## 1brbea2026001 ## Source details **Canonical URL:** [1brbea2026001](https://www.imf.org/-/media/files/publications/cr/2026/english/1brbea2026001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1brbea2026001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1brbea2026001.pdf.json) --- ### EXECUTIVE SUMMARY — Context and Key Achievements - BERT 2022 and Fund-supported EFF/RSF reinforced macroeconomic stability and structural reforms. - Fiscal and debt outcomes: - Primary surplus increased by 2 percentage points of GDP to 4.0 percent of revised GDP in FY2024/25. - Primary fiscal surplus of 4.2 percent of GDP in FY2025/26 (budget target 4.1 percent). - Public debt-to-GDP: 98.9 percent at end-FY2024/25 (revised GDP base); 96.0 percent at end-FY2025/26. - Market and financing developments: - Re-accessed international capital markets via a US$500 million bond issuance (June 2025) as part of an LMO. - Completed the world’s first debt-for-climate conversion in 2024. - Gross international reserves about US$1.5 billion (~6 months of imports). - Statistical update: - GDP rebased to 2023 Supply and Use Table; level in 2023 revised up by 7.5 percent. ### OUTLOOK, GROWTH, AND RISKS - Growth and activity: - Real GDP: 3.4 percent in 2024; estimated 2.7 percent y/y in 2025; estimated 1.7 percent in Q1 2026. - Key 2025 drivers: tourism, business services, construction, trade. - Long-stay arrivals through December 2025: +3.3 percent y/y; cruise arrivals 2025: +12.9 percent y/y; cruise arrivals Q1 2026: +30 percent y/y. - Construction output: +9.8 percent in 2025; business services +3.7 percent; agricultural output +13.3 percent. - Labor market: - Unemployment: 7.2 percent in Q4 2025; youth unemployment close to 18 percent in 2025 (down from 30 percent in 2020). - Labor force declined by 1.3 percent in Q4 2025 vs Q1 2025. - Inflation: - Headline (annual average): 1.5 percent in 2024; 0.9 percent in 2025. - End-of-period: rose from ‑0.3 percent in Feb 2025 to 1.3 percent in Feb 2026. - Staff projection: 12-month average inflation 3.1 percent in 2026; stabilize around 2.4 percent over medium term. - External and reserve position: - Current account deficit: 3.7 percent of GDP in 2024; estimated 5.7 percent of GDP at end-2025. - Gross international reserves: 1,593.0 US$ million (2024); 1,522.6 US$ million (2025); projected 1,333.4 US$ million (2026). - Main risks: - External: geopolitical tensions (Middle East war), commodity price volatility, global policy uncertainty. - Domestic: natural disasters, deceleration of reform momentum. ### BERT 2026: Strategic Shift and Priorities - Transition from stabilization to long-term transformation focusing on: - Boosting productivity and competitiveness. - Strengthening fiscal sustainability (debt target: 60 percent of GDP by FY2035/36). - Deepening financial markets. - Developing human capital. - Enhancing climate resilience. - Presented to Cabinet January 2026 after consultation with social partners. ### PRECAUTIONARY STANDBY ARRANGEMENT (SBA) — Design and Financing - Request: 36-month precautionary SBA to provide balance-of-payments insurance. - Total access and modalities: - Total access: SDR 189 million (200 percent of quota, or about US$259 million). - Initial tranche: about SDR 47 million (50 percent of quota) available at program approval. - Semi-annual reviews; precautionary modality. - Program anchors and policy directions: - Medium-term fiscal path anchored on debt-to-GDP = 60 percent by FY2035/36. - SBA targets a primary surplus of 3.5 percent of GDP for FY2026/27 and FY2027/28; medium-term steady state primary surplus 4.1 percent of GDP. - Emphasize fiscal structural reforms: tax exemptions framework, tax and customs administration strengthening, PFM enhancements, SOE oversight, fiscal transparency. - Mobilize near-term external official financing while developing domestic capital markets. - Maintain ample international reserve buffers and strengthen monetary policy operations. - Advance financial stability reforms: banking supervision, AML/CFT enhancements, resolution framework, deposit insurance legislation rollout. ### MACRO PROJECTIONS (Selected baseline series) - Real GDP, percent change: - 2024 Act.: 3.4 - 2025 Prel.: 2.7 - 2026 Proj.: 2.2 - 2027–2031 Proj.: 2.3, 2.1, 2.0, 2.0, 2.0 - CPI inflation, annual average: - 2024: 1.5 - 2025: 0.9 - 2026: 3.1 - 2027–2031: 2.7, 2.4, 2.4, 2.4, 2.4 - Primary balance (percent of GDP): - 2024: 4.0 - 2025: 4.2 - 2026: 3.5 - 2027–2031: 3.5, 4.1, 4.1, 4.1, 4.1 - Public sector debt (percent of GDP): - 2024: 98.9 - 2025: 96.0 - 2026: 91.8 - 2027–2031: 87.5, 83.3, 79.3, 75.5, 71.7 - Current account (percent of GDP): - 2024: -3.7 - 2025: -5.7 - 2026: -6.0 - 2027–2031: -5.8, -5.3, -5.2, -5.1, -4.9 - Gross International Reserves, US$ million: - 2024: 1593.0 - 2025: 1522.6 - 2026: 1333.4 - 2027–2031: 1325.9, 1389.9, 1426.6, 1465.7, 1501.7 ### FISCAL PERFORMANCE, REVENUE, AND EXPENDITURE HIGHLIGHTS - FY2025/26: - Primary fiscal surplus: 4.2 percent of GDP. - Capital spending: 4.1 percent of GDP (roads, geriatric hospital, two senior citizen villages, schools, skills, tourism). - Direct tax revenues overperformed; structural CIT increase staff estimate ~1.8 percent of GDP (versus earlier assumption ~one third of 0.9 percent of GDP). - Budget 2026 temporary measures (cost FY2026/27; total cost 0.87 percent of GDP): - Cost of living credit for pensioners and vulnerable (BD$100 monthly): 0.45 percent of GDP; duration 1 year. - VAT extension reduced rate for electricity (first 250kWh): 0.09 percent of GDP; duration 1 year. - VAT cap on fuel (47¢/litre gasoline; 37¢/litre diesel): 0.13 percent of GDP; duration 1 year. - Other measures: EV holidays and PIT deduction (0.03 percent of GDP); customs duty treatment (0.12 percent); excise reductions (0.01 percent); government absorption of 50% Fuel Clause Adjustment (0.04 percent). ### TAX POLICY, ADMINISTRATION, AND EXEMPTIONS - FY2026/27 PIT rates reduced: main and higher rates from 12.5 and 28.5 percent to 11.5 and 27.5 percent, effective April 1, 2026. - 2 percent foreign exchange fee yields 0.6 percent of GDP; removal would require offsetting revenue measures of around 0.6 percent of GDP. - Structural revenue measures recommended: - Base-broadening VAT reforms, land tax reform, fuel excise tax reform. - Tax exemptions framework: centralized platform for recertification of pre-2005 waivers; tax expenditure inventory with costings to be tabled in Parliament (proposed end-June 2027 SB); annual tax expenditures reports thereafter. - BRA to table Tax Administration Procedures Bill (proposed end-December 2026 SB); full review of accounts receivable; adopt mandatory e-payments; establish a single Large Taxpayer Unit. ### PUBLIC FINANCIAL MANAGEMENT, SOEs, AND PPPs - PFM priorities: - Develop and table PFM rules (proposed end-December 2026 SB). - Timely publication of quarterly fiscal data with a one-month lag (proposed end-September 2026 SB). - Fully operationalize the Fiscal Council. - SOE oversight: - Comprehensive SOE stock-take with Fund TA (proposed end-March 2027 SB). - Continued SOE reforms focused on transport, energy, welfare; planned transition of Barbados Agricultural Management Company to a cooperative. - PPPs: - New PPP framework adopted March 2025; develop PPP project database and initiate annual PPP reporting (proposed end-June 2027 SB). - Public investment efficiency: - Project appraisal guidelines developed March 2025 with Fund TA; roll-out includes rigorous appraisal and prioritization. ### PUBLIC DEBT, FINANCING ASSUMPTIONS, AND DOMESTIC CAPITAL MARKET DEVELOPMENT - Public debt dynamics: - Public debt: 96 percent of GDP end-FY2025/26; baseline projects decline below 80 percent by end-FY2029/30 and to 60 percent by FY2035/36. - June 2025 LMO reduced medium-term gross financing needs and rollover risk. - SRDSF: overall risk of sovereign stress assessed "moderate." - External financing and market access: - Baseline assumes IFI policy and project loans averaging US$141 million per year over next 2 fiscal years. - FY2026/27 expected loans: US$50 million (OPEC Fund), US$100 million policy-based loan (IDB). - Moderate capital market issuances programmed over medium term totaling US$300 million. - Domestic market indicators: - Net financing from commercial banks: 0.9 percent of GDP in FY2025/26. - Treasury bill issuances grown to 6 percent of GDP; short-term debt share 10 percent of total domestic debt. - BOSS+ bonds issuance: two rounds in 2025 (B$200 million each in June and December). - End-FY2025/26 cash buffers: 4.2 percent of GDP at end-March 2026. - Recommendations: lengthen maturities, reintroduce auctions for price discovery, build Debt Management Unit capacity, improve debt data publication. ### MONETARY POLICY FRAMEWORK, CBB OPERATIONS, AND FINANCIAL RESILIENCE - Exchange rate: - Fixed exchange rate peg since 1975, underpinned by capital controls. - 2 percent FX fee assessed as a CFM raising 0.6 percent of GDP; removal recommended once offsetting revenues identified. - CBB operational enhancements: - 2020 Central Bank Law enhanced autonomy; recapitalization plan adopted. - Long-term objective: mid-rate interest rate corridor and policy rate with standing facilities; use open market operations. - Near-term options: raise reserve requirements ratio; raise overnight lending facility rate. - Financial sector reforms: - Reorganize Bank Supervision Department (proposed end-November 2026 SB). - Develop resolution framework for banks and credit unions aligned with international standards. - Operationalize deposit insurance scheme; legislation planned to be submitted by end-2026. - Enhance climate risk analysis and contingent liabilities monitoring; Fund TA on transition risk planned for H2 2026. - Digital payments: - BiMPay launched August 2025; rollout to six commercial banks and three largest credit unions targeted June 2026. - Expected benefits: lower transaction costs, greater inclusion, data for credit provision; monitoring of technical, financial, cybersecurity risks emphasized. ### AML/CFT, SUPERVISION, AND SAFEGUARDS - AML/CFT progress: - Removed from FATF grey list in 2024 and EU money laundering blacklist in 2025. - Beneficial Ownership Register for companies with revenues over B$1 million announced. - Structural benchmark: implementation status note to be tabled in Parliament (proposed end-March 2027 SB) ahead of FATF mutual evaluation June 2027. - Safeguards: - Safeguards assessment of the CBB to be completed before the first review of proposed arrangement. - 2022 assessment recommendations largely implemented; one measure underway. - Memorandum of Understanding between government and CBB required to clarify responsibilities and repayment modalities. ### DEBT SUSTAINABILITY ANALYSIS (ANNEX II) — Key Findings - Overall assessment: Public debt assessed sustainable; overall risk of sovereign stress assessed "moderate." - Recent figures: - Public debt declined to 96.0 percent of GDP at end-March 2026 from 98.9 percent at end-FY2024/25. - Primary fiscal balance: 4.2 percent of GDP in FY2025/26. - June 26, 2025 Eurobond: US$500 million (coupon ~8 percent, maturity 10 years, 5-year grace on principal); proceeds: repay US$340 million of 2029 Eurobond, prepay US$108 million IMF obligations through March 2028, shore up buffers with remaining US$50 million. - Projections/assumptions: - Baseline: public debt declines to below 60 percent of GDP by FY2035/36 with steady primary surpluses and moderate growth. - External financing mix: IFI loans, domestic borrowing, moderate market issuances; moderate GFNs. - Risk and stress tests: - Debt fanchart index: moderate risk; probability of debt non-stabilization ~8 percent. - Natural disaster stress test: default shock 4.5 percent of GDP; debt path remains below 75th percentile. - Climate-related expenditure scenario: additional 1 percent of GDP annual adaptation spending would not significantly affect long-run debt sustainability. - Public debt composition (FY2025/26): - Total debt US$7,713.6 million = 96.0 percent of GDP. - External debt US$3,083.4 million = 40.0 percent of total debt. - Domestic debt US$4,630.2 million = 60.0 percent of total debt. - Multilateral creditors US$2,207.7 million (28.6 percent of total debt); IMF US$544.1 million (7.1 percent). ### ADVERSE SCENARIOS AND CONTINGENCY PLANNING - WEO severe scenario illustration: - GDP growth could be 1.5 ppts lower in 2026; inflation could rise an additional 0.9 ppts; CA could deteriorate by a further 1.3 percent of GDP. - Illustrative adverse scenario (global oil/food shock + trade disruptions): - GDP: real GDP would fall to -0.9 percent in 2026 (3.1 ppts below baseline for that scenario). - Inflation: 4.6 percent in 2026 (1.5 ppts above baseline). - CA: deficit ~8.8 percent of GDP in 2026. - Fiscal: primary balance declines to 2.8 percent of GDP in FY2026. - Financing need example: external financing gap ~US$560 million over 2026–28; IMF access of SDR 189 million (US$259 million) plus ~US$300 million IFI financing proposed to restore reserves. - Natural disaster scenario (major hurricane): - Capital damages ~6 percent of capital stock; services loss US$390–440 million; trade balance worsens US$420 million in 2026. - DRF and IFI financing could cover sizable shares; estimated external financing gap ~US$700 million; SBA disbursements could fill ~35 percent. ### PROGRAM MONITORING, CONDITIONALITY, AND STRUCTURAL BENCHMARKS - SBA monitoring: - Semi-annual reviews; test dates end-March and end-September (PCs); ITs for end-June and end-December. - QPCs and ITs on fiscal, external, and monetary aggregates; structural benchmarks in fiscal administration, PFM, SOE reform, PPPs, and AML/CFT. - Selected structural benchmarks and timelines: - BCED to publish regulations implementing 2022 Customs Act (end-September 2026). - Publish quarterly central government fiscal data with one-month lag (end-September 2026). - Table Tax Administration Procedures Bill in Parliament (end-December 2026). - Comprehensive recertification of pre-2005 tax waivers and tax expenditure inventory tabled in Parliament (end-June 2027). - SOE stock-take and financial dashboard (end-March 2027). - Develop PFM rules to support 2019 PFM Act (end-December 2026). - Strategic plan for CBB Banking Supervision Department (end-November 2026). - Implementation status note on AML/CFT progress (end-March 2027). - Annual RRF report tabled in Parliament (end-March 2027). - Establish Competitiveness and Productivity Commission (end-December 2026). ### CAPACITY DEVELOPMENT AND TECHNICAL ASSISTANCE - Fund CD priorities (near term): - Tax and customs administration, tax policy and tax expenditure costing, PFM operationalization, public debt management and domestic market development, financial supervision and climate stress testing, monetary policy toolkit, macro statistics (rebasing/expenditure-based GDP). - Recent TA and mission activity: - IMF missions and TA across customs, tax administration, PFM, central bank operations, climate risk, and macro statistics noted through FY2026. - GDP rebasing to 2023 and SUT update completed with Fund TA; planned BPM6 and IIP updates. ### SUPPLY-SIDE REFORMS, DIVERSIFICATION, AND HUMAN CAPITAL - Growth-enhancing reform areas: - Infrastructure bottlenecks: Grantley Adams International Airport expansion (US$150 million planned, completion by end-2027), port capacity increase (Berth 6), operationalize single electronic window, multi-shift port operations. - Business environment: Business Barbados (est. 2024), digital corporate registry by end-2026, deployment of 5G, data center, e-conveyancing platform, Competitiveness and Productivity Commission (end-December 2026). - Skills and labor: IDB study shows digital skills deficits; expand applied digital and AI skills programs; Immigration and Citizenship Bills to expand residency/citizenship pathways. - Growth expectations: - Medium-term growth expected to rise toward 3 percent under conservative program. - Full BERT 2026 implementation could raise potential growth toward 5 percent over medium-to-long term. - Planned hotel developments: increase room capacity by about 25 percent by 2030; tourism-related construction valued >B$1.8 billion (~12 percent of GDP) expected to expand room stock by 23 percent over next 3 years and increase accommodation & food-services employment by ~4,500 permanent jobs (+28 percent relative to 2024). ### CLIMATE RESILIENCE, DISASTER RISK FINANCING, AND ENERGY TRANSITION - RSF and RRF measures: - RSF reforms: climate-focus in budget, ‘green PFM’, incentives for resilient infrastructure and renewables. - RRF to finance ex-ante resilience investments and ex-post reconstruction; annual RRF reports to be tabled in Parliament (proposed end-March 2027 SB). - Renewable energy and storage: - Electricity Supply Act and Regulations approved early 2025. - RFPs published for 60 megawatts of battery storage; RfQ for 60 MW wind farm launched Nov 2025 (expected >15 percent of installed capacity). - Objective: at least 50 percent of electricity generation from renewables by end-2027; Net-Zero by 2035. - Disaster risk financing: - Layered DRF includes cash buffers, CCRIF, natural disaster clauses in bonds, contingent credit lines with World Bank and IDB; DRF could mobilize over US$650 million rapid contingent financing but may be insufficient for extreme events. - Options: catastrophe bonds, resilience bonds, regional pooling, expand private insurance penetration. ### ENTERPRISE RISK ASSESSMENT, SAFEGUARDS, AND STAFF APPRAISAL - Enterprise risk assessment: - Business risks mitigated by authorities’ track record and program ownership; conditionality calibrated to capacity. - Financial risks limited given improved credit ratings and return to markets. - Safeguards and staff appraisal: - CBB safeguards assessment to be completed before first review. - Staff appraisal: entry to proposed SBA from position of strengthened fundamentals; remaining challenges include high public debt and structural constraints (demographics, skills, diversification). ### CONCLUSION — Policy Implications and Commitments - Near-term outlook stable but tilted to downside; contingency planning and agile policy responses critical. - Authorities committed to: - Sustaining primary fiscal surpluses to reach 60 percent of GDP by FY2035/36. - Advancing structural reforms in tax administration, PFM, SOE oversight, financial sector resilience, and statistical modernization. - Preserving the exchange rate peg supported by ample reserves and reform of monetary operations. - Using any revenue overperformance to pay down debt, finance priority capital projects, build institutional capacity, and increase cash buffers. - Program support: - IMF staff supports the 36-month precautionary SBA with access of SDR 189.000 million (200 percent of quota); proposed schedule of purchases finalized with frontloading and semi-annual reviews. *Source: EXECUTIVE SUMMARY and selected chapters and annexes (1brbea2026001).