platform is slated to go live by March 31, 2026. ### AML/CFT framework and FATF status - Barbados exited the FATF’s International Review Group process after continued strengthening of the AML/CFT framework. - Timeline highlights: - On-site assessment in January 2024. - FATF concluded in February 2024 that the Government had completed its action plan to strengthen the effectiveness of the AML/CFT regime. - Key reforms identified by FATF included: - (i) conducting risk-based supervision of financial institutions and applying sanctions as appropriate; - (ii) ensuring that accurate and up-to-date beneficial ownership information is available on a timely basis; - (iii) improving and enhancing the use of financial intelligence; and - (iv) pursuing repatriation and sharing of confiscated assets with other countries. - Outcome: Barbados was removed from the FATF grey list. - Expected impacts: further enhancement of Barbados’ profile, reduction of enhanced due diligence required by overseas parties, improvement in the business environment, and boost to foreign investment. - Forward actions: - Update National AML/CFT Risk Assessment by 2027, mapping out strategic reforms to identified risks in the banking sector. - Continue to update the risk profiles of each licensee at the individual institution level. ### Growth strategy (BERT 2022) and targets - The BERT 2022 growth strategy seeks to increase the country’s productive potential to between 3.0 to 5.0 percent per annum. - Given binding constraints on fiscal space, reforms focus on regulatory and legislative improvements to business and investment conditions, climate resilience and empowerment, and resource capacity for sectoral development. - BERT 2022 pillars include: - incentivizing an acceleration of small-scale private-sector investment in the green transition; - incentivizing low- and middle-income housing; - investing in skills training and education to enhance human resource capacity; - preserving financial stability and mobilizing domestic savings for local investment; - making Government an enabler to enhance productivity, competitiveness, and service excellence to attract local and foreign direct investment; - establishing Barbados as a logistics hub by strengthening regional and international economic linkages, particularly with the African continent; - implementing targeted public investments for sectoral integration and climate-resilient infrastructure; - promoting a high-skilled, knowledge-based, tech-heavy, carbon-neutral, and marine-conscious economy; and, - adopting open labour market policies to support stronger, resilient growth while expanding the population base and improving productivity and competitiveness. - The Barbados Population Policy 2023–2024, approved in May 2024, aims to promote sustainable development, preserve environmental sustainability, ensure a population size that supports social care, productivity, and economic growth, and enhance labor force skills and access to opportunities. ### Near-term business and investment reforms - Completing reform program to further enhance business and investment conditions is a top near-term priority. - Institutional arrangements and milestones: - Doing Business Sub-Committee of Cabinet and Private Sector Committee established in 2018 to execute and monitor reforms. - Stocktaking of reform execution (structural benchmark for end-March 2023) identified unfinished reforms and next steps. - Identified priorities include: - finalize the second phase of the Corporate Affairs and Intellectual Property Office (CAIPO) reform to merge registration, payment, and information exchange processes within a single window; - broaden the Trusted Trader program for vetted companies; - fully operationalize the Barbados Electronic Single Window (ESAW) by end-2025 to enhance intermediation between business and government agencies. - In February 2025, Government approved the appointment of the first Board of Directors of Business Barbados, a newly formed state-owned enterprise to champion a customer-first business model; CAIPO operations were subsumed into Business Barbados. ### Additional near- and medium-term growth-enhancing reforms (selected) - Barbados Investment Plan aims to stimulate growth by attracting foreign direct investment, supporting local enterprises, and enhancing infrastructure development. - Energy and green transition: - Commitment to reaching the 100 percent renewable energy target by 2035. - Incentives for small-scale private sector investment in energy generation, transport, tourism, and agricultural sectors via temporary feed-in-tariffs and temporary tax reductions. - The Electricity Supply Bill (reform measure for end-September 2024) will facilitate these objectives. - Housing: - Build 10,000 houses in five years under the Home Ownership Providing Energy (HOPE) housing project, allowing homeowners to generate income from a roof-top solar system. - Education and skills: - Introduced the National First Jobs Initiative and Apprenticeship Scheme; restored free tertiary education at vocational, technical, and undergraduate levels. - Planned Education Act to modernize teaching and system management; replace the 11-plus secondary school entrance examination; promote STEAM subjects. - Prioritize Youth Advance Corps programme and continue the National Transformation Initiative offering access to more than 15,000 courses globally, as part of a seven (7) year goal to make Barbados world-class. - Public service digitization: - Complete rollout of digitization of Government services (structural benchmark end-September 2023). - GovTech agency established with a Board of Directors and ongoing staffing. - Digitization center established and digitization of records commenced. - Develop an E-Services platform and a digital platform to improve monitoring and execution of the Public Sector Investment Programme (structural benchmark end-September 2024), leveraging C-PIMA recommendations from September/October 2023. - Trade facilitation and logistics: - Enhanced port operations under BERT 2018; further gains expected with the electronic single window for trade to be fully operational by early 2026. - New cargo berth under construction expected to be operational towards mid-2025 to boost maritime logistics hub attractiveness and ease congestion. - Plans for an aggregate berth to ease congestion at bulk facility for construction materials. - New sister Port Agreements signed with ports in Africa, Latin America, and the Middle East. - Access to finance for SMEs: - Establish a web-based collateral registry of movable assets, a factoring program, and micro-leasing agencies to enhance access to finance for small- and medium-sized businesses. - Complementary measures: Fair Credit Reporting (FCR) Act proclaimed in May 2022; Financial Literacy Bureau launched; National Payments Systems Act and creation of a digital payments ecosystem. - Aviation and maritime strategy: - Establish Barbados as a southern hub for aviation commercial activity anchored by Grantley Adams International Airport. - Work underway to facilitate a new Maintenance and Repair Operation and expand flight training capability. - Reform civil aviation legislative framework to expand air routes and airlift, encourage direct flights from Europe and establish direct airlift with Africa. - Reform Maritime Legislative framework and invest in port infrastructure, including launch of the digital port community system. - Encourage establishment of a regional ferry service to improve regional goods and people movement. - Food security and destination management: - Collaborating with Guyana and Suriname to establish a Food Terminal in Barbados to address food security and help reduce the regional food import bill by 25 percent by 2027. - Establishment of a Barbados based Destination Management Cooperative and a Florida US based Destination Management Company to create a single purchasing platform for Destination Barbados. - UN World Food Program established a regional hub in Barbados at Grantley Adams International Airport; CDEMA established a hub in Bridgetown. - Tourism: - Build upon BEST Plan to refurbish and modernize the tourism product; support training, greening (photovoltaic systems, water conservation), and digital upgrades. - Support initiatives to maintain competitiveness, diversify product offerings, establish community villages, develop a cultural heritage niche including the Richard Stoute Amphitheatre, and invest in sewerage, sanitation and road repairs. - Business registration and company law: - Review and update the Companies Act to align with international best practices. - Continue improving efficiency of registration and incorporation through a digital strategy and ICT platforms, with systems for change management and staff training. ### Sustainability and climate resilience - Climate resilience is central to growth and macroeconomic stabilization strategy; RSF (Resilience and Sustainability Framework) reform measures were developed with World Bank and IDB. - RSF pillars: (i) addressing immediate adaptation and resiliency priorities; (ii) reducing greenhouse gas emissions; and (iii) mitigating transition risks. - Risk mitigation measures undertaken: - Insuring against natural disaster risks through the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and introducing natural disaster clauses into domestic and external bonds allowing capitalization of interest and deferral of scheduled amortization over a two-year period following a major natural disaster. - Securing an IDB contingent credit facility that allows Barbados to borrow up to US$80 million in case of a natural disaster. - Working on structural and post-disaster resilience measures (e.g., ‘roof-to-reef’ program and strengthened public procurement). - Providing incentives to individuals and corporates to invest in renewable energy, water conservation, and build resilience. - Adopting the National Comprehensive Disaster Risk Management (DRM) Policy to mainstream DRM principles into ministry and agency budget planning (reform measure for end-September 2023). - Transforming the existing Catastrophe Fund into the Resilience and Regeneration Fund to: - (i) provide greater financial and social protection by proactively enhancing natural-disaster resilience of existing housing structures; - (ii) provide financial aid to eligible persons and businesses in the event of a disaster; - (iii) provide funding to remedy any adverse effects of a possible disaster. - Financing the Fund by expanding the contributor pool and contribution rates, and allocating up to 50 percent of unclaimed assets (bank accounts unclaimed after 10 years which have been transferred to the Central Bank). - Establishing a Catastrophe Claims Committee responsible for assessment and granting of financial aid. *Source: 1brbea2025001-print-pdf - 28. Work to introduce a National Digital Payments System is progressing. The Central Bank* ### 35. To safeguard against external shocks to fuel import costs, Barbados remains ### 1brbea2025001-print-pdf - 35. To safeguard against external shocks to fuel import costs, Barbados remains ### Renewable energy targets, policy, and implementation - Committed to reaching its 100 percent renewable energy target by 2035. - Independent Fair Trading Commission (FTC) published Feed-in Tariffs (FITs) for independent power producers (IPPs) across renewable technologies. - Government of Barbados (GOB) established a licensing system for IPP renewable energy projects and issued a guidance note on the licensing and approval process for investors in March 2022. - Policy priority: expeditiously implement the clarified licensing process and accelerate private sector investments into renewable energy projects. - Specific initiatives: - Collaboration with the BL&P to develop a minimum of 30 megawatts (MW) of wind energy investment, with a requirement that Barbadians participate in and own a minimum 30 percent share in the benefits of the 30MW wind project through newly established financial instruments; an additional 30 percent to be reserved for SOEs (continued initiative text present in source). - Closure of remaining regulatory gaps in the FITs mechanism to promote renewable energy storage technologies and a corresponding licensing policy/approvals framework (reform measure for end-September 2023). - Ongoing efforts to enhance competitive procurement methods—feed-in tariffs, auctions, and direct negotiations—to increase investments into battery storage technologies. - November 2024: Ministry of Energy launched a Request for information (RFI) for the supply of up to 60MW of energy storage; the exercise received prospective project submissions well in excess of the 60MW target. - Electricity Supply Bill proclaimed in February 2025 to modernize regulation of generation, storage, transmission, distribution, supply, dispatch and sale of electricity (reform measure for end-September 2024). - Transport greening: - Fiscal incentives to reduce import duties, excise taxes and VAT on electric vehicles (reform measure for end-September 2023). - Two-year excise and value added tax holiday for electric vehicles introduced from April 1, 2022; extended for an additional two years with an end date of March 2026. - Reduction in tariff rates for alternative energy vehicles. - Public electric bus fleet: 89 electric buses (62 percent of available bus fleet, as at March 2025); plan to complete transition to a fully electric public bus fleet by end-2025. ### Housing, resilience, and the Roof to Reef (R2R) initiative - Housing agenda: build 10,000 houses in five years, financed in part through renewable energy technology (revenues from rooftop solar panels). - Models for delivery: - Government