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - The homegrown Barbados Economic Recovery and Transformation (BERT) 2022 Plan and supporting Fund arrangements reinforced macroeconomic stability and facilitated structural reforms. - Achievements under BERT 2022 and Fund-supported EFF/RSF include: - A gradual and sustained improvement in the fiscal accounts: the primary surplus increased by 2 percentage points of GDP to 4.0 percent of revised GDP in FY2024/25. - Public debt-to-GDP reached 96.0 percent of GDP at end-FY2025/26. - Implementation of fiscal structural reforms to: (i) strengthen tax and customs administration; (ii) improve public financial management (PFM); (iii) strengthen the pension system through major parametric reforms; (iv) rationalize key state-owned enterprises (SOEs); and (v) implement growth-enhancing measures. - Re-accessing international capital markets via a US$500 million bond issuance as part of a liability management operation (LMO) in June 2025. - Completion of the world’s first debt-for-climate conversion in 2024, supported by IFI guarantees and grants, to finance upfront investment. - Sustaining ample international reserves and steps to enhance the monetary policy framework, including a daily liquidity forecasting framework and an Emergency Liquidity Assistance framework. - Completion of RSF reform measures to build resilience and support long-term balance of payment stability, including: (i) enhancing focus on climate in the budget; (ii) introducing ‘green PFM’; and (iii) implementing measures to incentivize resilient infrastructure and renewable energy investments. - Statistical updates: - New GDP statistics released in November 2025 based on a 2023 Supply and Use Table (rebased from 2016), with the level in 2023 revised up by 7.5 percent. - Based on the revised GDP series, public debt at end-FY2024/25 stood at 98.9 percent of GDP, down 5.9 percentage points from prior estimates. ### Outlook and Risks - Growth remained robust in 2025, driven by tourism, construction, and business services; inflation continued to moderate. - Fiscal performance has been strong and gross international reserves remain at about US$1.5 billion (6 months of imports), ample to support the exchange rate peg. - While the war in the Middle East weighs on the outlook, growth is projected to remain stable absent further shocks. - Near-term economic outlook is subject to significant downside risks: heightened global policy uncertainty, elevated global oil and food prices, and Barbados’ vulnerability to natural disasters. ### BERT 2026 Reform Priorities - The BERT 2026 plan shifts from stabilization and growth toward long-term economic transformation, focusing on: - Boosting productivity and competitiveness. - Strengthening fiscal sustainability. - Deepening financial markets. - Developing human capital. - Enhancing climate resilience. - The plan was presented to Cabinet in January 2026 after consultation with social partners. ### Precautionary Stand-By Arrangement (SBA) — Key Policies and Objectives - The authorities requested a new 36-month precautionary SBA to support the BERT 2026 plan; the arrangement is intended as insurance against potential balance of payments shocks. - Program access and modalities: - Total access: SDR 189 million (200 percent of quota, or about US$259 million). - An initial tranche of about SDR 47 million (50 percent of quota) will become available at program approval. - The proposed SBA will have semi-annual reviews and is precautionary in modality. - Key SBA policy directions: - Sustaining high primary fiscal surpluses while providing space for critical capital and social spending. The medium-term fiscal path is anchored on achieving the debt-to-GDP target of 60 percent by FY2035/36. - Implementing fiscal structural reforms to build policy and institutional credibility and economic resilience: - Rolling out the new tax exemptions framework and deepening tax and customs administration to support revenue mobilization. - Strengthening public financial management (PFM), including the medium-term fiscal framework, oversight of SOEs, and fiscal transparency. - Continuing to mobilize external official financing in the near term, while advancing development of domestic capital markets to support debt sustainability and utilize domestic savings for transformation. - Maintaining ample international reserve buffers to support the exchange rate peg; monetary policy operations should continue to be strengthened over the long term. - Advancing financial stability reforms: improvements in banking supervision, further enhancements to the AML/CFT framework, developing a resolution framework, and rolling out new deposit insurance legislation. - Supporting government efforts to boost productivity, competitiveness, and resilience to natural disasters for more sustainable and inclusive growth. ### Program Design and Implementation Context - The new government, led by Prime Minister Mia Mottley after the February general elections in which the Barbados Labour Party won all 30 parliamentary seats, has a strong mandate to push critical structural reforms. - The proposed SBA is intended to be precautionary, acting as insurance against BoP shocks such as geopolitical escalation, further oil and food price increases, or persistent global policy uncertainty. ### Recent Developments and Mission - A mission team visited Bridgetown, Barbados from April 30 to May 14, 2026. The team was headed by Michael Perks and included staff from WHD, FAD, SPR, MCM, and the Resident Representative, with local office assistance. - The mission met with Prime Minister Mia Mottley, Minister of Finance Ryan Straughn, Central Bank Governor Kevin Greenidge, other senior officials, trade unions, banks, the private sector, and development partners. *Source: EXECUTIVE SUMMARY (1brbea2026001).* ### 5. Economic activity in 2025 and early 2026 remained robust. After strong growth of ### 5. Economic activity in 2025 and early 2026 remained robust. After strong growth of ### Economic activity and sectoral performance - Real GDP growth: - 3.4 percent in 2024. - Estimated 2.7 percent y/y in 2025. - Estimated 1.7 percent in Q1 2026. - Key growth drivers in 2025: - Tourism, business services, construction and trade. - Long stay arrivals through December 2025 increased by 3.3 percent y/y. - Cruise arrivals rose by 12.9 percent y/y in 2025; cruise arrivals up 30 percent y/y in Q1 2026. - Construction output rose by 9.8 percent in 2025. - Business and other services grew by 3.7 percent in 2025. - Agricultural output grew by 13.3 percent in 2025, driven largely by rising food crops. - Q1 2026 indicators: - Long-stay arrivals up 1.2 percent. - Cruise arrivals rising by 30 percent y/y. ### Labor market - Unemployment: - Overall unemployment rate: 7.2 percent in Q4 2025. - Youth unemployment: close to 18 percent in 2025 (down from 30 percent in 2020). - Labor force and claims: - Labor force declined by 1.3 percent in Q4 2025 compared to Q1 2025. - Unemployment claims increased by 1.3 percent through December 2025, remaining below the historical average. - Drivers: More workers retired and school enrollments rose; hotel renovations contributed to claim increases. ### Inflation and cost-of-living - Headline inflation (annual average): - 1.5 percent in 2024. - 0.9 percent in 2025. - End‑of‑period inflation rose from ‑0.3 percent in February 2025 to 1.3 percent in February 2026. - Near-term outlook: - Inflation (12-month average) expected to pick up to 3.1 percent in 2026 (from 0.9 percent in 2025). - Stabilize around 2.4 percent over the medium term (historical average). - Notes: - Food prices remained elevated; legacy of high food price inflation from 2022-23. - Official poverty and inequality estimates outdated; ongoing IDB-supported social study expected to update estimates. ### Financial sector conditions - Credit and banking: - Credit to the non-financial private sector grew by 5.2 percent in 2025, driven by lending to hotels, restaurants, real estate, and households. - Non-performing loans (NPLs) continued to decline in 2025. - Capital, liquidity, and provisioning remained well above required levels. - Deposits and other institutions: - Deposits grew moderately, driven mainly by foreign currency deposits linked to real estate and business activity. - Financial soundness indicators for finance companies and credit unions improved somewhat; credit union NPLs remain elevated. ### Fiscal performance and public debt - Primary fiscal balance and public debt: - Primary fiscal surplus of 4 percent of GDP in FY2024/25. - Primary fiscal surplus reached 4.2 percent of GDP in FY2025/26 (budget target was 4.1 percent). - Public debt fell to 96 percent of GDP at end-FY2025/26. - Revenue and expenditure developments in FY2025/26: - Direct tax revenues overperformed; strong CIT receipts reflecting higher profitability and one-off revenues from asset dissolution of a large corporate group. - Staff estimates that structural CIT increase could be around 1.8 percent of GDP (versus earlier assumption of roughly one third of 0.9 percent of GDP). - Capital spending reached 4.1 percent of GDP in FY2025/26 (construction of roads, a geriatric hospital and two senior citizen villages, school infrastructure, skills development and tourism). - Budget measures to address rising commodity prices (Budget 2026, cost FY2026/27): - Cost of living credit for pensioners and the vulnerable (BD$ 100 monthly): 0.45 percent of GDP; duration 1 year. - VAT - Extension of the reduced rate (7.5%) for electricity for the first 250kWh for residential homes: 0.09 percent of GDP; duration 1 year. - VAT - Cap on fuel (47¢ per litre for gasoline and 37¢ per litre for diesel): 0.13 percent of GDP; duration 1 year. - Customs Duties/VAT/Excise/PIT - Extension of duty and tax holidays for EVs; PIT deduction for EV battery replacement: 0.03 percent of GDP; duration 3 years; 5 years. - Customs Duties - Exclusion of freight and insurance to calculate duty on essential items; capped for other goods: 0.12 percent of GDP; duration 1 year. - Excise - Reduction of excise tax on gasoline (99.39¢ to 89.39¢ per litre) and diesel (44.03¢ to 34.03¢ per litre): 0.01 percent of GDP; duration 3 months. - Government absorption of 50% of Fuel Clause Adjustment to electricity prices, above March 2026 levels: 0.04 percent of GDP; duration 3 months. - Total cost: 0.87 percent of GDP. ### External position and financing - Current account and reserves: - Current account deficit: estimated 5.7 percent of GDP at end-2025 (from 3.7 percent of GDP in 2024). - Drivers: higher merchandise imports (investment- and construction-related inputs), lower re-exports, unwinding of one-off CIT transfers. - Travel receipts remained strong; FDI strengthened significantly. - Gross international reserves (GIR) about US$1.5 billion at end-2025. - Financing: - June 2025: US$500 million sovereign bond issued as part of a debt-neutral LMO; proceeds used to roll over bulk of 2029 Eurobond and prepay IMF obligations through March 2028. - Around US$400 million agreed from non-Paris Club lenders for Queen Elizabeth Hospital expansion and public health. - About US$300 million from IFIs for BERT 2026 projects (including water desalination and energy). - Sovereign spreads declined below 350 bps; upgrades from S&P and Fitch in Q4 2025. ### Outlook and macro projections (Text Table 1, Baseline) - Real GDP, percent change: - 2024 Act.: 3.4 - 2025 Prel.: 2.7 - 2026 Proj.: 2.2 - 2027–2031 Proj.: 2.3, 2.1, 2.0, 2.0, 2.0 - CPI inflation, annual average: - 2024: 1.5 - 2025: 0.9 - 2026: 3.1 - 2027–2031: 2.7, 2.4, 2.4, 2.4, 2.4 - Primary balance (percent of GDP): - 2024: 4.0 - 2025: 4.2 - 2026: 3.5 - 2027–2031: 3.5, 4.1, 4.1, 4.1, 4.1 - Public sector debt (percent of GDP): - 2024: 98.9 - 2025: 96.0 - 2026: 91.8 - 2027–2031: 87.5, 83.3, 79.3, 75.5, 71.7 - Current account (percent of GDP): - 2024: -3.7 - 2025: -5.7 - 2026: -6.0 - 2027–2031: -5.8, -5.3, -5.2, -5.1, -4.9 - FDI and long-term debt (percent of GDP): - 2024: 4.7 - 2025: 5.7 - 2026: 6.0 - 2027–2031: 6.0, 5.9, 5.8, 5.7, 5.7 - Gross International Reserves, US$ million: - 2024: 1593.0 - 2025: 1522.6 - 2026: 1333.4 - 2027–2031: 1325.9, 1389.9, 1426.6, 1465.7, 1501.7 - Gross International Reserves, percent of ARA: - 2024: 194.6 - 2025: 193.8 - 2026: 150.7 - 2027–2031: 152.8, 152.4, 150.8, 148.6, 146.3 ### Risks to the outlook - External risks (tilted to the downside): - Vulnerability to global commodity price shocks and geopolitical tensions (Middle East war). - Illustrative WEO severe scenario: GDP growth could be 1.5 ppts lower in 2026, inflation could rise by an additional 0.9 ppts, and the CA could deteriorate by a further 1.3 percent of GDP. - Escalating trade measures, policy uncertainty, reduced tourism demand, suppressed FDI, higher import costs, and tighter global financial conditions are possible. - Domestic risks: - Natural disasters could undermine growth, increase fiscal deficit and public debt, deplete reserves, and create financial stability challenges through higher delinquencies. - Deceleration of reform momentum could undermine debt reduction and potential growth, though mitigated by authorities’ track record. - Impact of Middle East war in baseline: - Baseline assumes higher government expenditure financed by “top-up” CIT revenues; staff projections assume CIT “top-up” revenues of 2.8 percent of GDP, with about 30 percent originating from abroad. ### Program design, objectives, and policy recommendations - SBA objectives: - Provide insurance against potential external shocks and/or natural disasters. - Maintain prudent macroeconomic management to ensure public debt on track to reach 60 percent of GDP by FY2035/36. - Continue structural reforms to build policy credibility, institutional capacity, and resilience supporting BERT 2026. - FY2026/27 fiscal stance and medium term: - SBA targets a primary surplus of 3.5 percent of GDP for FY2026/27. - Revenues projected to increase by around 1.7 percent of GDP (conservative estimate for “top-up” CIT). - Any revenue overperformance to finance high-priority spending within the SBA surplus target or to rebuild fiscal buffers. - Maintain medium-term anchor: primary surpluses of 4.1 percent of GDP over the medium term to meet 60 percent of GDP debt target by FY2035/36. - Policy recommendations and contingency planning: - Targeted and temporary support measures for most vulnerable; avoid permanent increases in recurrent spending. - In case of higher oil prices: reallocate non-essential current spending; avoid inefficient temporary broad tax reliefs; favor targeted transfers. - If shock persists: reprioritize capital spending, defer lower priority projects, consider tax policy reform options to contain imports and bolster revenues. - Continue efforts to accelerate transition to renewable energy to reduce exposure to volatile fossil fuel prices. - Strengthen fiscal institutions: consider targeted regrading and recruitment (e.g., budget and debt management teams) while maintaining medium-term wage anchor. *Source: IMF staff report excerpt.