provides land; large local contractors construct houses and infrastructure. - Government provides infrastructure; small- and medium-sized local contractors construct houses. - First-time homeowners (low- and middle-income earners) provided affordable climate-resilient and energy-efficient housing using renewable energy technology. - NHC constructing new housing units for rent-to-own for those who cannot participate in HOPE schemes. - Roof to Reef (R2R) initiative: national roadmap for resilient development emphasizing sustainable development and climate crisis resilience. - Components include: rapid roof replacement programme for non-hurricane resistant roofs; replacement and maintenance of water mains, reservoirs and climate-resilient water and sanitation infrastructure; enhanced efforts to protect coral reefs and marine environment. - Measures to reduce pollution of the water table, including conversion of remaining outdoor toilets into indoor water-efficient toilets. - Systematic re-siting of currently overground utility infrastructure underground. - Development of national storage capacity of generators, water, food, and medicine to last for seven days. - Upgrades to hurricane shelters. - GOB approved amendments to the Planning and Development Act to improve climate resilience of roads through improved drainage (reform measure for end-March 2023). - Additional R2R priorities and deliverables: - Passage of the Water Re-use Bill in Parliament in May 2023, incorporating the new water re-use policy (reform measure for end-March 2023). - Operationalization of the Barbados Environmental Sustainability Fund (BESF), which began receiving funds from the debt-to-nature swap as of end-FY2022/23 (reform measure for end-March 2023). - Tabled new Stormwater Management Plan to replace existing Prevention of Floods Act (reform measure for end-March 2024). - Cabinet approval for the Energy Efficiency and Conservation Policy Framework to reduce energy use across government agencies and develop efficient public lighting (reform measure for end-March 2024). - Stormwater Management Plan requirements: developers in identified flood areas must submit plans with sound estimates and protocols for water runoff; Plan includes possible penalties and remediation measures. - Barbados Water Authority (BWA) initiatives (footnote): use Green Climate Fund grant funding to provide 1,500 tanks and rainwater harvesting systems at homes, educational and health facilities, and community centres; Strap-It programme to retrofit as many roofs as possible across vulnerable communities to secure housing stock against hurricanes. ### Green public financial management, procurement, and financial stability actions - Adopt green PFM practices to integrate climate priorities across the budget cycle (preparation, execution, reporting, oversight, auditing) and to quantify macroeconomic and fiscal impacts of climate crisis. - Fiscal risk statements and budgetary actions: - GOB committed to include a fiscal risk statement in the regular budget process with a dedicated section on climate crisis risks. - Inaugural fiscal risk statement included in the FY2023/24 budget (reform measure for end-September 2023); latest successor published for FY2025/26 in March 2025. - GOB committed to sustaining fiscal risk analysis in forthcoming budgets. - Sustainable procurement and budget tagging: - Cabinet approved a sustainable/green public procurement framework with TA support from the Fund and IDB (reform measure for end-September 2023). - Cabinet approved guidelines for climate/green budget tagging developed with TA from the Fund and the IDB; select Ministries/agencies piloted climate/budget tagging; results mandated to be published in an annex to the annual budget (reform measure for end-September 2023). - Results from ministerial level green budget tagging published in the annex of the approved Estimates for FY2024/25, providing climate change and mitigation budget estimates with project descriptors; progress toward more detailed green budget tagging will continue with government in-reach and external TA if needed. - Fiscal strategy reporting: - GOB will include climate adaptation and mitigation priorities in the annual fiscal strategy report (released annually in August) to (i) identify programs to enhance climate resilience in the fiscal framework and (ii) discuss climate crisis related risks in a fiscal risk statement. IMF TA will be required to support this work. - PFM diagnostics and reforms: - Completed a diagnostic evaluation in 2023 through a C-PIMA and has completed reforms including development of a PPP framework, public investment project appraisal guidelines and deepening of fiscal risk analysis (reform measure for end-March 2025). - Financial sector climate risk work: - Central Bank of Barbados (CBB) progressing integration of climate risks into financial stability assessments, including stress testing based on potential scenarios. - CBB adopted a strategy with time-bound guideposts for building capacity to monitor and assess climate change risk (reform measure for end-September 2024), including building a data-collection mechanism and joining the Network for Greening the Financial System. - Implementation supported by CARTAC/IMF TA. - Financial Services Commission (FSC) will publish climate stress tests for the local insurance industry in its upcoming Financial Stability Report. - CBB conducted a preliminary climate risk analysis exercise for commercial banks starting from climate physical risks with support from MDBs; refined and finalized the exercise in December (reform measure for end-March 2025). - Planned extension of climate risk analysis to include transition risks; continued capacity building on operational and technical capacities for climate risk analysis. ### Program monitoring, performance, and structural benchmarks - Program implementation monitored through quantitative performance criteria and indicative targets, structural benchmarks, and reform measures. - Fifth review is on track to be successfully completed in a timely manner. - Government has met all EFF quantitative targets and completed all structural benchmarks (some with delay) and all RSF reform measures. - Tables 1, 2 and 3 and the attached Technical Memorandum of Understanding (TMU) provide details; example items from Table 1 (structural benchmarks) and Table 2 (RSF reform measures) include: - Structural benchmarks met with specified timings and EFF review references (examples extracted from source): - SB1: adopt new legislative/regulatory provisions to modernize duty and tax exemptions procedures — End-December 2022 — 1st EFF Review — Met. - SB2: undertake data matching project with BRA and BCED — End-March 2023 — 1st EFF Review — Met. - SB3: implement formal time-bound transition process for pre-existing exemptions — End-March 2024 — 3rd EFF Review — Met. - SB4: BCED to establish mandatory use of TIN as unique identifier for importers/exporters — End-September 2024 — 4th EFF Review — Met. - SB5: Government to complete assessment of human resource needs at BCED — End-March 2025 — 5th EFF Review — Met. - SB7: Government to table a revised public pension law — End-March 2023 — 1st EFF Review — Not Met; Implemented with delay. - SB8: Government to set up a fiscal risk unit — End-June 2023 — 2nd EFF review — Not Met; Implemented with delay. - SB9: NIS to submit outstanding financial statements for audit — End-March 2024 — 3rd EFF Review — Not Met; Implemented with delay. - SB10: Government to establish a Cash Management Unit — End-March 2024 — 3rd EFF Review — Met. - SB11: Parliament to approve the public pension law (SB7) — End-March 2024 — 3rd EFF Review — Met. - SB12: Government to develop standard contracts for routine procurements — End-September 2024 — 4th EFF Review — Met. - SB13: MFEI to prepare a Public Private Partnerships (PPPs) framework — End-March 2025 — 5th EFF Review — Met. - RSF reform measures under Pillar 1 (examples): - RM1: Approve Planning and Development Act amendments; table Water Re-use Bill; fully operationalize National Environmental and Conservation Trust — End-March 2023 — 1st EFF Review — Met. - RM2: Include fiscal risk statement focusing on climate risks in FY2023/24 budget; Cabinet to approve Procurement Act Regulations; approve sustainable/green public procurement framework; approve guidelines for climate/green budget tagging and mandate publication of results — timing and assessment per source. *Source: 1brbea2025001-print-pdf - 35. To safeguard against external shocks to fuel import costs, Barbados remains* ### annex in the annual budget. ### 1brbea2025001-print-pdf - annex in the annual budget ### Structural reform measures under the RSF (Pillar summaries and status) - Structural benchmarks and reform measures (selected items from Tables): - 3) Government to table the National Comprehensive Disaster Risk Management Policy to support mainstreaming of comprehensive DRM principles into ministry and agency budget planning, ensuring resilience in government and business continuity after a disaster event. - Timing: End-September 2023 - Expected Corresponding Review Under the EFF Arrangement Assessed: 2nd EFF Review - Status: Met - 4) Government to table an amended Prevention of Floods Act in Parliament, incorporating the new Stormwater Management Plan. - Timing: End-March 2024 - Expected Corresponding Review Under the EFF Arrangement Assessed: 3rd EFF Review - Status: Met - 5) Government to implement reforms to strengthen integration of climate concerns into the PFM process, based on a comprehensive diagnostic evaluation. - Timing: End-March 2025 - Expected Corresponding Review Under the EFF Arrangement Assessed: 5th EFF Review - Status: Met - Pillar 2: Climate mitigation reform measures (reduction of GHG emissions) - 6) (i) Government to extend the tax holiday on electric vehicles; (ii) Government to close remaining regulatory gaps in licensing policy/approvals framework to increase investments into battery storage technologies to meet energy demand. - Timing: End-September 2023 - Expected Review: 2nd EFF Review - Status: Met - 7) Cabinet approval for the Energy Efficiency and Conservation Policy Framework to reduce energy use of all government agencies and develop efficient public lighting. - Timing: End-March 2024 - Expected Review: 3rd EFF Review - Status: Met - 8) Government to table in Parliament the New Electricity Supply Bill to (i) enhance competition in the electricity market and (ii) introduce local participation in renewable energy investment. - Timing: End-September 2024 - Expected Review: 4th EFF Review - Status: Met - Pillar 3: Reform measures to mitigate transition risks - 9) The CBB to adopt a strategy with time-bound guideposts for building capacity to monitor and assess climate change risks, including building data collection mechanism and joining the Network for Greening the Financial System. - Timing: End-September 2024 - Expected Review: 4th EFF Review - Status: Met - 10) The CBB to include climate change risk in their bank stress testing exercise with support from MDBs including through relevant capacity development. - Timing: End-March 2025 - Expected Review: 5th EFF Review - Status: Met ### Quantitative Performance Criteria and Indicative Targets (selected items from Table 3) - Fiscal Targets (Performance Criteria / Indicative Targets) — showing Targets, Actuals, and Status at test dates: - Floor on the CG Primary Balance 4/1 - End June 2024: Target 22517... Actual 210581... Status ... - End September 2024: Target 418776... Actual 558621... - Note: Floor on the CG Primary Balance (adjusted) entries show "122517Met210581Met418776Met550621Met" - Non-accumulation of CG external debt arrears 4/6/ - End June 2024: Target 00 Met - End September 2024: Target 00 Met - End December 2024: Target 00 Met - End March 2025: Target 00 Met - Ceiling on CG Transfers and Grants to Public Institutions 4/7/ - End June 2024: Target 11989 Met - End September 2024: Target 244194 Met - End December 2024: Target 365324 Met - End March 2025: Target 425417 Met - Ceiling on Public Debt 5/ - End June 2024: Target 15,044 Actual 14,673 ... - End September 2024: Target 15,101 Actual 14,894 ... - End December 2024: Target 15,101 Actual 14,750 ... - End March 2025: Target 15,173 Actual 14,924 ... - Ceiling on Public Debt (adjusted) entries show "15,04414,673Met15,10114,894Met15,10114,750Met15,17314,924Met" - Indicative Targets (selected) - Ceiling on CG Domestic Arrears 5/ 8/ - End June 2024: Target 231229 Met - End September 2024: Target 221218 Met - End December 2024: Target 211190 Met - End March 2025: Target 201187 Met - Floor on Social Spending 4/ 9/ - End June 2024: Target 2728 Met - End September 2024: Target 5961 Met - End December 2024: Target 8994 Met - End March 2025: Target 119127 Met - Ceiling on Public Institutions Arrears 5/ - End June 2024: Target 2319 Met - End September 2024: Target 2320 Met - End December 2024: Target 2321 Met - End March 2025: Target 2019 Met - Monetary Targets (Performance Criteria) - Ceiling on Net Domestic Assets of the CBB 5/ - Target: 2,350 - End June 2024: Actual 1,529 Met - End September 2024: Actual 1,577 Met - End December 2024: Actual 1,384 Met - End March 2025: Actual 1,549 Met - Floor on Net International Reserves 5/ - Target: 1,200 - End June 2024: Actual 2,106 ... - End September 2024: Actual 2,021 ... - End December 2024: Actual 2,067 ... - End March 2025: Actual 2,241 ... - Floor on Net International Reserves (adjusted) shows "1,2002,106Met1,2002,021Met1,2002,067Met1,2002,241Met" - Items feeding into Debt, and NIR adjustors (selected reported/planned disbursements) - IDB budget support: 4/00...00...00...200200 - CDB budget support: 4/00...00...00...00 - CAF budget support: 4/00...00...00...00 - WB budget support: 4/00...00...00...00 - Grants: 4/00...00...00...80 ### Technical Memorandum of Understanding (definitions, measurement, and monitoring modalities) - Purpose and scope - TMU sets out definitions of quantitative performance criteria (PCs) and indicative targets (ITs), modalities for assessing performance, and information requirements for program monitoring. - The quantitative PCs and ITs are shown in Table 3 of the MEFP; structural benchmarks are in Table 1 of the MEFP. - Exchange rates (program exchange rates as of 10/31/2022) - Table 1. Barbados: Program Exchange Rates (10/31/2022) 1/ - 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 - Note: Average daily selling rates as reported by the CBB. Expressed as units of local currency per one unit of foreign currency, unless otherwise indicated. The exchange rate of the Barbadian dollar to the SDR is expressed as units of SRDs per unit of Barbadian dollar. - Key definitions used for program monitoring - Central Government (CG): set of institutions currently covered under the state budget including transfers to SOEs. - CG revenues/expenditures: cover all items included in the CG budget as approved by Parliament. - Fiscal year: starts on April 1 and ends on March 31. - Debt: defined per Guidelines on Public Debt Conditionality (Decision No. 16919-(20/103), October 28, 2020) as a current liability under a contractual arrangement creating an obligation to make payments in the future; includes loans, suppliers’ credits, and leases (present value at inception). - 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. - Public Institutions covered (selected list includes): 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. - Specific definitions and measurement modalities for PCs/ITs - A. Floor on the CG Primary Balance - CG primary balance = total revenues and grants minus primary expenditure; covers non-interest government activities; measured cumulative over the fiscal year and monitored above the line. - Revenues: recorded when funds transferred to a Government revenue account; tax revenues net of tax refunds; tax refunds recorded when funds transferred to the BRA from the Barbados Treasury Department; revenues include grants; capital revenues exclude non-financial asset sales from divestment. - Primary expenditure: recorded on a cash basis and includes recurrent expenditures, capital spending, and transfers to SOEs; primary expenditures settled with bonds or other non-cash liability treated as one-off adjustments recorded as spending above-the-line and financed with debt issuance. - Adjustors: primary balance target adjusted by surplus (shortfall) in disbursements of grants relative to baseline projection. - Reporting: data provided monthly with a lag of no more than four weeks from end-of-period (Section C, Table 2). - B. Ceiling on Stock of Net Domestic Assets (NDA) of the CBB - NDA defined as monetary base minus sum of 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 hands of non-bank public, vault cash, statutory cash reserve requirements, and current account balances of commercial banks and non-bank financial institutions (Part III companies) at the Central Bank. - Reporting: monthly basis with lag no more than two weeks from end-of-period (Section B, Table 2). - C. Floor on Net International Reserves (NIR) - NIR = reserve assets minus reserve liabilities with maturity < one year. - Reserve assets: monetary gold, SDRs, foreign currency cash, foreign currency securities, deposits abroad, country’s reserve position at the Fund; excludes sinking funds’ assets and assets pledged/collateralized or otherwise encumbered, claims on residents, derivatives claims vis-à-vis domestic currency, precious metals other than gold, assets in nonconvertible currencies, and illiquid assets. - Reserve liabilities: all foreign exchange liabilities to residents and nonresidents with maturity < one year including derivative commitments; all liabilities outstanding to the IMF including EFF/RSF disbursements used for budget support. - Adjustors: NIR target adjusted upward (downward) by 75 percent of surplus (shortfall) in program loan disbursements from multilateral institutions (CDB, IDB, CAF, IBRD) relative to baseline; also adjusted by surplus (shortfall) in disbursements of budget support grants relative to baseline. - Reporting: Central Bank to report data on a daily basis, with lag no more than one week from end-of-period (Section A, Table 2). - D. Non-Accumulation of CG External Debt Arrears - CG will not incur new arrears in external debt payments during the program; external arrears defined as delay beyond contractual grace period; arrears subject to agreed clearance frameworks or debt restructuring excluded. - Performance criterion applied continuously; external arrears data reported immediately. - E. Ceiling on CG Transfers and Grants to Public Institutions - Includes cash transfers and grants to entities listed in paragraph 2 above. - Measured cumulative over the fiscal year; reported monthly with lag no more than four weeks from end-of-period (Section C, Table 2). - F. Ceiling on the Stock of Public Debt - Public debt = domestic and external CG debt, SOE debt guaranteed by CG, and domestic CG expenditure arrears; interest and penalties arrears from external commercial debt under restructuring excluded. - Stock of CG and CG guaranteed debt measured on disbursement basis excluding valuation effects; program FX rates used to value FX debt. - Adjustors: ceiling adjusted upwards by full amount of surplus in disbursements from multilateral institutions (CDB, IDB, CAF, IBRD) relative to baseline; adjusted downward by nominal debt forgiveness in debt restructuring. - Reporting: CG debt and CG guaranteed debt data by issuer, creditor, maturity, and currency reported quarterly with lag no more than four weeks from end-of-period (Section D, Table 2). - II. Indicative Targets — Ceiling on Stock of Domestic CG Expenditure Arrears - Definition: sum of (a) invoices received and verified for goods/services/capital goods not paid within contractually agreed period or, absent grace period, within 60 days after due date; (b) non-contributory pension transfers (by CG only), wages and pensions contributions to the NIS pending >60 days; (c) rent and loan payments to the NIS pending >60 days; (d) arrears on refunds of PIT, RTC, CIT, and VAT. Tax refund arrears = obligations on tax refunds unpaid six months after filing date. *Source: 1brbea2025001-print-pdf - annex in the annual budget.