* ### 20. Sustained structural reforms will support revenue mobilization and build fiscal ### 20. Sustained structural reforms will support revenue mobilization and build fiscal ### Tax policy and revenue measures - The eventual removal of the distortionary 2 percent FX transaction fee will require offsetting measures of around 0.6 percent of GDP (¶26). - The FY2026/27 budget announced a reduction in the main and higher rates for personal income tax, from 12.5 and 28.5 percent to 11.5 and 27.5 percent, respectively, effective April 1, 2026. - Recently announced reductions in the PIT rate will increase reliance on VAT and CIT. - Near-term CIT revenues are expected to be strong, but the full impact and permanence of the reforms remain uncertain. - Recommended further revenue-raising measures: - Base-broadening VAT reforms. - Reforms to the land tax. - Reforms to the fuel excise tax (see Annex VI). - The authorities should develop further revenue-raising measures given uncertainty around CIT and the revenue loss from FX fee removal. ### Tax exemptions, tax administration, and customs - Implementing the new tax exemption framework: - A centralized platform for recertification of tax waivers and concessions granted prior to 2005 has been developed. - A comprehensive tax expenditure inventory, including costings of foregone revenue, will be tabled in Parliament with Fund TA support (proposed end-June 2027 structural benchmark (SB)). - Thereafter, annual tax expenditures reports will be published alongside the budget. - Monitoring and reporting procedures will be critical to verify compliance with the updated framework and consolidating the underlying tax incentive legislation would further strengthen transparency and governance. - Deepening tax administration reforms: - In late-2025, the Barbados Revenue Authority (BRA) undertook an updated Tax Administration Diagnostic Assessment Tool (TADAT). - The government will table a Tax Administration Procedures Bill in Parliament aimed at modernizing and strengthening administrative and enforcement powers of the BRA (proposed end-December 2026 SB). - A full review of accounts receivable is needed to identify uncollectible arrears and facilitate write-down. - Adopt mandatory e-payments for all large (and eventually medium) taxpayers, and all taxes. - Establish a single Large Taxpayer Unit to improve risk‑based compliance management and administrative efficiency. - Strengthening Barbados Customs and Excise Department (BCED): - Continue implementing the HR roadmap to fill vacancies and guide strategic initiatives. - Priority reforms include: - Publication of regulations to implement the 2022 Customs Act (proposed end-September 2026 SB). - Implementation of advanced rulings and review procedures to align with the WTO Trade Facilitation Agreement. - Establishment of a risk-based exemptions control framework for fuel. - Improving BRA and BCED coordination: - Mandatory use of the Taxpayer Identification Number (TIN) is now in effect as the unique identifier for importers and exporters and as a requirement for border transactions. - Electronic information exchange between BRA, BCED, and NISSS will be essential for assessing compliance and supporting delivery of strategic objectives. ### Public financial management, SOEs, PPPs, and public investment - Enhancing the Medium-Term Fiscal Framework (MTFF): - The government adopted a procedural fiscal rule in 2021 grounded in its 2019 PFM Act and the budget cycle. - Key near-term measures: - Develop and table PFM rules in Parliament (proposed end-December 2026 SB). - Timely publication of quarterly fiscal data, with a one-month lag (proposed end-September 2026 SB). - BERT 2026 prioritizes fully operationalizing the Fiscal Council (established in 2023). - Prepare a concept note to explore options to augment the MTFF (proposed end-December 2027 SB) with Fund TA support. - Strengthening SOE oversight and reporting: - Authorities will undertake a comprehensive SOE stock-take with Fund TA, focusing on financial monitoring and reporting (proposed end-March 2027 SB). - Ongoing SOE reforms have focused on transport, energy, and welfare sectors. - Planned transition of Barbados Agricultural Management Company to a new cooperative entity remains a priority, supported by construction of a new factory with an integrated battery storage system. - Implementing the PPP framework: - New PPP framework adopted in March 2025; a PPP committee within Ministry of Finance evaluates project concepts and feasibility. - Develop a database of existing and proposed PPP projects and initiate annual reporting on PPP execution and performance, aligned with the PFM Act (proposed end-June 2027 SB). - Improving public investment efficiency: - Project appraisal guidelines were developed in March 2025 with Fund TA. - As guidelines are rolled out, develop rigorous appraisal methodology and prioritization/selection process. ### Public debt, financing assumptions, and domestic capital markets - Public debt and projections: - Public debt fell to 96 percent of GDP by end-FY2025/26, reflecting improved fiscal balances and robust GDP growth. - Under the baseline, public debt is projected to continue declining below 80 percent by end-FY2029/30 and to achieve the 60 percent of GDP target by FY2035/36, supported by sustained strong primary fiscal balances and moderate GDP growth. - The June 2025 LMO reduced medium-term gross financing needs and removed a key source of rollover risk. - The Sovereign Risk and Debt Sustainability Framework (SRDSF) suggests overall risk of sovereign stress is moderate and that debt is sustainable. - Near-term assessment and the fan-chart tool indicate moderate risk, but the width of the possible debt path indicates a high degree of uncertainty given Barbados’ history of economic volatility. - Domestic risks related to maintaining strong fiscal balances continue to decline; external risks remain high (see ¶14). - Mitigating factors include strong track record of reform implementation, substantial cash buffers, and favorable debt service schedule. - External official financing and program assumptions: - Baseline assumes policy and project loans from IFIs averaging US$141 million per year over the next 2 fiscal years. - For FY2026/27, authorities expect a loan of US$50 million from the OPEC Fund for International Development and a US$100 million policy-based loan from IDB. - Barbados is aiming to undertake a debt-for-social swap under a new standardized facility with guarantees from IDB, World Bank, CAF and EIB likely to be approved before-end 2026, with the swap expected to be finalized shortly thereafter. - Moderate capital market issuances are programmed over the medium term, totaling US$300 million. - Developing domestic capital markets: - In FY2025/26, net financing from commercial banks reached 0.9 percent of GDP. - Treasury bill issuances have grown to 6 percent of GDP, taking the overall share of short-term debt to 10 percent of total domestic debt. - Following the fully subscribed second issuance of Barbados Optional Savings Scheme (BOSS)+ bonds in April 2025, the government launched a third and fourth round for B$200 million in June and December 2025, respectively. - Issuance of domestic debt is mainly by subscription at pre-announced terms. - With restructured domestic debt gradually maturing, recommended actions include lengthening maturities, reintroducing auctions to enable price discovery and develop a yield curve, and building capacity of the Debt Management Unit to enhance investor relations and improve publication of debt data. - End-FY2025/26 cash buffers stood at 4.2 percent of GDP at end-March 2026. ### Authorities’ views - The authorities are committed to achieving the public debt target of 60 percent of GDP by FY2035/36 while meeting infrastructure and development needs. - They view the 3.5 percent of GDP primary surplus for FY2026/27-FY2027/28 as appropriate to respond to external shocks and frontload investment in education, health, water management, and security. - They consider revenue projections conservative and will use any overperformance to pay down debt, finance priority capital projects, build institutional capacity, and increase cash buffers. - Forthcoming public sector job re-grading is important for improving staff retention in police, healthcare, and education. - Strengthening revenue administration and rationalizing tax expenditures remain top priorities. - Tax reform options are considered potential medium-term measures and would be assessed against revenue yield, fairness, competitiveness, cost-of-living implications, administrative feasibility, and consistency with BERT 2026 objectives. - The authorities are committed to finalizing the latest phase of SOE reforms and view the Fiscal Council as critical for maintaining fiscal discipline and improving accountability. - Developing domestic capital markets is essential to mobilize domestic saving and support economic transformation. ### Monetary policy framework and financial system resilience - Exchange rate and FX fee: - Barbados has had a fixed exchange rate since 1975, underpinned by capital controls. - The 2 percent foreign exchange fee (introduced in 2017) is assessed as a capital flow management (CFM) measure and raises annual revenues of 0.6 percent of GDP; removal should be considered to reduce market distortions and support trade and investment, with alternative revenue sources identified (¶20, ¶26). - Strengthening the Central Bank of Barbados (CBB) operations: - The 2020 Central Bank Law reform enhanced CBB autonomy, mandate, and decision-making, while limiting monetary financing of budget deficits. - The CBB adopted a plan to gradually recapitalize the central bank. - Long-term objectives include establishing a mid-rate interest rate corridor, with a policy rate to signal stance and anchor standing deposit and lending facilities, and using open market operations to keep short-term interbank rates around the policy rate. - Near-term options include raising the reserve requirements ratio to address excess liquidity and raising the rate on the overnight lending facility. - Financial sector reforms to build resilience: - Improving banking supervision: - CBB plans to reorganize its Bank Supervision Department (BSD) to improve risk management (proposed end-November 2026 SB). - Strengthen prudential activity: increase on-site inspections, reduce delays in reporting, ensure compliance with supervisory plans, clarify timing and methodology for individual institution risks, establish specialized oversight units, and foster collaboration with other financial entities. - Developing a resolution framework: - Currently resolution powers for banks reside with the High Court per the Financial Institutions Act; for credit unions FSC has limited liquidation powers but often must apply to the High Court. - Authorities should develop a resolution framework for banks and credit unions aligned with international standards that clarifies designated resolution authorities, establishes a non-court-led resolution process, and introduces a broad set of resolution tools. - Operationalizing the deposit insurance scheme: - Work to revise the legislative framework is ongoing with TA from US Treasury; plans to submit legislation to Parliament by end-2026. - Key changes include expanding coverage to credit unions; scheme should be underpinned by stringent supervision and an adequate resolution regime. - Enhancing climate risk analysis: - Continue building capacity with primary focus on physical risk analysis; a Fund TA mission on transition risk and alignment approaches (including taxonomy) is planned for H2 2026. - Deepen analysis of contingent liabilities across the financial system. - Digital payments and BiMPay: - Barbados digital payments system (BiMPay) was officially launched in August 2025 with World Bank TA support. - Authorities aim to roll out the system to six commercial banks and the three largest credit unions in June 2026. - Potential benefits: reduce transaction costs, increase efficiency, improve financial social inclusion, reduce informality, spur financial development and regulatory reform. - Authorities are monitoring technical, financial and cybersecurity risks during rollout. *Source: IMF staff summary of chapter "Sustained structural reforms will support revenue mobilization and build fiscal" (1brbea2026001).* ### 30. The government should continue enhancing Barbados’ AML/CFT framework. Following ### The government should continue enhancing Barbados’ AML/CFT framework. ### AML/CFT progress and recommendations - Barbados was removed from the Financial Action Task Force (FATF) grey list in 2024 and from the European Union money laundering blacklist in 2025. - The government announced establishment of a Beneficial Ownership Register for companies with revenues over B$1 million. - Focus going forward: effective implementation and enforcement in supervision, investigations, prosecutions, and asset recovery. - Ahead of the FATF mutual evaluation scheduled for June 2027, the authorities will table in Parliament a note outlining progress in key areas of AML/CFT (proposed end-March 2027 SB). ### Authorities’ views on payments, liquidity, and financial stability - Near-term priority: planned launch of BiMPay in June 2026, including monitoring and mitigating risks. - Excess liquidity in the banking system is not considered to pose financial stability risks due to conservative lending practices and is expected to continue declining with private credit growth. - Authorities do not see a need to raise reserve requirements; view development of the monetary policy toolkit as a long-term endeavor. - Reform priorities include CBB’s reorganization of the BSD and consolidation of the credit union sector before bringing it within the updated deposit insurance scheme. - Agreed priorities: need for a resolution regime for financial institutions and continued commitment to enhance the AML/CFT framework. - Assessment: Barbados’ external position is broadly in line with medium-term economic fundamentals; reserve coverage remains ample to support the exchange rate peg. - The positive policy gap reflects sustained fiscal effort under BERT 2018 and BERT 2022. ### Boosting growth prospects — findings and reform areas - Near-term support: several large private hotel projects and strong public investment suggest robust activity (see Annex VIII). - Structural constraints: vulnerability to external shocks and natural disasters; demographic headwinds of an ageing population and emigration limit long-term potential output. - Medium-to-long term reforms needed include: - Tackling infrastructure bottlenecks: - Berth 6 completed in May and equipped with two electric-powered cranes, expanding yard capacity by about 40 percent. - US$150 million expansion of the Grantley Adam International Airport planned for completion by end-2027, including a new passenger terminal and runway expansion. - Request: operationalize the single electronic window; adopt slot‑coordinated airport approach and multi‑shift operations at the maritime port. - Improving the business environment: - Business Barbados established in 2024. - Operationalization of a new digital corporate registry by end-2026; revision of fee structures; enhanced integration with other government digital systems. - Digitalization advances: deployment of 5G, establishment of a data center, launch of an e-conveyancing property transfer platform, creation of a cyber security operations center. - World Bank’s B-Ready Report (2024) identifies weaknesses in property transfer standards, building and energy standards, and zoning and land use regulations; time and cost for construction and environmental permits remain excessive. - Proposed establishment of a Competitiveness and Productivity Commission (proposed end-December 2026 SB). - Closing the skills gap: - 2025 IDB study found widespread deficiencies in intermediate, cross-cutting digital skills. - Policy: develop plans to strengthen applied digital skills and support firms to use AI, process automation, data analytics, and emerging digital technologies. - Immigration Bill and Barbados Citizenship Bill aim to expand pathways to permanent residency and citizenship for eligible individuals; free-movement agreements within CARICOM facilitate skilled labor mobility. - Authorities’ growth expectations: - Medium-term growth expected to rise toward 3 percent under the conservative program framework. - Full implementation of BERT 2026 could raise growth potential further toward 5 percent over the medium to longer term. - Planned hotel developments expected to increase room capacity by about 25 percent by 2030. ### Building resilience to shocks and natural disasters - RSF-supported climate policy agenda aims to strengthen policy frameworks and institutions and catalyze investment in resilience (see Annex XVI). - Measures implemented: improved disaster risk management policy, upgraded infrastructure planning, enhanced stormwater management, increased public procurement efficiency, targeted energy transition measures, and capacity building to monitor natural disaster risks in the financial sector. - Renewable energy progress: - Electricity Supply Act approved in early 2025; Cabinet approved Electricity Supply Regulations. - Request for proposals to be published for 60 megawatts of battery storage—nearly half of targeted capacity. - Request for qualifications for a utility-scale wind farm launched in November 2025; project expected to generate 60 megawatts and contribute over 15 percent to total installed electricity capacity. - IFC acting as lead transaction advisor to structure the wind farm as a PPP. - Scaling renewables depends on modernizing the electricity grid and scaling battery storage. - Disaster risk financing framework (see Annex XII): - Significant cash liquidity buffers available for immediate post-disaster use. - Insurance: CCRIF coverage; state-contingent domestic and external bonds for debt service relief in disasters or pandemics. - Access to contingent credit lines from the World Bank and the IDB. - Proposed Fund-supported SBA would provide additional financing. - Scope remains to deepen private insurance coverage among households, farmers, and fishers; requires financial literacy and addressing behavioral biases. - Resilience and Regeneration Fund (RRF) will finance ex-ante resilience investments and ex-post reconstruction; annual RRF reports to be tabled in Parliament (proposed end-March 2027 SB). - Authorities’ view: - Natural disasters seen as an existential threat; reliance on imported fossil fuels a key macroeconomic vulnerability. - Layered disaster risk financing framework viewed as broadly adequate for moderate and more frequent events; residual protection gap for low-probability, high-severity shocks to be met through reserves, the SBA, and ex‑post borrowing. - Closing the private catastrophe insurance gap is a key medium-term objective. ### Data issues and statistical modernization - Data provision: broadly adequate for surveillance but with shortcomings (see Annex XV). - Fiscal, financing and debt data: comprehensive and timely but not published on the government’s website. - National accounts and balance of payments: - Barbados publishes annual GDP by production with a 6-month lag; GDP by expenditure published infrequently; quarterly GDP data not published. - Updated IIP data shared with staff but not published; delays and significant data revisions hinder BoP consistency evaluation. - Authorities preparing BPM6-based BoP data for 2018-2025 and IIP statistics for 2010-2024, following Fund TA. - SUT update from 2016 to 2023 provides a comprehensive benchmark for GDP estimates. - Capacity building: - Need to strengthen capacity of the Barbados Statistical Service (BSS). - A comprehensive review of BSS operations, supported by IMF TA, could identify institutional constraints and recommendations to improve data quality and publication timing. - Authorities’ position: - Broad agreement that data are adequate for surveillance with areas needing strengthening. - Welcomed improvements: GDP rebasing to 2016 and then to 2023; updated SUT; progress toward expenditure-based GDP estimates; BPM6-based BoP estimates for 2018-2025; IIP statistics for 2010-2024. - Committed to continuing improvements and support a comprehensive review of BSS with IMF TA. ### Program modalities, scenarios, and financing - Proposed precautionary SBA: - Duration: 36 months. - Rationale: insurance against potential shocks and/or natural disasters; time to reduce public debt and implement structural reforms; signal of macroeconomic strength to catalyze IFI and market financing. - Proposed access and amounts: - Support proposed: 200 percent of quota (SDR 189 million or about US$259 million). - Adverse scenario considerations: - Under a plausible adverse scenario, GIR could decline by as much as US$700 million to 80 percent of the Fund’s ARA metric (see Annex IX). - Access of 200 percent of quota (US$259 million) would help maintain reserves close to 110 percent of the ARA metric, supported by sustained fiscal policy implementation. - In the adverse scenario, Fund financing would be complemented by additional IFI financing. - Program access will be frontloaded, with a quarter available at both the program request and the first review. - Quantitative and structural conditionality: - QPCs and Indicative Targets to be set and monitored under semi-annual reviews; semi-annual reviews follow end-March and end-September test dates, with ITs for June and December. - Structural benchmarks targeted in critical fiscal and financial policy areas, including revenue policy and administration; the budget process and fiscal framework; public investment and PPP management; fiscal transparency; SOE reform; and financial supervision and AML/CFT. - Financing assurances: - In the baseline, the SBA is fully financed for the first 12 months with IFI loans. - In the adverse shock scenario, the financing gap would be closed by drawing down reserve buffers, fiscal policy adjustment, and financing from the SBA and other IFIs. - Capacity to repay: - GRA credit outstanding to the Fund declined from 370 percent of quota to 249.9 percent of quota following the government’s SDR78 million pre-payment of repurchases falling due through March 2028. - Fund obligations peak at 3.2 percent of goods and services exports and 7.3 percent of GIR in 2028 in the baseline. - In the adverse shock scenario, where full access under the SBA is drawn, GRA credit outstanding would rise to 375 percent of quota. - Fund obligations would peak in 2030 at 4.4 percent of goods and services exports and 10.2 percent of GIR, then decline quickly thereafter. - Risks to repayment: significant external risks; mitigants include authorities’ track record, commitment to reforms, and reserve buffers well above 100 percent of the Fund’s ARA metric. Authorities stand ready to take additional fiscal measures if needed to meet program targets. *Source: 1brbea2026001 - 30.* ### 47. Enterprise risk assessment. Business risks related to program performance are mitigated by ### 47. Enterprise risk assessment. Business risks related to program performance are mitigated by ### Enterprise risk assessment and safeguards - Business risks: - Mitigated by the authorities’ excellent track record and strong ownership of the program. - Mitigated by careful calibration of conditionality to reflect capacity constraints. - Financial risks: - Limited given Barbados’ low likelihood of sovereign debt distress, improved credit ratings, and recent successful return to international capital markets. - Further mitigated by program design, including the moderate level and the intention to treat the program as precautionary. - Staff safety and reputational risks: - No risks to staff safety and well-being that would jeopardize the ability of the Fund to conduct missions or maintain a Resident Representative presence. - Program does not present notable reputational risks from perceived lack of evenhandedness in access or conditionality. - Not proceeding with the program could raise reputational risks if the Fund fails to provide assistance to a vulnerable small island developing member. - Safeguards assessment: - A safeguards assessment of the CBB will be completed before the first review of the proposed arrangement. - The 2022 assessment recommendations have largely been implemented, with one measure still underway. - Given that the SBA is envisaged to provide budget support, a Memorandum of Understanding between the government and the CBB will be required to clarify institutional responsibilities and repayment modalities to the Fund. ### Staff appraisal — overall assessment - Context and progress: - Building on strong progress under the BERT 2022 plan and Fund-supported EFF/RSF arrangements, BERT 2026 focuses on long-term economic transformation. - Barbados has put debt on a firm downward path, rebuilt international reserves, and regained access to international capital markets. - Entry to the proposed new Fund arrangement is from a position of strengthened macroeconomic fundamentals. - Remaining challenges: - Public debt remains high and the reform agenda needs to advance. - Structural factors holding back growth include demographic headwinds, chronic skills gaps, capacity constraints, limited diversification, and low productivity growth. - BERT 2026 seeks to transform Barbados into a high-performing, inclusive, and climate-resilient economy. ### Near-term outlook and risks - Near-term outlook: - Remains stable. - Risk profile: - Risks are tilted firmly to the downside due to a highly uncertain external environment and vulnerability to natural disasters. - External exposures include deepening geopolitical tensions and a further escalation or extension of the war in the Middle East, which could shock global commodity prices and affect trade and investment. - Domestic risk of loss of reform momentum, mitigated by the government’s strong ownership, track record of implementation, and renewed mandate for reform. - Policy implication: - Contingency planning and agile policymaking remain critical. ### Fiscal policy and debt - Fiscal commitment: - Authorities committed to maintaining high primary fiscal surpluses over the medium term, consistent with achieving the 60 percent debt target by FY2035/36. - Program targets: - Primary surplus of 3.5 percent in FY2026/27 and FY2027/28. - Underpinned by further increases in CIT revenues and prudent spending increases focused on critical social and capital projects. - Stance and contingencies: - Modest relaxation of the near-term fiscal stance is appropriate to cushion external shocks and accelerate resilience-building. - With limited fiscal space, additional measures to address further shocks should be temporary and targeted on the most vulnerable. - Any additional revenue windfalls should be used to boost resilience through critical capital spending and further buildup of fiscal buffers. - Debt sustainability and financing: - Staff continues to assess public debt to be sustainable, with moderate overall risks of sovereign stress. - Critical to continue developing domestic debt markets to lengthen maturities, reduce rollover risks, and mobilize domestic savings. ### Fiscal structural reforms and public financial management - Recommended reforms: - Continue fiscal structural reforms to build policy credibility and strengthen policy frameworks and institutions. - Develop further tax policy reform options to support near-term contingency planning and the eventual removal of the 2 percent foreign exchange fee. - Implement the new tax exemption framework and deepen revenue administration reforms to protect the tax base, increase compliance, and raise economic efficiency. - Further improvements in PFM to improve public spending efficiency, strengthen the budgetary process and the MTFF, and build institutional capacity. - Improve SOE oversight and reporting to enhance transparency, accountability and mitigation of fiscal risks. - Implement the new PPP framework and project appraisal guidelines to mitigate contingent liabilities, boost public investment efficiency, and support sustainable growth. ### Exchange rate, monetary policy, and external position - Exchange rate anchor: - Authorities committed to implementing policies needed to support the exchange rate peg, a critical anchor for macroeconomic stability. - Reserves and external assessment: - International reserves remain ample to support the exchange rate peg. - The external position in 2025 is assessed to be broadly in line with the level consistent with medium-term fundamentals and desirable policies. - Policy recommendations: - Given macroeconomic improvements and protection against capital outflows provided by longstanding capital controls, authorities should consider removing the 2 percent foreign exchange fee (a CFM measure) to reduce market distortions and support trade and investment. - CBB focused on rolling out the new instant payments system (BiMPay). - CBB should continue long-term efforts to strengthen monetary policy operations. ### Financial sector resilience - Current conditions: - Financial system remains stable, strongly capitalized and profitable, with deposit growth supporting liquidity and moderate private credit growth. - Ongoing reforms and priorities: - CBB reorganizing its Banking Supervision Department (BSD) to strengthen prudential activity, improve risk management, and safeguard financial stability. - Develop a resolution framework for financial institutions in line with international standards. - Operationalize the new deposit insurance scheme. - Continue to enhance the AML/CFT framework, including establishing a new Beneficial Ownership Registry. ### Supply-side reforms and growth prospects - Short-term growth drivers: - Strong private and public construction activity expected to anchor growth for the next 2 years. - Medium-term requirements: - Further structural reforms needed to boost potential growth. - Tackle infrastructure bottlenecks, including planned modernization and expansion of both the airport and maritime port. - Continue efforts to improve the business environment, supported by the Growth Council and Business Barbados. - Enhance ease of doing business through digitalization and better integration of government services, facilitating trade, and streamlining permitting, customs clearance, construction approvals, company registration, and work permits. - Close skills gaps, particularly digital skills and AI readiness, to improve competitiveness. ### Resilience to external shocks and natural disasters - Energy transition and disaster resilience: - Maintain implementation of RMs completed under the 2022 RSF to address immediate adaptation needs and facilitate transition to renewable energy sources by 2035. - Accelerate deployment of battery storage and improve the electricity grid to scale up renewable electricity generation and strengthen energy security amid volatile global fossil fuel prices. - Disaster risk financing: - Continue developing a comprehensive multi-layered disaster risk financing framework, notably through the expanded role and financing of the RRF to improve disaster response, preparedness, and mitigation. - Explore further risk transfer, including measures to promote private disaster insurance. *Source: IMF staff report excerpts (paragraphs 47–56, STAFF APPRAISAL).* ### 57. In view of Barbados’ exposure to external risks and potential BoP needs, staff supports ### 1brbea2026001 - 57. In view of Barbados’ exposure to external risks and potential BoP needs, staff supports ### Program support and IMF engagement - Staff supports the authorities’ request for a precautionary 36-month arrangement under the SBA in the amount of 200 percent of quota. - Staff recommends that Barbados remains on a 24-month cycle for Article IV Consultations (Decision No. 14747 – (10/96)). - Table 9 (Proposed Schedule of Purchases Under the Proposed SBA): - Total Access: 189.000 SDR million = 200 percent of quota. - Scheduled purchases: 47.250 SDR million (50.0 percent of quota) on June 22, 2026; 47.250 SDR million (50.0 percent of quota) on December 1, 2026; 23.625 SDR million (25.0 percent of quota) on June 1, 2027; 23.625 SDR million (25.0 percent of quota) on December 1, 2027; 23.625 SDR million (25.0 percent of quota) on June 1, 2028; 23.625 SDR million (25.0 percent of quota) on December 1, 2028. ### Real sector developments and labor market (Figure 1; Table 6) - Economic growth: - CY Real GDP: 3.4 (Old GDP 2024), 2.7 (Revised GDP 2026); projections through 2031 include values such as 2.7, 2.2, 2.3, 2.1, 2.0, 2.0, 2.0. - Drivers of growth: tourist arrivals; construction; business and other services. - Labor market: unemployment at historic lows. - Inflation: - CPI inflation (average): 1.5 (2025), 2.6 (2026 revised), with projections including 0.9, 3.1, 2.7, 2.4, 2.4, 2.4, 2.4. - CPI inflation (end of period): 0.4 (2025), 3.7 (2026 revised), with projections including 1.6, 3.8, 2.4, 2.4, 2.4, 2.4, 2.4. - Per capita and demographic indicators (Table 1): - Population (2025 est., thousand) 282.7 - Per capita GDP (2025 est., US$ thousand) 28.7 - Unemployment rate (2025) 6.6 ### Fiscal sector developments (Figure 2; Tables 2a, 2b, 6) - FY2025/26 fiscal outcome: - Sizable primary surplus recorded in FY2025/26. - Support from continued strong revenue collection, particularly CIT and VAT. - Stable primary expenditures; interest bill declined somewhat due to lower costs of variable-rate external debts. - Central government fiscal aggregates (2023/24–2031/32; Table 2a, Table 2b): - Total revenue (2024/25): 4,199 million BDS$; projections include 4,138 (2026/27) up to 5,583 (2031/32). - Total expenditure (2024/25): 4,328 million BDS$; projections include 4,186 (2026/27) up to 5,491 (2031/32). - CG Fiscal balance (2024/25): -129 million BDS$; CG Primary balance (2024/25): 621 million BDS$. - Ratios (percent of FY-GDP): Total revenue 27.2 (2024/25); Total expenditure 28.1 (2024/25); CG Fiscal balance -0.8 (2024/25); CG Primary balance 4.0 (2024/25). - Public debt and composition (Table 3; Table 6): - Public sector debt 98.9 (2025/26, percent of FY GDP per Table 3) and projections trending down to 71.7 (2031/32). - Central government debt (FY amounts): 14,887 (2025/26, BDS$ millions); domestic 9,135; external 5,753. - Public sector debt + IMF (BOP support): 15,243 (2025/26, BDS$ millions) = 98.9 percent of FY GDP. - Interest expenditure (percent of FY GDP) around 4.9 (2024/25) and projected 4.7, 4.5, 4.4, 4.4, 4.2 across years. ### External sector developments (Figure 3; Tables 4a, 4b, 8) - Current account: - Weakened in 2025 due to higher imports related to investment and construction, offsetting savings from declining fuel and food import prices. - Current account balance (US$ million): -282 (2024), -480 (2026), with projections e.g., -452 (2027), -503 (2028). - Current account (percent of CY-GDP): -3.7 (2024), -6.4 (2026), projected values including -5.7, -6.0, -5.8, -5.3 across horizon. - Financial inflows and reserves: - Financial inflows remained strong, driven by increased FDI flows. - FX reserves (Gross International Reserves, GIR) fell slightly to US$1.5 billion at end-2025: 1,593 (2024), 1,615 (2025), 1,523 (2026), with projections e.g., 1,333 (2028). - Import coverage: GIR in months of imports of G&S: 6.7 (2024), 7.1 (2025), 6.0 (2026), 4.8 (2028). - GIR (percent of ARA): 195 (2024), 198 (2025), 194 (2026), 151 (2028). - Trade and services: - Exports of goods and services (US$ million): 2,671 (2024), 2,486 (2026), projected rising to 3,606 (2031). - Imports of goods and services (US$ million): 2,836 (2024), 2,747 (2026), with projections up to 3,920 (2031). - Travel (credit) as a major services component: 1,311 (2024), 1,402 (2026), projected to 1,831 (2031). - External financing requirements and sources (Table 8): - Gross Financing Requirements (US$ million): 428 (2027), 744 (2028), 1,127 (2029). - Sources of financing include public sector inflows, FDI and long-term debt (net) e.g., 354 (2026), 468 (2028); short-term debt (net) typically negative in projections. - Change in reserves (without RSF): -88 (2024), -23 (2026), 70 (2027), 189 (2028). ### Monetary and financial sector (Figure 4; Table 5) - Monetary conditions and credit: - Lending rates continued to decline. - Real credit growth to private and public sectors remained positive. - Broad money (M2, liabilities to the private sector) BDS$: 15,163 (2024), 15,703 (2025), projected to 20,882 (2031). - Credit to the non financial private sector BDS$: 8,959 (2024), 9,228 (2025), projected 13,444 (2031). - Excess cash liquidity in the banking system declined but remained sizable. - Banking sector soundness: - NPL ratios continued to decline. - Profitability remained relatively stable for commercial banks and credit unions. - Capital buffers remained strong. - Central Bank of Barbados (Table 5): - Monetary base (BDS$ millions): 4,283 (2024), 3,402 (2025), projected 4,412 (2031). - Net International Reserves (BDS$ millions): 1,857 (2024), 2,175 (2025), projections e.g., 2,077 (2031). ### Public debt dynamics and program monitoring (Tables 3, 10a, 10b) - Public sector debt trajectory: - Public sector debt (BDS$ millions): 14,957 (2025/26), projected 15,008 (2026/27) through 15,257 (2031/32). - Public sector debt (percent of FY GDP): 97.0 (2025/26), 98.0 (2026/27), trending down to 71.7 (2031/32). - IMF-related balances and program monitoring: - Stock of existing and prospective Fund credit (Baseline, SDR million): 354.5 (2026) declining to 0.0 (2045); composition includes EFF and RSF. - Baseline obligations (SDR million): principal and charges schedules provided with obligations and repayment profiles through 2045. - Shock scenario (Table 10b) shows alternative disbursement and outstanding profiles if SBA disbursements occur, with stock of Fund credit rising to 496.3 (2026) and obligations higher in early years. - Fund credit outstanding in percent of quota (Baseline): 375.2 (2026) falling over time; under Shock peaks higher (e.g., 525.2 in 2026). ### Key projections and memorandum items (Table 6 and Tables 4/5) - Oil Price (WTI, US$ per barrel): 80.6 (2023), 79.2 (2024), 66.9 (2025), projections include 67.7, 87.8, 77.1, 73.0, 71.1, 69.5, 68.0. - Nominal GDP, CY (BDS$ millions): 15,195 (2025), 15,112 (2026 revised), projections e.g., 16,646 (2030). - GIR (US$ millions): 1,593 (2024), 1,615 (2025), 1,523 (2026), projected 1,333 (2028) and 1,502 (2031). - Current account (percent of GDP): -3.7 (2024), -6.4 (2026), projected improving gradually toward -4.9 by 2031. *Source: IMF staff report and accompanying tables and figures contained in the provided content.* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Global Risks - Geopolitical Tensions and Intensification of Conflicts - Likelihood: High - Impact: High - Policy Response: - Continue the transition to a renewable economy, reducing reliance on fuel imports. - Increase domestic food production, while diversifying import sources. - Sustain efforts to strengthen the fiscal position, backed by structural reforms to maintain fiscal sustainability. - Implement structural measures to improve competitiveness of the tourism sector, while, over time, diversifying the economy to reduce dependence on tourism. - Continue improving the business environment to increase investor confidence. - Any cost-of-living support measures introduced in response to global price pressures should be targeted and temporary. - Commodity Price Volatility - Likelihood: High - Impact: High - Policy Response: - Maintain efforts to raise the share of renewables in energy supply and reduce exposure to volatile fossil fuel prices. - Raise domestic food production, while diversifying import sources. - Maintain fiscal and external sustainability, reprioritizing government spending to target support on the most vulnerable. - Any cost-of-living support measures introduced in response to global price pressures should be targeted and temporary. - Trade-related Risks - Downside: Protectionism and Trade Disruptions. Upside: New Trade Agreements. - Likelihood (Downside): High - Likelihood (Upside): Low - Impact (Downside): High - Impact (Upside): Medium - Policy Response (Downside): - Maintain strong fiscal position, reprioritizing government spending to target support on the most vulnerable, while continuing to implement structural reforms to support fiscal sustainability. - Utilize ample FX reserves and tap emergency IFI financing, as necessary, to meet additional financing needs. - Implement structural measures to improve tourism competitiveness and diversify source markets, while over time reducing dependence on tourism. - Increase domestic food production, while diversifying import sources. - Continue improving the business environment to increase investor confidence. - Policy Response (Upside): - Capitalize on stronger global conditions by maintaining prudent fiscal policy and continuing to implement structural reforms to support fiscal sustainability and raise potential growth. - Fiscal Vulnerabilities and Higher Interest Rates - Likelihood: High - Impact: Medium - Policy Response: - Utilize ample fiscal cash buffers and increase domestic financing to meet additional financing needs from higher debt service on variable rate debt. At the same time, the recent return to international capital markets mitigates near-term refinancing risks. - Maintain strong fiscal balances, supported by structural reforms to maintain fiscal sustainability and improve the business environment, thereby increasing investor confidence. - Utilize ample FX reserves and tap emergency IFI financing, as necessary, to meet additional financing needs. - Disorderly AI Correction - Likelihood: High - Impact: Medium - Policy Response: - Maintain strong fiscal position, reprioritizing government spending to target support on the most vulnerable, while continuing to implement structural reforms to support fiscal sustainability. - Utilize ample FX reserves and tap emergency IFI financing, as necessary, to meet additional financing needs. - Implement structural measures to improve tourism competitiveness and diversify source markets, while over time reducing dependence on tourism. - Continue improving the business environment to increase investor confidence. ### Country-specific Risks - Deceleration of reform momentum - Likelihood: Medium - Impact: High - Policy Response: - Adhere to medium-term fiscal framework, consistent with the proposed Fund program, to sustain high primary surpluses and remain on track to reduce public debt to 60 percent of GDP by FY2035/36. - 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 - Policy Response: - Tackle potential infrastructure bottlenecks by fully executing key ongoing / planned investment projects, including upgrading capacity at the airport and maritime port. - Implement structural measures to increase competitiveness and boost investment in the tourism sector. - Over time, diversify the economy to reduce dependence on tourism. - Climate Change - Likelihood: Medium - Impact: High - Policy Response: - Accelerate investment in resilient infrastructure to mitigate disaster risk. - Investigate avenues to increase private insurance penetration. - Utilize the existing multi-layered disaster financing framework (e.g., hurricane clauses in government debt and insurance, such as CCRIF; World Bank CAT DDO). - Cyberthreats - Likelihood: Medium - Impact: High - Policy Response: - Monitor and evaluate the scope of cyber security vulnerabilities, guided by the enhanced cyber risk supervisory frameworks and leveraging the new Cyber Security Operations Center. --- ### Annex II. Debt Sustainability Analysis ### Overall Assessment - Public debt is assessed to be sustainable; 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. - Gross Financing Needs (GFN) financeability tool indicates moderate risk due to relatively low financing needs projected to remain stable. ### Recent Outcomes and Key Figures - Public debt declined to 96.0 percent of GDP at end-March 2026 from 98.9 percent of GDP at end-FY2024/25. - Primary fiscal balance: 4.2 percent of GDP during FY2025/26. - Authorities issued a US$500 million Eurobond on June 26, 2025 (coupon rate of around 8 percent, maturity 10 years, grace period on principal of 5 years). The issuance was oversubscribed with around US$ 2.7 billion of offers. - Uses of Eurobond proceeds: - Repay US$340 million (83.5 percent) of the outstanding 2029 Eurobond. - Prepay US$108 million of IMF obligations falling due until March 2028 (bringing IMF credit outstanding to 274.6 percent of quota). - Shore up fiscal cash and FX reserve buffers with remaining US$50 million. - Official loans acquired: US$150 million from China and US$147 million from the United Arab Emirates for Queen Elizabeth Hospital expansion. Budget support loan of US$50 million from OPEC Fund for International Development expected in FY2026/27. IDB Board approved US$200 million for replacement of water mains (expected to disburse in next two years). - Stock of government deposits: 4.2 percent of GDP at end-March 2026. ### Projections and Assumptions - Public debt projected to decline below 60 percent of GDP by FY2035/36 under baseline. - Baseline macroeconomic assumptions: - Real GDP growth: 2.2 percent in 2026; 2 percent over the medium term. - Average inflation: increase from 0.9 percent in 2025 to 3.1 percent in 2026; remain at around 2½ percent from 2026 onwards. - Fiscal assumptions: - Primary surplus: 4.2 percent of GDP in FY2025/26; SBA target 3.5 percent of GDP for FY2026/27-FY2027/28; rise to steady state of 4.1 percent of GDP thereafter to achieve 60 percent-of-GDP debt target. - Financing and market access: - Over the medium term, GFNs expected to be met with IFI loans, domestic borrowing, and international capital market issuances. - Short-term public debt service poses limited risks due to large primary balance, favorable repayment schedule from 2018-19 debt restructuring, debt-for-climate conversion, long-term IFI borrowing, higher cash buffers, and recent return to international capital markets. - Assumptions: short-term debt held by commercial banks rolled over; residual financing via IFI financing and modest net domestic borrowing. BOSS II plus bonds fully subscribed; BOSS III plus and 20-year debenture of B$250 million fully subscribed in first half of 2025. Baseline assumes residual financing through 5-year BOSS bonds. Further market access from 2028. Sovereign spreads tracked in the 300-400 basis points range. ### Risk Analysis and Stress Tests - Medium-term fanchart index: moderate risk; probability of debt not stabilizing is around 8 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. - GFNs: financeability index indicates moderate risk with declining path and average GFNs in baseline below the median. - Long-term: gradual decline in debt relative to GDP under baseline; GFNs lower in medium term reflecting LMO and IMF prepayment, stabilizing at a higher level from 2030 as LMO matures. - Climate-related expenditure scenario: assuming expenditure 1 percent of GDP higher than baseline to cover preliminary adaptation and mitigation needs would not significantly affect long-run debt sustainability. - Healthcare and pension reforms: current healthcare expenditure policies and pension reforms expected to be financially sustainable; pension reforms make NISSS financially sustainable for 25-30 years. ### Conclusion and Key Policy Implications - On balance, public debt is assessed to be sustainable and on a downward trajectory consistent with reaching 60 percent of GDP by FY2035/36. - Domestic risks related to maintaining high primary balances over a prolonged period remain but have declined given sustained fiscal performance. - External risks include spillovers from trade policy and investment shocks, geoeconomic fragmentation, tightening global financial conditions, systemic instability, and natural disasters. - Mitigating factors: strong policy implementation track record, commitment to fiscal improvement and structural reforms, favorable debt service schedule from 2018-19 restructuring, 2024 debt-for-climate conversion, and renewed access to international markets. *Source: Annex I. Risk Assessment Matrix and Annex II. Debt Sustainability Analysis (excerpt).* ### Annex II. Table 1. Barbados: Risk of Sovereign Stress ### Annex II. Table 1. Barbados: Risk of Sovereign Stress ### Overall assessment - Barbados' overall risk of sovereign stress is assessed as "moderate". - Rationale: moderate levels of vulnerability in the medium- and long-term horizons; mechanical signals confirm the moderate final assessments. ### DSA Summary Assessment and commentary - DSA conclusion: Sustainable. - Key points: - Under the baseline scenario underpinned by strong policy measures and reforms, and the favorable debt service schedule, Barbados' public debt is assessed as sustainable. - Under the current baseline, the 60 percent-of-GDP debt anchor is projected to be reached by FY2035/36 with envisaged primary surpluses backed by continued economic growth and structural reforms. - Non-guaranteed SOE debt declined marginally to 2.6 percent of GDP in FY2025/26 and is not included in the analysis. - Projections do not include recently announced non-guaranteed loans for the expansion of the airport and the Queen Elizabeth Hospital. - Going forward, enhanced governance, monitoring and reporting of SOEs remains critical to minimize fiscal risks. - Note on concepts: - The risk of sovereign stress is broader than debt sustainability; unsustainable debt requires exceptional measures (such as debt restructuring), whereas sovereign stress can be addressed by non-restructuring measures (such as fiscal adjustment and new financing). _Source: Fund staff._ ### Near-, medium-, and long-term risk signals - Near term: - Not applicable in cases where there is a disbursing IMF arrangement (note 1/). - Medium term: - Assessment: Moderate. - Mechanical signals: moderate on Fanchart and GFN predicated on the projected primary balance path. - Commentary: Medium-term risks are assessed as moderate consistent with mechanical moderate signals on the Fanchart and GFN predicated on the projected primary balance path. - Long term: - Assessment: Moderate. - Long-term risks arise from debt refinancing needs and climate change and are judged moderate. - Pension reforms: Implementation of the authorities’ pension reforms is expected to make the National Insurance and Social Security financially sustainable for 25-30 years with no additional financing needs from the budget. ### Medium-term risk analysis (index and probabilities) - Debt fanchart module: - Debt fanchart index (DFI): 2.0 - Debt fanchart width (percent of GDP): 79.4 - Terminal debt-to-GDP x institutions index: 34.3 - Probability of debt non-stabilization (percent): 8.4 - Risk signal: Moderate - Gross Financing Needs (GFN) module: - Average baseline GFN (percent of GDP): 9.6 - Initial Banks' claims on the general government (pct bank assets): 17.6 - Change in banks' claims in stress (pct banks' assets): 3.1 - GFN financeability index (GFI): 10.0 - Risk signal: Moderate - Medium-term index: - Medium-term index value (aggregate): not explicitly numeric beyond components; final assessment: Moderate - Prob. of missed crisis, 2026-2031, if stress not predicted: 18.2 pct. - Prob. of false alarms, 2026-2031, if stress predicted: 25.0 pct. - Commentary: 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. Triggered stress test suggests even with a natural disaster shock the medium-term index would remain within the moderate risk threshold. _Source: IMF staff estimates and projections._ ### Debt coverage and disclosure (coverage decisions and inclusions) - Coverage used in SRDSA: central government (Barbados has no state or local governments). - Inclusions in central government analysis: - State-Owned Enterprise debt amounting to 2.5 percent of GDP guaranteed by the central government is added to the central government's debt. - Central Bank of Barbados' debt to the Fund is added. - 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. - Basis of recording / valuation notes: - Not consolidated; on-lent funds included in CG. - Not consolidated; CB's debt (BoP support) to IMF is added. - CG-guaranteed SoE debt included. - Non-consolidated; guaranteed debt included. ### Decomposition of public debt and debt service (selected stock and creditor shares, FY2025/26–FY2028/29) - Total debt (FY2025/26, In US$ million): 7,713.6 - Total debt (percent total debt): 100.0 - Total debt (percent of GDP): 96.0 - External debt (In US$ million): 3,083.4 - External (Percent total debt): 40.0 - External (Percent of GDP): 40.0 - Multilateral creditors (In US$ million): 2,207.7 (28.6 percent total debt; 28.6 percent of GDP) - IMF: 544.1 (7.1 percent total debt) - World Bank: 231.7 (3.0 percent total debt) - IADB: 977.3 (12.7 percent total debt) - Other Multilaterals: 454.6 (5.9 percent total debt) - o/w: CDB: 235.0 (3.0 percent total debt) - Bilateral creditors (In US$ million): 186.9 (2.4 percent total debt) - Paris Club: 10.6 (0.1 percent total debt) - Non-Paris Club: 176.3 (2.3 percent total debt) - Bonds (In US$ million): 569.5 (7.4 percent total debt) - Commercial creditors (In US$ million): 119.3 (1.5 percent total debt) - Domestic debt (In US$ million): 4,630.2 (60.0 percent total debt; 60.1 percent of GDP) - Short-term debt (incl. T-Bills) (In US$ million): 578.8 (7.5 percent total debt) - Held by: central bank: 212.9 - local banks: 350.6 - local non-banks: 15.3 - Long-term debt (incl. Bonds) (In US$ million): 4,051.4 (52.5 percent total debt) - Held by: central bank: 252.7 - local banks: 1,344.5 - local non-banks: 2,454.2 - Contingent liabilities (In US$ million): 147.2 (1.9 percent of GDP) - o/w: Public guarantees: 147.2 (1.9 percent of GDP) - Memo: Nominal GDP (In US$ million): 8,038.9 (FY2025/26); 8,429.6 (FY2026/27); 8,865.0 (FY2027/28); 9,282.3 (FY2028/29) - Notes: - Debt coverage is the same as the DSA. Future debt services are associated with existing debt stock as of end of FY2024/25. The amount of nonresidents' holdings of domestic debt is negligible. - Collateralized debt: 0.0 (no collateralized debt reported). _Source: Ministry of Finance._ ### Baseline scenario — public debt path and key fiscal/ macro projections (percent of GDP unless indicated) - Public debt (actual and projections): - Actual FY2025: 96.0 - 2026: 91.8 - 2027: 87.5 - 2028: 83.3 - 2029: 79.3 - 2030: 75.5 - 2031: 71.7 - 2032: 68.0 - 2033: 64.9 - 2034: 61.7 - 2035: 58.5 - 2036: 56.0 - 2037: 53.6 - 2038: 51.1 - Change in public debt (percent of GDP): - 2025: -2.9 - 2026: -4.2 - 2027: -4.3 - 2028: -4.2 - 2029: -4.0 - 2030: -3.8 - 2031: -3.8 - 2032: -3.8 - 2033: -3.1 - 2034: -3.1 - 2035: -3.2 - 2036: -2.4 - 2037: -2.5 - 2038: -2.5 - Contribution of identified flows (percent of GDP): - 2025: -4.1 - 2026: -3.9 - 2027: -4.0 - 2028: -4.1 - 2029: -3.8 - 2030: -3.7 - 2031: -3.6 - 2032: -3.6 - 2033: -2.9 - 2034: -3.0 - 2035: -3.1 - 2036: -2.3 - 2037: -2.3 - 2038: -2.4 - Primary deficit (percent of GDP): - 2025: -4.2 - 2026: -3.5 - 2027: -3.5 - 2028: -4.1 - 2029: -4.1 - 2030: -4.1 - 2031: -4.1 - 2032: -4.1 - 2033: -3.7 - 2034: -3.7 - 2035: -3.7 - 2036: -2.9 - 2037: -2.9 - 2038: -2.9 - Noninterest revenues (percent of GDP): 26.8 (2025), 28.5 (2026), 26.6 (2027), 26.5 (2028), 26.4 (2029), 26.3 (2030–2038 constant at 26.2–26.3 as shown) - Noninterest expenditures (percent of GDP): 22.6 (2025), 25.0 (2026), 23.1 (2027), 22.4 (2028), 22.3 (2029), 22.2 (2030), 22.1 (2031), 22.1 (2032), 22.5 (2033), 22.5 (2034), 22.5 (2035), 23.3 (2036), 23.3 (2037), 23.3 (2038) - Automatic debt dynamics (percent of GDP): 0.3 (2025), -0.1 (2026), -0.1 (2027), 0.3 (2028), 0.5 (2029), 0.5 (2030), 0.6 (2031), 0.6 (2032), 0.8 (2033), 0.7 (2034), 0.6 (2035), 0.6 (2036), 0.6 (2037), 