* ### 22. For the purpose of monitoring, the data on CG expenditure arrears and its ### 1brbea2025001-print-pdf - 22. For the purpose of monitoring, the data on CG expenditure arrears and its ### Monitoring of CG and SOE expenditure arrears - CG expenditure arrears and its components by creditors will be measured as stock observed as at test date and reported on a monthly basis, with a lag of no more than four weeks from the end-of-period. (Section C, Table 2) - SOE (public institutions) expenditure arrears and its components by creditors will be measured as stock observed as at the test date and reported on a monthly basis, with a lag of no more than four weeks from the end-of-period. (Section D, Table 2) - The stock of public institutions expenditure arrears is defined as the sum of: - (a) any invoice received by a spending agency from a supplier of goods, services, and capital goods delivered and verified, and for which payment has not been made within the contractually agreed period (taking into account any applicable contractual grace period), or in the absence of a grace period, within 60 days after the due date; - (b) wages and pensions contributions to the NIS for which payment has been pending for longer than 60 days; - (c) arrears on Tax obligations defined as obligations on taxes in accordance with tax legislation. - The list of public institutions covered by this indicative target is listed in paragraph 2 excluding University of West Indies (UWI). ### Indicative floor on Central Government (CG) social spending - The indicative floor on social spending of the CG applies only to expenditures incurred by the CG on the following plans and programs, excluding operating expenditure, intended to have a positive impact on education, health, social protection, housing and community services and recreational activities: - 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. - For monitoring, the data will be measured as cumulative over the fiscal year and reported on a quarterly basis, with a lag of no more than four weeks from the end-of-period (Section D, Table 2). ### Program reporting requirements and data reporting timetable (Table 2 summary) - Performance under the program will be monitored from data supplied to the IMF as outlined in Table 2. Authorities will transmit promptly any data revisions and other information necessary to monitor the arrangement under the EFF. - Reporting frequencies and key items: - Daily, lag no more than one week: - CBB NIR, as defined in section I. - CBB GIR. - Monthly, lag no more than two weeks (Financial Sector): - CBB NDA, as defined in section I. - CBB survey showing detailed 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. - Monthly, lag no more than four weeks (Real, Fiscal, External): - 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 and its components as defined in Section I. This will be reported immediately. - Program loan disbursements from multilateral institutions, including the CDB, the IDB, the CAF, and the IBRD as defined in section I. - Budget support grants as defined in section I. - Liabilities of public-private partnerships (PPPs) (if any). - Stock of CG expenditure arrears by creditor and its components as defined in Section II. - Stock of expenditure arrears of public institutions listed in paragraph 2 by creditor and its components as defined in Section II. - BOP trade balance data. - CBB’s Cashflow Table deriving GIR and NIR. - Monthly, lag no more than six weeks (Financial Sector): - ODC survey showing gross items for NFA, claims on the CBB, NCCG, COSE, OIN, deposits included in BM, deposits excluded from BM, and liabilities to the CBB. - DC survey as consolidation of CBB and ODC surveys showing gross items for CBB NFA, ODC NFA, ODC NCCG, COSE, OIN, and BM. - Quarterly, lag no more than four weeks: - Nominal and real GDP. - Tourism and other real sector high frequency indicators. - Social expenditure and its 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 debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity). - CG external debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity). - CG domestic guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity). - CG external guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity). - SOE domestic non CG guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity). - SOE external non CG guaranteed debt stock data by creditor/holder and by maturity (ST <= 1 year, and LT > 1 year maturity). - Quarterly LT and ST debt amortization and interest projections separate for CG domestic, CG external, CG guaranteed domestic, and CG guaranteed external debt. - Copies of loan agreements for any new loan contracted, including financing involving the issue of Government paper, and of any renegotiated agreement on existing loans. - Stock of Tax Refunds and its components as defined in Section II. - CBB Balance sheet. - Balance of Payments accounts. - Quarterly, lag no more than six weeks (Financial Sector - stability indicators by bank and by sector): - Regulatory capital - Regulatory Tier 1 capital - Risk-weighted assets - Total assets - Total liabilities - Nonperforming loans in BRB$ millions - Non-performing loans net of provisions - Gross loans - Sectoral distribution of loans to total loans - Return on assets - Return on equity - Interest margin - Gross income - Noninterest expenses - Liquid assets - Short-term liabilities - Net open position in foreign exchange - Large exposures to capital - Gross asset position in financial derivatives - Gross liability position in financial derivatives - Total income - Personnel expenses - Noninterest expenses - Spread between reference lending and deposit rates (base points) - Highest interbank rate - Lowest interbank rate - Customer deposits - Total (non-interbank) loans - Foreign-currency-denominated loans - Foreign-currency-denominated liabilities - Net open position in equities - Net profits of the banking sector - Annual, within 6 weeks of 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. ### RSF Assessment Letter update — Overview and country vulnerability (June 18, 2025 update) - This update to the RSF Assessment Letter for Barbados, dated June 17, 2025, includes relevant changes and updates since the previous Assessment Letter on December 5, 2024. - The IMF’s RSF program in Barbados provides financing to support the country’s climate change adaptation and mitigation efforts, and support Barbados’s ambitious goal of transitioning to a fully renewable-based economy. ### A. Country vulnerability to climate change — key findings and indicators - Recent hurricane events: - Hurricane Elsa (July 2021): Category 1, first hurricane to hit the island in over 60 years. - Hurricane Beryl (July 2024): Category 3, passed just forty miles south of the country. - Economic and social impacts: - Hurricane Beryl caused significant damage to the agriculture sector and severely disrupted the fishing and tourism industries. - Social costs included displacement in affected fishing communities and many in the tourism sector. - Projected climate changes (from IPCC Fifth Assessment Report summary as presented): - 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. - Additional