0.6 (2038) - Real interest rate and relative inflation: - Combined: 2.5 (2025), 2.0 (2026), 1.9 (2027), 2.1 (2028), 2.2 (2029), 2.1 (2030), 2.0 (2031), 2.0 (2032), 2.1 (2033), 2.0 (2034), 1.8 (2035), 1.8 (2036), 1.7 (2037), 1.6 (2038) - Real interest rate: 2.8 (2025), 1.8 (2026), 1.6 (2027), 2.0 (2028), 1.9 (2029), 1.9 (2030), 1.8 (2031), 1.8 (2032), 2.0 (2033), 1.9 (2034), 1.7 (2035), 1.6 (2036), 1.6 (2037), 1.5 (2038) - Relative inflation: -0.3 (2025), 0.1 (2026), 0.3 (2027), 0.2 (2028), 0.2 (2029), 0.2 (2030), 0.2 (2031), 0.2 (2032), 0.2 (2033), 0.1 (2034), 0.2 (2035), 0.1 (2036), 0.2 (2037), 0.1 (2038) - Real growth rate (percent): -2.5 (2025), -2.1 (2026), -2.0 (2027), -1.8 (2028), -1.6 (2029), -1.6 (2030), -1.5 (2031), -1.4 (2032), -1.3 (2033), -1.3 (2034), -1.2 (2035), -1.1 (2036), -1.1 (2037), -1.1 (2038) - Other identified flows: -0.2 (2025), -0.3 (2026), -0.4 (2027), -0.3 (2028), -0.2 (2029), -0.1 (2030), 0.0 thereafter - Contingent liabilities contribution: -0.8 (2025), -0.4 (2026), -0.4 (2027), -0.4 (2028), -0.3 (2029), -0.1 (2030), 0.0 thereafter - Contribution of residual: 1.2 (2025), -0.2 (2026), -0.3 (2027), -0.1 (2028), -0.2 (2029), -0.1 (2030), -0.2 (2031), -0.2 (2032), -0.2 (2033), -0.1 (2034), -0.2 (2035), -0.1 (2036), -0.1 (2037), -0.1 (2038) - Gross financing needs (GFN) (percent of GDP): - 2025: 11.6 - 2026: 11.8 - 2027: 8.7 - 2028: 9.2 - 2029: 7.0 - 2030: 8.8 - 2031: 11.7 - 2032: 10.0 - 2033: 9.3 - 2034: 6.8 - 2035: 7.7 - 2036: 10.6 - 2037: 9.1 - 2038: 8.7 - of which: debt service (percent of GDP): 16.6 (2025), 15.8 (2026), 12.7 (2027), 13.8 (2028), 11.4 (2029), 13.0 (2030), 15.9 (2031), 14.2 (2032), 13.0 (2033), 10.5 (2034), 11.4 (2035), 13.5 (2036), 12.0 (2037), 11.7 (2038) - Debt currency composition of GFNs (percent of GDP, local vs foreign): - Local currency: 12.7 (2025), 12.2 (2026), 9.2 (2027), 10.0 (2028), 7.8 (2029), 9.2 (2030), 12.1 (2031), 10.8 (2032), 9.7 (2033), 7.1 (2034), 8.4 (2035), 10.8 (2036), 9.3 (2037), 9.0 (2038) - Foreign currency: 3.8 (2025), 3.5 (2026), 3.4 (2027), 3.7 (2028), 3.7 (2029), 3.9 (2030), 3.8 (2031), 3.4 (2032), 3.3 (2033), 3.4 (2034), 3.0 (2035), 2.7 (2036), 2.7 (2037), 2.7 (2038) - Memo items (macroeconomic projections): - Real GDP growth (percent): 2.6 (2025), 2.2 (2026), 2.3 (2027), 2.1 (2028), 2.0 (2029), 2.0 (2030–2038 at 2.0) - Inflation (GDP deflator; percent): 1.7 (2025), 2.6 (2026), 2.8 (2027), 2.6 (2028), 2.6 (2029), 2.6 (2030–2032), 2.6 (2033), 2.5 (2034), 2.4 (2035), 2.5 (2036–2038 at 2.5) - Nominal GDP growth (percent): 4.3 (2025), 4.9 (2026), 5.2 (2027), 4.7 (2028), 4.6 (2029), 4.7 (2030), 4.6 (2031), 4.6 (2032), 4.5 (2033), 4.5 (2034), 4.6 (2035–2038 at 4.6) - Effective interest rate (percent): 4.7 (2025), 4.6 (2026), 4.6 (2027), 4.9 (2028), 5.0 (2029), 5.1 (2030), 5.1 (2031), 5.2 (2032), 5.5 (2033), 5.4 (2034), 5.4 (2035), 5.4 (2036), 5.4 (2037), 5.4 (2038) - Commentary on baseline trajectory: - Public debt continues on a downward trajectory and is projected to decline to meet the long-term target of 60 percent of GDP by FY2035/36, driven by prudent fiscal policies and steady economic growth. - Gross financing needs in 2025 increased due to prepayment of the 2029 bond and early repurchase of IMF debt; expected to remain steady in 2026 due to higher share of short-term domestic debt, but projected to be about 1 percent of GDP lower than estimated at the fifth review of the EFF and RSF programs over the medium term, reducing refinancing risks. - The increase in GFNs in 2030 is due to the onset of Liability Management Operation amortization. - The contribution to debt reduction from contingent liabilities reflects SOEs' principal payment of guaranteed debt while residual contribution in the medium to long term reflects the real effective exchange rate. ### Realism of baseline assumptions and stress-testing commentary - Realism tools indicate: - Stronger primary surpluses compared to the past are expected to continue driving debt down in the next five years, but decline will be mitigated by rising interest rates on external debt coupled with slowing growth as it returns to long-run steady state. - Realism tools suggest projected medium-term debt reduction is optimistic, but staff view it as feasible given authorities’ commitment to fiscal discipline and structural reforms. - With moderate fiscal adjustment expected in FY2025/26 followed by a steady primary surplus, the baseline looks optimistic compared to Barbados' recent episode of fiscal adjustment. - Decline in bond issuance in 2029 is due to lower amortization of long-term domestic debt. ### Public debt structure indicators (qualitative commentary) - Re-entry into international capital markets has increased the share of marketable debt for the projection horizon. - Maturing short-term and long-term debt are assumed to be replaced by medium-term debt, increasing the share of medium-term debt in total debt. - Residual maturity: 6. years (as reported in figure labeling). _Source: The Barbadian authorities; IMF staff._ ### Annex II. Figure 6. Barbados: Long-Term Risk Analysis ### Annex II. Figure 6. Barbados: Long-Term Risk Analysis ### Long-Term Risk Assessment: Large Amortization - Projection scenarios presented: Baseline; Baseline with t+5; Baseline with t+5 and DSPB; Historical 10-year average; Medium-term extrapolation with debt stabilizing primary balance. - Findings: - Analysis shows gradual declines in GFN and debt relative to GDP both under the baseline and custom scenarios. - Increase in GFNs after 2030 under the baseline reflects the maturity of the 2035 Eurobonds but stabilizes thereafter. - GFNs under the baseline with t+5 and DSPB would rise to 20 percent of GDP, highlighting the importance of sustaining the consolidation and reform momentum. - Visual indicators (time series coverage): 2018, 2021, 2024, 2027, 2030, 2033, 2036, 2039, 2042, 2045, 2048, 2051 (and long-run projection). - Risk indication labels shown: GFN-to-GDP ratio (Medium-term extrapolation), Amortization-to-GDP ratio, Amortization; Historical average assumptions also reported for GFN and amortization. - Overall risk indication reported for: GFN-to-GDP Ratio; Total Public Debt-to-GDP Ratio. *Commentary excerpt: The increase in GFNs after 2030 under the baseline reflects the maturity of the 2035 Eurobonds but stabilizes thereafter. GFNs under the baseline with t+5 and DSPB would rise to 20 percent of GDP highlighting the importance of sustaining the consolidation and reform momentum.* --- ### Demographics: Pensions - Time horizons modeled: 30 years; 50 years; Until 2100. - Metrics and findings: - Pension financing needs (pp of GDP per year) charted at: 0.0%, 0.1%, 0.2%, 0.3%, 0.4%, 0.5% across 2026–2056 horizon. - Total benefits paid (per cent of GDP) projected through 2026–2056, with peaks shown by mid-2050s. - GFN-to-GDP Ratio and Total Public Debt-to-GDP Ratio shown to track baseline projections over the projection horizon. - Long run projection and projection series include: Baseline: 10-year historical average; With pension cost increase. - Findings: - Parametric changes between 2022 and 2023 boosted contributions while slowing the growth of pension benefits, and are expected to make the National Insurance Scheme financially sustainable for 25-30 years. - Increase in pension benefits is mainly driven by the rising old-age dependency ratio and is expected to peak by the mid-2050s. - Thus, GFNs-to-GDP and total public debt-to GDP ratios are expected to track the baseline projections over the projection horizon. - Permanent adjustment needed in the pension system to keep pension assets positive reported for specified horizons (30 years, 50 years, until 2100) — charted but specific numeric adjustment values not separately listed in text beyond the sustainability horizon of "25-30 years." --- ### Demographics: Health - Findings: - 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. - Projection series: - Baseline: 10-year historical average; Health (Demographics); Health (Demographics + ECG). - Charts reported for: GFN-to-GDP Ratio and Total Public Debt-to-GDP Ratio over 2018–2051. --- ### Climate Change: Adaptation - Findings: - 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. - Projection series: - Baseline: 10-year historical average; With climate adaptation (standardized scenario); With climate adaptation (customized scenario). - Charts reported for: GFN-to-GDP Ratio and Total Public Debt-to-GDP Ratio over 2018–2051 (and timepoints 2018, 2021, 2024, 2027, 2030, 2033, 2036, 2039, 2042, 2045, 2048, 2051). --- ### Annex III — External Sector Assessment: Overall Assessment and Policy Responses - Overall assessment (2025): - External position in 2025 was broadly in line with the level implied by fundamentals and desirable policies. - Current account deficit widened to 5.7 percent of GDP from 3.7 percent in 2024. - Reserve coverage remains ample, supporting the exchange rate peg. - Current account expected to strengthen over the medium term as import growth moderates and commodity prices decline, while tourism-related exports remain robust. - External sector statistics present shortcomings, including data limitations on the international investment position. - Potential policy responses: - (i) Maintain strong fiscal balances to safeguard public debt sustainability, while preserving adequate social and capital spending. - (ii) Sustain investments to strengthen resilience against natural disasters and commodity price volatility. - (iii) Implement reforms to facilitate private investment, boost competitiveness, and unlock potential growth. --- ### Annex III — Foreign Assets and Liabilities; Debt and Financing - Background and data points: - Total public and publicly guaranteed external debt stood at about 40 percent of GDP as of end-2025, accounting for 40 percent of total public debt. - Outstanding debt to all multilateral creditors stood at about 28.6 percent of GDP, or 71.5 percent of the total external debt stock. - June 2025: Barbados regained access to international capital markets; proceeds of the US$500 million bond issuance largely used to repay existing debt. - Assessment: - External borrowing expected to continue in FY2026/27 and to gradually decrease over the medium term supported by high primary surpluses. - Successful return to international capital markets smoothed external amortization and reduced medium-term financing pressures. - Over the medium term, gross financing needs expected to be covered through a mix of IFI loans, domestic borrowing, and moderate market issuances. --- ### Annex III — Current Account Developments - Background and recent trajectory: - CA deficit averaged around 3.2 percent of GDP during 2015–19. - Widened to around 7.7 percent of GDP in 2021-23 due to the pandemic impact on tourism and higher commodity and freight costs. - CA deficit narrowed to 3.7 percent in 2024 supported by tourism receipts, declining import prices, and one-off current transfers related to corporate tax. - CA deficit widened to 5.7 percent in 2025 due to increasing investment-related imports from strong construction activity, declining re-exports (intermediate goods component), and lower CIT receipts. - Revisions: - Recent revisions to national accounts and BoP statistics concentrated in wholesale and retail trade (merchanting) and selected services sectors; revisions improve measurement but do not materially change CA drivers or assessment. --- ### Annex III — EBA-lite Model Results, 2025 (selected figures) - Cyclically adjusted CA balance (Adjusted CA): –5.1 percent of GDP. - Multilaterally consistent estimated cyclically adjusted CA norm (Adjusted CA Norm): –5.1 percent of GDP. - CA Gap: 0.0 percent of GDP. - Policy gap: +0.9 percent of GDP (driven primarily by continued fiscal effort and public health spending). - Elasticity used: –0.3. - REER Gap (in percent) reported as: - CA model implied REER Gap: 0.0 (staff assesses REER gap around 0 percent, in line with CA model results). - EBA-Lite REER model points to an overvaluation of about 3.8 percent. - Tourist arrivals: Monthly series displayed (Jan-17 through Oct-25) from Barbados Statistical Service. - Adjusted CA components noted: - CA-Actual: –5.7 - Cyclical contributions (from model): (–) -0.3 - Natural disasters and conflicts: (–) -0.3 - Adjustments to the norm: (+) 0.0 --- ### Annex III — Capital and Financial Accounts; FX Intervention and Reserves - Financing patterns and flows: - FDI averaged 5.6 percent of GDP between 2020 and 2023. - FDI strengthened in 2025 to about 5.7 percent of GDP, largely driven by tourism-related investment projects, financing the bulk of the CA deficit. - Assessment: Ongoing efforts to enhance business environment, attract private investment, and mobilize financing for resilience should increase private sector share of external financing. - Policy consideration: Authorities should consider eventual removal of the 2 percent foreign exchange fee (introduced in 2017), implementing offsetting revenue-raising measures as necessary. - Reserves: - International reserves ended 2025 at about US$1.5 billion, equivalent to around 6 months of imports of goods and services and 194 percent of the Fund’s reserve adequacy metric. - Slight decline in reserves in 2025 reflected wider CA deficit and early repurchases to the Fund of around US$100 million. - Projection: Reserves are projected to remain adequate during the projection period, at around 4.7 months of imports and close to a level of 150 of the Fund’s reserve adequacy metric. - Footnote detail: - The ARA metric for 2025 excludes debt that was repaid early as part of the 2025 liability management operation. External long-term debt amortization reflects projected debt maturing over the next 12 months net of the early repurchase of the 2029 Eurobond (about B$449 million). --- ### Annex IV — Inflation Vulnerability in Barbados: Key Findings - Vulnerability to global shocks: - SIDS are approximately twice as vulnerable to international food inflation shocks as non-SIDS (source cited: Alleyne and Blagrave (2025)). - Vulnerability is asymmetric: positive food-price shocks have a larger and more persistent impact than similarly sized negative shocks. - Drivers: - Market structures in SIDS (small order sizes, higher shipping and spoilage risks, fewer local substitutes) can enable greater markups and pricing power, amplifying pass-through of global price shocks. - Recent domestic developments: - Since 2020, cost of food and non-alcoholic beverages rose by approximately 21 percent, double the 10 percent rise in prices for all core goods in the Retail Price Index. - Cost of transportation-related goods rose by 12 percent since 2020. - Consumption basket composition (July 2018 =100): Food & Non-Alcoholic Beverages 22%; Housing Water Electricity Gas and Other Fuels 15%; Transport 14%; Goods, Services & Household items 13%; Education 10%; Restaurants and Hotels 9%; Miscellaneous Other 9%; Communication, Recreation & Culture 8%. - Policy options recommended: - Multi-pronged approach including collaborative efforts to enhance connectivity and accessibility. - Redouble focus on food security: improve efficiency and orientation of domestic production to support diversification and self-sufficiency. - Regional and international collaboration to address food security and explore alternate suppliers within the region. - Pooling orders at regional level (e.g., regional food hub) to exercise greater purchasing power. - Addressing food dependency can deliver broader economic benefits by reducing structural vulnerability. --- ### Annex V — Public Sector Employment and Compensation - Recent trends and historical context: - Government wage bill declined from 8 percent of GDP in 2010 to 6 percent of GDP in 2024. - Public sector employment in 2024 represented around 6 percent of Barbados’ working-age population vs. 9 percent in other small emerging economies. - Public sector real compensation index (2010=100) series shown for Barbados and regional peers through 2024. - Program projections and commitments: - Authorities committed to maintaining sustainability of the public wage bill. - Program envisages wage bill broadly stable at around 5.5 percent of GDP over the medium term (2.3 percent real growth). - Challenges: - Central government vacancy rates historically high (averaging around 30 percent) across most ministries, departments, and agencies. - Recruitment and skills gaps driven by structural issues: aging and declining population; ratio of population aged 65+ rose from 12 to 16 percent from 2010 to 2023; emigration (estimated at 35 percent with about half tertiary educated, per cited sources). - Current framework for appointing public servants limits Ministries’ autonomy to appoint, retain and promote staff for technical, departmental positions, exacerbating recruitment and skills gap challenges. *Italic source attribution: Content compiled from "1brbea2026001 - Annex II. Figure 6. Barbados: Long-Term Risk Analysis" (PDF chapter/section).* ### 4. To address structural demographic challenges, the government is implementing ### 4. To address structural demographic challenges, the government is implementing population and talent-attraction policies. ### Population and talent-attraction policies - Government measures: - 2024 Population Policy; 2025 Immigration Bill; Barbados Citizenship Bill aim to: - promote active ageing, labor force participation, and skill attraction and retention. - strengthen links to diaspora and expand pathways to permanent residency and citizenship for eligible CARICOM nationals and non-national descendants of Barbadians. - Expected complementarities: - Encourage skills transfer and circular migration (Bassarsky, Gu, & Spoorenberg, 2024). ### Education reform and training initiatives - Strategic priorities: - Continue to accord priority to human resource development and training in specific fields to improve administrative capacity (Chittoo, 2011), despite high per unit costs for SIDS. - BERT 2026 focus on training schemes: National Transformation Initiative, Youth Advance Corps, Apprenticeships Scheme, and First Jobs. - Leverage IDB Skills Gap study results to pursue IT modernization and development of AI skills for process automation and data analytics to address capacity constraints. ### Regional cooperation and labor mobility - Regional measures: - Strengthen regional co-operation through pooling of resources and expertise to alleviate national skill shortages (Chittoo, 2011). - Utilize implementation of full labor movement between Barbados, Belize, Dominica, and St. Vincent and the Grenadines effective October 1, 2025, while broader CARICOM full labor movement discussions continue. ### Recruitment to strengthen policy institutions and service delivery - Priorities given fiscal constraints and skill gaps: - Prioritize recruitment for positions that strengthen policy institutions and support critical service delivery (example: Ministry of Finance roles for budget and fiscal policy formulation, and debt management operations). - Consider targeted re-grading of critical institutional positions to open recruitment to a wider pool of talent, including private sector and overseas candidates. *Source: IMF staff analysis in the provided content.* --- ### Annex VI. Revenue Mobilization: Recent Successes and Future Challenges ### Context and recent fiscal performance - Fiscal outcomes FY2021/22 to FY2025/26: - Primary fiscal balance increased by around 5 percentage points of GDP (from -0.7 to 4.2 percent of GDP). - Total revenues increased from 23.2 percent of GDP to 26.8 percent of GDP. - 2024 revenue comparison: - Total revenues reached around 27 percent of GDP (in line with regional average). - Tax revenues: 26 percent of GDP (95 percent of total revenues) versus regional peers at 19 percent of GDP (70 percent of total revenues). ### Revenue structure and recent policy reforms - Tax system built around VAT, CIT, and PIT with recent BERT reforms: - VAT: - Standard VAT rate: 17.5 percent. - Reduced rate: 7.5 percent (with recent policy changes noted). - Historical adjustments: - 2019: 17.5 percent rate expanded to foreign digital services by non-resident companies. - 2020: reduced rate increased to 10 percent for accommodation supplied by guest houses, hotels, and inns. - 2020: 22 percent VAT applied to telecommunications services. - 2022: VAT on first 250 kWh of household electricity reduced from 17.5 percent to 7.5 percent (measure remains in place). - Some goods/services reclassified from zero-rated to exempt to reduce business claims of VAT on inputs. - CIT: - Flat 9 percent CIT rate introduced for most companies (policy reforms in 2024 to comply with Pillar Two). - Small businesses with annual earnings below B$2 million: preferential 5.5 percent rate. - From 2024 onwards, in-scope MNE groups with consolidated annual revenue of at least EUR 750 million subject to 15 percent Qualified Domestic Minimum Top-Up Tax. - Monthly CIT prepayments introduced. - Historical note: 2019 reform replaced old 1-5.5 percent sliding scale and harmonized domestic and international corporate tax regimes; earlier international companies paid very low rates (0.25–2.5 percent) under the prior structure. - PIT: - 2018: progressive rates introduced—16 percent for income up to B$50,000; 33.5 percent for income above B$50,000. - Subsequent rate reductions in 2019, 2020, and 2026: - 2026: top rate lowered to 27.5 percent and lower rate to 11.5 percent. - Personal allowance: - B$25,000 introduced for working-age individuals in 2020; increased in 2025 to B$40,000 (B$50,000 for pensioners). - Targeted reliefs (2023–2025): incentives for homeowners and first-time buyers; expanded education expense deductions; income tax exemptions for remote workers under the Welcome Stamp program; tax-free meal allowances for hotel workers; increased deductions for union members’ dues. - Other taxes/levies: - Land (property) taxes: 1.5 percent of GDP. - 2 percent foreign exchange fee: 0.6 percent of GDP. - Foreign exchange fee of 2 percent charged on sales of all foreign currencies, capped at B$100,000 per transaction. - In place since September 2017. - Tourism Tax Levy (2018): per-night charge to visitors. - 10 percent Shared Economy Levy (2018) for unregistered short-term rentals. - June 1, 2025: new 20 percent excise tax on salty snack foods. ### Tax expenditures and reforms - Magnitude: - Reported indirect tax expenditures exceed 6 percent of GDP (mostly VAT import exemptions for industry and hotels). - Fund TA indicates overall annual tax expenditures (direct and indirect) could exceed 10 percent of GDP (global average about 4 percent of GDP). - Reform efforts: - Replace old discretionary incentives with a formal rules-based framework, standardized reliefs for qualified investors, provided through centralized approvals. - Time-bound transition requiring pre-existing tax and customs waivers to requalify; recertification process expected to be completed in early 2027. - Plan to develop a comprehensive inventory of tax expenditures and methodology to improve costing accuracy, supported by Fund TA. - Emphasize ongoing monitoring and transparent reporting. Size and timing of potential yields from rationalization are difficult to forecast. ### Tax policy reform priorities and contingency planning - Remove the 2 percent foreign exchange fee (assessed to be a CFM measure) to reduce market distortions and support trade and investment, recognizing: - The fee yields 0.6 percent of GDP; alternative revenue sources should be identified to offset revenue losses. - Context: improvements in macroeconomic conditions and protection against capital outflows from longstanding capital controls. - CIT uncertainty and contingency: - Activity in the global business sector strengthened in 2025 (foreign currency permits issuances up 1.3 percent in 2025; permit renewals decline 0.1 percent). - CIT system remains relatively new; corporate location decisions and various relief measures (e.g., incentives for intellectual property holdings) complicate forecasting. - Future revenues from the Qualified Domestic Minimum Top-Up Tax depend on adoption of Pillar Two regulations and related measures domestically and internationally. - Recommendation: maintain conservative CIT projections and identify contingency plans. ### Reform options and estimated potential yields (% of GDP) - VAT reforms to address low C-efficiency (Barbados VAT C-efficiency estimated at 0.59; regional average 0.66; small island average 0.83): - Repeal preferential 7.5 and 10 percent VAT rates for supplies related to tourism, taxing these supplies at 17.5 percent. - Broaden VAT base to tax: (i) first sales of newly constructed residential property; and (ii) all supplies of construction goods and services. Continue housing rebate (section 55A) targeted to low and middle-income households using property for residential purposes. - Land tax reforms to increase progressivity and revenue: - Eliminate the B$100k cap on maximum tax collectible on residential property. - Increase top residential Land Tax rate by 0.25 percentage points. - Subject villas to same valuation methodology and progressive tax rates as residential properties. - Repeal 50 percent hotel rebate and 25 percent villa rebate. - Fuel excise tax reform (medium-term): - Once fuel prices decline from current high levels, increase Excise Tax on diesel to reduce differential with gasoline, better reflect external costs. - Current excise: gasoline 99.39 cents per liter; diesel 44.03 cents per liter. - Estimated yields (Potential Revenue Yields (% of GDP)): - Removing Domestic VAT reduced rate: 0.2 - Removing Domestic VAT exemptions: 0.4 - Removing Import VAT border waivers: 1.9 - Reform of land tax (rebate elimination; cap removal; increase in top rate): 0.2 - Reform of fuel excise tax (level up diesel to gasoline rate): 0.1 - Total: 2.8 *Source: Estimates from IMF Technical Assistance Report "Tax Expenditure Reporting and Governance", March 2025; staff calculations using ASYCUDA World data from BCED and other country benchmarks.* --- ### Annex VII. State-Owned Enterprise Reform Agenda ### Context - SOEs role and fiscal cost: - SOEs provide public goods/services (transport, water and sanitation, housing) and have been used to encourage private development (tourism). - Some SOEs operate commercially; supporting them has required large recurring transfers and accumulation of debt. - By FY2018/19: total number of SOEs had reached 58; government transfers reached 6.7 percent of GDP. ### Reform agenda under BERT plans - Priorities (BERT 2018 and BERT 2022): - Increase operational efficiency and profitability: - Measures under BERT 2018: mergers and closures, headcount reductions, renegotiation of supplier contracts, tariff adjustments (bus fares and water rates), new levies on sanitation, health, and tourism services. - BERT 2022: shift commercial activities to private sector, deliver efficiency gains while preserving service quality, require ministries/departments/agencies to undergo an efficiency and technology audit by end-2023/24. - Improve financial monitoring and assess financial viability: - PFM Act (2019) requires all SOE borrowing be approved by the Minister responsible for Finance. - SOE financial health dashboard under the 2018 EFF provides mechanism to analyze priority SOE performance and supports legislative requirement for government and parliament to receive regular financial reports. ### Restructuring progress and operational changes - Examples of restructuring and transitions: - Steps toward divestment of the Barbados Agriculture Management Company (finalization uncertain). - Restructuring of the Transport Board and the National Housing Corporation underway. - Amalgamation of Rural Development Commission and Urban Development Commission completed; Rural and Urban Development Commission began operations in April 2025. - 2024: Caribbean Broadcasting Corporation restructured and transitioned into a fully digital broadcaster. - April 2, 2025: Barbados National Oil Company Limited and Barbados National Terminal Company Limited transitioned to Barbados National Energy Company Limited. - November 2025: National Petroleum Corporation joined Barbados National Energy Company Limited. - March 2025: Child Care Board, National Assistance Board, Welfare Department, and National Disabilities Unit amalgamated into the Social Empowerment Agency via the Social Empowerment Agency Act. - Social Empowerment Agency became operationally effective in January 2026. *Source: IMF staff analysis in the provided content.* ### 4. SOE reforms have enabled a reorientation ### 4. SOE reforms have enabled a reorientation ### Reorientation of resources and fiscal effects - Current transfers to commercial SOEs (TMU SOEs) declined from 5.2 percent of GDP in FY2020/21 to 2.9 percent of GDP in FY2025/26, in line with program ceilings. - Greater reliance on earmarked revenues supported operations of specific entities: - Airline Travel and Development Fee → Barbados Tourism Marketing Inc. - Garbage and Sewage Contribution Levy → Sanitation and Service Authority - Health Service Contribution → Queen Elizabeth Hospital - Other transfers to SOEs (focused on investment and public service delivery) increased from 1.1 percent of GDP in FY2021/22 to 1.4 percent of GDP in FY2025/26. - Project-related capital transfers averaged 1.4 percent of GDP over the course of the last three years. - Other current transfers to non-TMU SOEs remained broadly stable, with small increases reflecting reclassification of entities (e.g., National Cultural Foundation in 2024) and establishment of new SOEs (e.g., Business Barbados). ### SOE debt guarantees and contingent liabilities - Government guaranteed SOE debt was BDS$69.8 million at end-March 2026 (0.4 percent of GDP). - SOE non-guaranteed debt was BDSS$426 million (2.7 percent of GDP). - Implicit contingent liabilities remain a concern, including unfunded pension liabilities; a weakening of SOE financial performance could raise risks related to honoring non-guaranteed SOE debt. ### Operational efficiency and reporting gaps - Fiscal risk assessments for commercial SOEs (FY2021/22 to FY2023/24) showed a positive trend in aggregate financial indicators (liquidity, solvency and profitability) despite reduced government transfers. - Financial indicators for non-commercial SOEs remained weaker, reflecting their role in public service delivery and reliance on government transfers. - More recent fiscal risk statements have focused on a small number of SOEs, limiting the ability to assess up-to-date operational efficiency and financial impacts of reforms. ### Next steps and policy recommendations - Updated comprehensive assessment: - An updated assessment of the SOE sector is needed to evaluate how operations have been rationalized, estimate efficiencies and fiscal savings, and identify remaining policy challenges and risks. - The exercise will be supported by Fund TA. - Enhanced SOE governance, monitoring, and reporting: - Strengthen reporting mechanisms and risk-management practices under the Fiscal-technical Working Group, the Management Accounting Unit, and the Fiscal Risk Unit. - Continue benchmarking, stress testing, and forecasting exercises by these entities. - Ensure audited financial statements are completed and reviewed by the Auditor General, consistent with PFM disclosure requirements. - Use the Fund’s Quarterly SOE-Health Check Tool to standardize reporting and strengthen monitoring of fiscal risks. ### Selected operational and investment developments (highlights from Annex VII) - Grantley Adams International Airport: pursuing a loan of about US$150 million to expand the passenger terminal building; construction expected to begin in 2026, with completion by end-2027. - Queen Elizabeth Hospital: supported by the Health Service Levy; automation and cost-reducing measures underway; a US$200 million loan is expected to finance construction of two multi-storey buildings with modern laboratory and specialized facilities. - Barbados Transport Board: purchase of an additional 31 electric buses completed the transition of the public service fleet from diesel to electric buses (121 vehicles); expected reduction in fuel and maintenance costs of US$1.5 million per year. - Child Care Board and related entities: merged into the Social Empowerment Agency (SEA) launched in January 2026; wider mandate has resulted in higher transfers. - Energy sector consolidation: Barbados National Oil Company Limited and Barbados National Terminal Company Limited transitioned to Barbados National Energy Company Limited (BNECL) in April, 2025; National Petroleum Corporation merged with BNECL in November, 2025; BNECL undertaking program to reduce gas loss leakages. - Tourism-related construction: notable hotel developments valued in excess of B$1.8 billion (12 percent of GDP) expected to expand room stock by 23 percent (over 1,500 bedrooms) over the next 3 years; tourism sector employment capacity expected to increase by more than 4,500 permanent jobs, a 28 percent gain relative to 2024 employment levels in the accommodation and food-services industry. *Source: IMF staff report.* ### Conclusion ### Conclusion ### Near-term outlook and medium- to long-term headwinds - Supported by strong tourism-related construction activity and sound macroeconomic policies, Barbados is poised to continue to grow solidly in the near term, provided that the island can accommodate an additional inflow of tourists without encountering supply chain bottlenecks. - Heightened construction activity and increasing tourist arrivals are unlikely to continue indefinitely; when the current boom subsides, demographic headwinds (including a domestic population decline) will act as a meaningful brake on economic growth. - With economic activity concentrated in the tourism sector, growth prospects are acutely vulnerable to an economic slowdown in tourism-source countries. ### Structural reform priorities and human capital - Financial, trade, and labor market reforms are likely to be most impactful; sequencing and timing will determine their significance for growth. - Tourism-industry investment can boost off-peak demand in areas such as Meetings, Incentives, Conferences, and Exhibitions (MICE) and cultural tourism, reducing seasonal fluctuations and improving resilience. - Human capital development and productivity are central to sustaining productive capacity in the face of demographic decline. Policy actions referenced in the text: - 2024 Population Policy with recommendations for managed migration and interventions to spur fertility rates. - Immigration Bill, 2025 and Barbados Citizenship Bill, 2025 (tabling noted). - National Training Initiative and the Barbados Job Registry to strengthen labor market alignment between skills and employers’ needs. ### Annex IX — An Illustrative Adverse Scenario: shocks, assumptions, and transmission channels - The adverse scenario incorporates two external shock layers: (i) a large and persistent increase in global oil and food prices, and (ii) a further escalation of trade disruptions, with the U.S. effective tariff rate rising by 10 percent. - Key scenario assumptions and channel impacts: - Tourism: staff assume a growth shock in key source markets (US, UK, and Canada) of around 1.6 percentage points in 2026 and 1.5 percentage points in 2027, which leads to approximately a 20 percent decline in tourist arrivals. This reduces tourism receipts by about US$175 million per year, on average. Tourist receipts are assumed to begin recovering in 2028. - Goods exports: reduction in goods exports receipts averaging US$5 million in 2026 and 2027. - Goods import prices: import prices are assumed to be, on average, 17 percent higher in 2026, gradually falling later but remaining above baseline levels; offset partially by a temporary reduction in tourism-related import volumes. - FDI: under the adverse scenario, FDI inflows decline by almost US$150 million in 2026 and 2027, before beginning to recover