vulnerabilities and indicators: - Predicted increase in storm intensity and frequency of Category 4 and 5 hurricanes across the Caribbean over the next decades. - World Risk Index considers Barbados as 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. - More than 70 percent of the country’s coral reefs have suffered significantly from coral bleaching. ### B. Government adaptation policies and resilience measures - Recent policy and program advances: - 2024 debt-for-climate operation completed with support of IADB and EIB guarantees totaling US$300 million to help finance critical climate adaptation projects. - Central Bank of Barbados adopted a strategy to build capacity to monitor and assess climate change risks. - Government launched a Plan for Investment in Prosperity and Resilience as an overarching roadmap. - Climate risks incorporated into financial stability assessments and into the public financial management process. - Disaster risk financing and legal changes (Cabinet/Parliament approvals in 2025): - Disaster Risk Financing (DRF) policy approved by the Cabinet in February 2025, integrating scalable social protection mechanisms. - Amendment to the Catastrophe Fund Act approved by the Cabinet in February 2025 to repurpose the Catastrophe Fund into a Resilience and Regeneration Fund by modifying sources of financing, utilization, and management. - Integrated Coastal and Marine Management Bill approved by the Cabinet in March 2025. - Sustainable Fisheries Management and Development Bill passed by Parliament in March 2025. - Stormwater Management Bill passed by Parliament in April 2025, outlining stormwater management responsibilities and regulations. ### C. Mitigation policies and emissions-reduction priorities - Recent mitigation-focused actions: - Enhanced competitive procurement methods to increase investments in battery storage and support renewable energy integration. - New Electricity Supply Bill passed by Parliament on September 27, 2024. - 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 government agencies and develop efficient public lighting systems. ### D. Pollution control, environmental management, and financing instruments - Regulatory and institutional measures: - Pollution Control (Discharge) Regulations and List of Pollutants with Prohibited Concentration levels established. - Environmental Protection Department (EPD) finalizing the Marine Pollution Control (Discharge) Regulations to enable action against pollution discharges that exceed standards. - Expected increased certainty for developers, planners, engineers, and architects regarding discharge requirements and wastewater treatment standards. - Financing and budgeting tools: - Barbados Environmental Sustainability Fund (BESF) and the climate budget tagging methodology remain available as long-term sources of financing and tools for strategic resource allocation, supported by IBRD’s Barbados Green and Resilient Recovery Development Policy Loan. ### E. World Bank engagement (heading present; content not expanded in supplied excerpt) - Section header present indicating World Bank engagement in climate change, with no further details in the supplied content. *IMF staff report extract (June 18, 2025).* ### 5. Until recently, the World Bank’s engagement in Barbados, as an IBRD graduate, was ### Statement by Ms. Gina Fitzgerald, Alternate Executive Director for Barbados and Ms. Ann Marie Wickham, Senior Advisor to Executive Director — June 20, 2025 ### World Bank engagement and disaster financing - World Bank engagement in Barbados, as an IBRD graduate, was limited until recently but is expanding as the country became a regular IBRD borrower again. - Country Engagement Note with a strong focus on resilience to climate change was discussed by the IBRD Board of Executive Directors on January 23, 2025. - Barbados Beryl Emergency Response and Recovery Project, approved on November 21, 2024: - Will help to restore targeted, disaster-affected sectors, enhance climate-resilient infrastructure, and strengthen emergency preparedness and response capacities. - Barbados Disaster Risk Management Development Policy Loan with Catastrophe Deferred Drawdown Option (CAT DDO), approved on April 10, 2025: - Improves disaster risk management and financing framework. - Provides a fast-access line of credit to support timely and effective responses once an emergency is declared, enhancing financial resilience against disasters. - Climate Resilient Debt Clause (CRDC): - Enables deferment of principal and interest payments to the Bank for up to two years in case of a natural disaster. - Similar to clauses embedded in commercial papers issued by Barbados domestically and externally. ### I. Introduction and context - Authorities thank the Executive Board, Management and staff for support throughout the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) arrangements. - BERT program history: - BERT supported by the Fund since 2018. - BERT 2018 initiated to restore fiscal discipline after public debt had soared to over 170 percent of GDP, international reserves had fallen to less than three weeks of import cover, and arrears had accumulated. - BERT 2022, supported by the 2022 EFF and RSF, focused on consolidating earlier gains and strengthening climate adaptation and mitigation. - Reform implementation: - Seventy (70) structural benchmarks and reform measures implemented across revenue and customs administration, public financial management (PFM), state-owned enterprise (SOE) reform, and central bank modernization. - BERT 2025 objectives: - Third-generation reform strategy building on prior gains. - Focus areas: resilience, competitiveness, inclusive growth, PFM, tax administration, SOE reform, digital transformation, climate adaptation, fiscal sustainability, modernized monetary policy framework, and digital financial ecosystem. - Anchored in the Barbados 2035 Vision. ### II. Program performance and recent economic developments - Program compliance: - All end-March 2025 quantitative performance criteria and indicative targets met. - All three structural benchmarks under the EFF achieved: - Completion of a human resource needs assessment at the Barbados Customs and Excise Department. - Preparation of a draft public-private partnership (PPP) framework. - Development of a daily liquidity forecasting framework by the Central Bank of Barbados (CBB). - RSF reform measures met, including integration of climate considerations into PFM and incorporation of physical climate risk into the CBB’s stress tests. - Macroeconomic outcomes and indicators: - Real GDP grew by 4 percent in 2024. - Inflation declined to 1.4 percent at end-2024 and to 0.9 percent by February 2025. - Unemployment improved to 7.1 percent by Q3 2024. - Gross international reserves: US$1.7 billion (31.2 weeks of import cover) by end-March 2025. - Primary balance recorded a surplus of 4.3 percent of GDP in FY2024/25, surpassing the program target. - Debt-to-GDP ratio reduced to 104.8 percent by end-FY2024/25. - Financial sector: declining non-performing loans, strong capital buffers, ample liquidity. - Credit rating upgrades: S&P and Fitch in late 2024; Moody’s upgrade in April 2025. - Outlook and risks: - Growth projected at 2.7 percent in 2025. - Debt ratio on track to fall below 100 percent by 2026. - Downside risks: global economic headwinds, tourism volatility, and climate shocks. ### III. Fiscal policy and debt sustainability - FY2025/26 fiscal target: - Government targeting a primary fiscal surplus of 4.4 percent of GDP. - Debt target of 60 percent of GDP by FY2035/36. - Revenue and expenditure posture: - Improved revenue performance notably from corporate income tax (CIT) reforms. - Revenues from CIT reform being channeled into capital projects and rebuilding fiscal buffers while preserving social spending. - Budget priorities: education, healthcare, security, and strong capital investment for diversification, tourism, and climate-resilient infrastructure. - Institutional reforms: - Integration of climate risk into fiscal planning via project appraisal guidelines and fiscal risk analysis tools. - New PPP framework to attract private investment into priority infrastructure, particularly climate adaptation and service delivery. - PFM measures: new fiscal risk register, rollout of investment appraisal and prioritization tools. - Revenue administration modernization: address staffing gaps in customs, improve oversight of tax concessions, implement a tax arrears recovery strategy. - Continued SOE reform focused on increasing efficiency, reducing transfers, and improving service delivery. - Market re-engagement and debt operations: - Voluntary tender offer launched on June 13, 2025 for 6.5 percent Eurobonds due 2029; offer runs until June 20 and is conditioned on successful issuance of new longer-dated notes. - Strategic goals: smooth debt maturities, extend yield curve benchmarks, enhance market liquidity. - Domestic market deepening: introduction of longer-tenor instruments including a 20-year bond, and resumption of Treasury bill issuances. - Sovereign Risk and Debt Sustainability Framework (SRDSF) confirms public debt is sustainable. ### IV. Monetary policy and financial stability - Exchange rate and reserves: - Exchange rate peg remains the anchor of monetary policy. - International reserves stood at 205 percent of the IMF’s adequacy metric as of end-2024. - CBB modernization and independence: - 2020 amendments to the CBB Act reinforced operational independence, governance, and introduced binding limits on monetary financing. - Daily liquidity forecasting framework implemented; research underway to establish a benchmark policy rate. - Medium-term plans: transition to a formal policy rate, interest rate corridor, standing facilities, and open market operations. - Digital payments and infrastructure: - In partnership with the World Bank, CBB launched a modernization project aimed at a fully digital payments ecosystem by March 2026. - Financial safety net and resolution: - Emergency liquidity assistance (ELA) framework introduced. - Review and refinements to collateral policy and risk management underway. - Work advancing on a resolution framework for financial institutions and reforms to the Barbados Deposit Insurance Scheme, including plans to extend coverage to credit unions. - Financial integrity: - Removal from the FATF grey list and the EU blacklist. - Ongoing AML/CFT compliance, asset recovery, and regulatory oversight efforts. ### V. Structural reforms - Growth targets and strategy: - BERT 2022 aims for medium-term growth of 3–5 percent. - Focus: economic diversification, climate resilience, and human capital strengthening. - Key priorities and initiatives: - Renewable energy transition, digital innovation, business environment improvement, trade and logistics infrastructure investment. - Barbados 2035 Plan and Population Policy support transformation; Growth Council provides active oversight. - Digitalization and human capital: - Investments in 5G infrastructure, a new national data center, e-conveyancing, and a Cyber Security Operations Center. - Cybercrime Bill being advanced. - Skills development in AI, data analytics, and emerging technologies; Talent Attraction and Retention Strategy targeting global professionals and the diaspora. - Trade and logistics: - Trade facilitation reforms including launch of ASYCUDA 5 by 2026, new port infrastructure, and an export-oriented manufacturing strategy to position Barbados as a regional logistics and digital services hub. ### VI. Building resilience to climate change - RSF-supported reforms completed across flood and stormwater management, environmental legislation, green public procurement, and climate risk integration into financial sector supervision. - Renewable energy and grid readiness: - Expansion of the country’s first utility-scale wind farm. - Development of 125 MW in battery storage. - New Electricity Supply Act enabling competitive procurement and supporting energy storage integration. - Grid mapping and micro-grid feasibility studies. - Energy Smart Fund supporting SMEs to relaunch renewable energy projects. - Climate integration into PFM: - Climate-focused project appraisal guidelines, improved fiscal risk analysis, PPP framework aligned with environmental sustainability. - Climate considerations inform budget cycle, procurement, and infrastructure planning. - Catastrophe Fund transformation: - Catastrophe Fund being transformed into a Resilience and Regeneration Fund (RRF) with an expanded mandate and sustainable financing sources, including payroll contributions, budget allocations, and access to dormant assets. - World Bank and climate financing: - In April 2025, authorities secured a US$30 million World Bank Disaster Risk Management Development Policy Loan, including access to the Cat DDO. - Second debt-for-climate swap executed in late 2024. - Blue Green Bank launched to invest up to US$250 million in resilient infrastructure and clean energy across the region. ### VII. Concluding remarks - Barbados has made remarkable progress since the onset of the BERT program, underpinned by Fund-supported programs. - Authorities reaffirm strong national ownership and leadership in implementing reforms under challenging circumstances. - Authorities intend to maintain a close and constructive relationship with the Fund, recognizing its role as a trusted policy partner in an increasingly uncertain global environment. *Source: Statement by Ms. Gina Fitzgerald, Alternate Executive Director for Barbados and Ms. Ann Marie Wickham, Senior Advisor to Executive Director — June 20, 2025 (extracted text).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1brbea2025001-print-pdf.pdf_