in 2028. - External market financing: borrowing costs rise by 100 bps on existing variable interest rate debt (roughly 20 percent of total public debt), increasing debt service costs by around US$15 million in 2026 and 2027. Next international issuance in FY2028/29 is assumed to go ahead. ### Adverse scenario: macro outcomes (key statistics) - Growth: real GDP would fall to –0.9 percent in 2026 (3.1 percentage points lower than the baseline). Growth is expected to rebound in 2029 and return to potential by 2031. Potential growth remains unchanged from the baseline at 2 percent. - Inflation: rises to 4.6 percent in 2026 (1.5 percentage points higher than the baseline) and stays elevated in 2027; inflation close to 2.3 percent by 2030 (0.1 percentage points lower than the baseline). - Current account (CA): CA deficit widens to around 8.8 percent of GDP in 2026 (2.8 percentage points higher than baseline); recovery to baseline CA of 4.9 percent of GDP by 2031. - Fiscal balances: primary balance declines to 2.8 percent of GDP in FY2026 and 2.9 percent of GDP in FY2027 (0.7 and 0.6 percentage points below the baseline, respectively); primary surplus peaks at 4.9 percent of GDP in FY2031/32–FY2032/33 (0.8 percentage point above baseline). - Public debt: elevated at around 93 percent of GDP in FY2027 (5.2 percentage points above the baseline). - Reserve and financing metrics: - GIR would decline significantly to US$0.7 billion by end-2028 (81 percent of the ARA metric). - Anchoring program disbursements to keep GIR not significantly below US$1 billion and above 100 percent of the ARA metric implies an external financing gap of around US$560 million over 2026–28. - Financing package described: IMF access of 200 percent of quota (SDR 189 million or US$259 million) complemented by additional IFI financing of US$300 million, helping maintain reserves at US$963 million (110 percent of the ARA metric). ### Policy response in the adverse scenario - Fiscal policy plays the primary role: revenue shortfalls are partially offset through reprioritization of government spending, including reallocation of non‑essential capital expenditures toward critical social programs and high-priority resilience investments, while preserving the medium-term fiscal anchor. - An assumed 18 percent reduction in total government spending helps contain current account deterioration, contributing an average improvement of about 0.4 percentage points over the medium term. - IFI financing (including an IMF-supported program) is needed to fill the external financing gap and maintain reserve buffers. ### Alternative Natural Disaster Scenario: major hurricane impacts and financing - Capital damages: hurricane damages roughly 6 percent of Barbados’ capital stock (calibrated to a 1‑in‑100‑year hurricane scenario). - Tourism and trade impacts: - Services balance reduced by about US$390 million in 2026 and US$440 million in 2027. - Trade balance worsens by approximately US$420 million in 2026 and US$180 million in 2027, driven by higher imports for reconstruction and reduced domestic production. - Insurance and income effects: - Payouts from CCRIF and private insurers increase secondary income by about US$310 million through 2028. - Activation of natural disaster clauses in long‑term bonds and higher remittances improve the primary income balance by US$70 million. - Uninsured losses to non‑residential capital financed through FDI amount to about US$165 million. - Financing needs and coverage: - Existing ex‑ante disaster risk financing arrangements complemented with additional IFI financing to cover an external financing gap of about US$700 million, maintaining a GIR floor of approximately US$1,035 million. - Roughly 35 percent of the financing gap is filled by SBA disbursements. ### Annex X — BERT 2026: strategic pillars and delivery - Strategic vision: shift from stabilization and recovery to long-term economic transformation toward a high-performing, inclusive, climate-resilient economy built on sustained productivity gains, fiscal discipline, and investment-led growth. - Strategic pillars: - Productivity and Competitiveness: streamline regulations, improve trade logistics (operationalize the electronic single window, expand the Trusted Trader Programme), digitalize public services, and advance Business Barbados. - Debt and Fiscal Sustainability: maintain public debt anchor of 60 percent of GDP by 2035 via sustained large primary surpluses, rationalize tax concessions, improve concession transparency, continue SOE reform, and strengthen Fiscal Council oversight. - Financial Market Deepening: issue Barbados Optional Savings Scheme Plus bonds, pursue credit market reforms, modernize PPP governance, implement a national instant payment system, strengthen SME governance, and encourage use of credit ratings. - Climate Resilience & Green Economy: scale renewable energy and storage, electrify public transport, implement green budgeting, climate-proof real estate and public infrastructure, operationalize the Resilience and Regeneration Fund (RRF), maintain CCRIF coverage, expand regional insurance capacity, and scale climate finance. - Human Capital and Inclusion: education reform, scale training initiatives to tackle youth unemployment, implement the 2024 Population Policy to promote active ageing and labor force participation and skill attraction/retention, and deliver affordable homes. - Governance and implementation: - Strategic direction by the Joint Economic Group (JEG), chaired by the Prime Minister. - Implementation led by the Ministry of Finance in collaboration with the Central Bank of Barbados and other ministries. - Ministries integrate workplans into budgets, with quarterly reporting and monitoring by the BERT Monitoring Committee (including social partners, the Fiscal Council, and the Growth Council). *Source: 1brbea2026001 - Conclusion* ### 3. The BERT 2026 plan recognizes that effective delivery will depend on strengthening ### 3. The BERT 2026 plan recognizes that effective delivery will depend on strengthening institutional capacity and improving information flows. To this end, the government intends to continue investing in training, technology, and cross-agency data platforms to support implementation and reporting. ### Annex XI. BiMPay: Potential Benefits and Costs of Barbados’ New Instant Payment System - Context and timeline - In October 2024, the CBB launched Barbados’ Payment System Modernisation Project, in collaboration with the World Bank. - The project covers five areas: (i) legal and regulatory support; (ii) payments oversight development; (iii) an instant payment system (IPS) and interoperability operationalization; (iv) payments system usage; and (v) digital financial literacy. - The new IPS platform, called BiMPay, is expected to be rolled out by end-June 2026. - Oversight instruments: Central Bank of Barbados Act, the National Payment System Act, and the new Regulatory Framework for Payment Service Providers. - Objectives and expected economic spillovers - Increase the speed and convenience of domestic payments, fostering financial inclusion and supporting business operations (cashflow management, record keeping, payroll management, invoicing). - Encourage financial technology innovations and facilitate government payments to citizens, reducing informal employment. - Strengthen the CBB’s regulatory authority over payment systems, clearing, and settlement services, and boost economic activity. - Note: BiMPay will not cover instant cross-border payments. - Empirical and cross-country evidence - IPSs have been introduced in over 120 countries to date. - Research suggests IPSs can raise household incomes, small business activity, and credit supply. - IPSs generate data enabling access to financial services like credit provision, and as a lower cost payment option can raise savings in financial institutions and foster competition and interoperability. - Brazil example: success factors for Pix included mandatory participation of larger payment providers, active stakeholder engagement, a user-centric approach, low fees, and emphasis on security. - Risks, constraints, and adoption challenges - Risks: supervision of real-time activity; liquidity assurances for participants; consistency of capital regulations; testing of crisis management arrangements; mitigation of AML/CFT risks. - Adoption constraints: (i) uneven mobile and internet penetration; (ii) uncertain public take-up given convenience and anonymity of existing payments; (iii) difficulties reaching individuals without stable employment and access to a bank or credit union account; (iv) low financial and digital literacy, especially for less educated users. - Technical drivers of adoption: temporary offline functionality, strong supervision and monitoring, and simplicity of use. - Policy implication: central bank must clearly establish its regulatory and oversight role on a sound legal basis; carefully designed state intervention can support competition, innovation, coordination, security, and accessibility. ### Annex XII. Insuring Barbados Against Natural Disasters - Exposure and recent events - Barbados is highly exposed to natural disasters; on average Barbados is impacted by a natural disaster every 4 years. - Hurricane Beryl in 2024 caused an estimated B$193 million in losses, primarily to the fisheries and tourism sectors. - World Bank estimates of probable maximum losses from a 1-in-250-year event: about US$2.5 billion (31 percent of GDP) for hurricanes and US$783 million (9.8 percent of GDP) for earthquakes. - Insurance coverage and protection gaps - About 74 percent of total property value in Barbados is insured against natural disasters (FSC, 2024). - Protection gaps exceed 50 percent of total property value in some less populated parishes. - Uninsured losses in the traded sector are typically higher due to asset concentration in coastal zones. - Small-scale lodging and older residential real estate have lower insurance uptake and weaker compliance with building codes. - Market developments and affordability pressures - Since 2019, the share of premiums retained domestically has declined by about 10 percentage points. - Insurance premiums have risen by roughly 49 percent since 2019, intensifying affordability pressures. - Potential fiscal and financial impacts of tail events - At the current level of insurance coverage, the likely uninsured property loss from a 1-in-250-year hurricane could be in the range of US$0.75-1.1 billion. - Such an event could overwhelm household and corporate balance sheets and generate spillovers to the banking system, public finances, and the external position. - Accounting for higher replacement costs, cleanup costs, and income losses could raise overall disaster-related financing needs further. - Disaster Risk Financing (DRF) framework and capacity - The DRF comprises: government liquidity buffers; the domestic RRF; contingent credit lines with the World Bank and IDB; parametric insurance coverage through CCRIF; and natural disaster clauses embedded in most long-term public debt (which could generate up to 4 percent of GDP in temporary fiscal space in the year of a qualifying disaster). - Overall, the DRF could mobilize over US$650 million in rapid contingent financing, but this could still be insufficient for the most extreme or repeated events, factoring in clean-up costs and income losses. - Contingent financing composition (illustrative instrument caps cited): - Resilience and Regeneration Fund (formerly Catastrophe Fund): up to $28mn - Parametric insurance (CCRIF): up to $110mn - Contingent lines of credit (IADB's CCF and WB's Cat-DDO): Unknown to Up to $100mn - Contingent financing total: up to $400mn / up to $100mn* (as shown in the source diagram) - Options to narrow protection gaps and enhance resilience - Explore further “risk transfer” options, including accessing catastrophe bond markets—potentially via coordinated multi-country issuances to minimize costs and overcome technical complexity. - Consider resilience bonds that link insurance premia to risk‑reducing projects with rebates reflecting estimated reductions in expected losses relative to business‑as‑usual. - Government should report on coverage for extreme risks across all public assets, including critical infrastructure, in a transparent and rule-based manner, underpinned by a formal and regularly updated asset inventory. - Policy goals to promote private disaster insurance and lower premiums: - Improve information on the spatial distribution of risk exposure. - Incentivize structural resilience through regulations. - Continue investments in early-warning systems and public preparedness. - Enhance financial literacy and address behavioral biases (including myopia) to increase insurance uptake. - Lower transaction costs, reduce information asymmetries, and strengthen risk pooling to support broader and more affordable insurance coverage. ### Annex XIII. Capacity Development Strategy: Updated Country Strategy Note - Strategic context - The fifth and final reviews under the EFF and RSF arrangements were concluded by the IMF Executive Board in June 2025. - The authorities have requested support under a successor Standby Arrangement (SBA). The new precautionary SBA aims to: consolidate macroeconomic stability, strengthen institutional frameworks, preserve fiscal gains, keep public debt consistent with long‑term targets, advance structural reforms, and enhance resilience. - Capacity development (CD) will remain a critical complement under the proposed SBA. - Recent CD delivery and integration - Barbados has received extensive CD from the Fund with a good implementation record; the government and the CBB provided effective communication supporting public buy‑in to the reform agenda. - During the 2022 EFF and RSF arrangements, CD delivery was fully aligned with authorities’ reform objectives; sequencing of CD across reform streams was critical given implementation capacity constraints. - The Fund engaged closely with multilateral and bilateral donors, including the World Bank (debt management, disaster risk financing, climate change adaptation, business climate) and the IDB (debt swap initiatives, climate adaptation, sustainable procurement, climate budget tagging, PPPs). - CD priority areas over 2024-2025 - Revenue and customs administration, public financial management (PFM), and tax policy (FAD/CARTAC). - TA provided on improving and modernizing the duty and tax exemptions framework, reducing tax arrears, and assessing human resources needs at the BCED. - CD on tax policy advised on rationalizing tax expenditures. - PFM: support on budget preparation, regulatory framework for PPPs, project appraisal guidelines, and fiscal risk analysis and reporting for MoF. - Financial supervision and central bank operations (MCM/CARTAC): - Strengthened supervisory capacity via organizational reforms at the CBB and a review of the FSC. - Enhanced risk‑based supervision (cybersecurity and climate risks). - Supported central bank operations through establishment of Emergency Liquidity Assistance and collateral frameworks. - Macroeconomic statistics (STA/CARTAC): - Update of the Supply and Use Table. - Rebasing GDP statistics (production-based) to 2023. - Strengthening external debt statistics and timeliness of BOP and IIP data. - Forward-looking integration - CD delivery will remain a key pillar supporting reform progress under the proposed SBA, with emphasis on close integration between CD activities and program priorities and coordination with other TA providers. - Appropriate sequencing and coordination across CD providers and the authorities will continue to be critical given the diverse reform agenda and implementation capacity constraints. *Source: IMF staff compilation of the document content.* ### 6. In the near term, Fund CD will continue to support the Barbadian authorities in ### 6. In the near term, Fund CD will continue to support the Barbadian authorities in ### Near‑term capacity development priorities - Tax and customs administration - CD will continue to support tax and customs administration reforms, with assistance to the BRA focused on improving compliance, reducing tax arrears, enhancing data quality, and following up on recommendations from a recent TADAT assessment. - CD will support implementation of the roadmap to address human resource challenges at BCED, operationalization of regulations under the 2022 Customs Act, establishment of a risk‑based framework for managing fuel exemptions, enhancing customs procedures for review and appeals, as well as CD on Suspended Duty Regimes. - Tax policy - Tax policy CD will continue to focus on improving the monitoring and costing of tax expenditures. - Public Financial Management (PFM) - CD will support ongoing PFM reforms, with assistance to the MF focused on developing and implementing the necessary rules to operationalize the 2019 PFM Act; preparing an accounting procedures manual; and strengthening and standardizing the monitoring the fiscal risks of SOEs using the Quarterly SOE Health-Check Tool (SOE-HCT). - Public debt management - Authorities have indicated interest in TA to strengthen debt management and deepen the development of domestic capital markets, consistent with the BERT 2026 objective to mobilize domestic savings to support economic transformation. - Financial supervision and central bank operations - CD will provide follow‑up support to further strengthen risk‑based financial sector supervision and enhance climate stress testing, including extending the analysis to transition risks. - Authorities expressed interest in follow-up TA on monetary policy toolkit. - Macroeconomic statistics - Efforts to improve publicly accessible macroeconomic statistics will continue, with plans to provide TA on rebasing of expenditure‑based GDP to 2023. - Once GDP reporting is sufficiently strengthened, authorities may seek TA on the compilation of Gross National Income. ### IMF Capacity Development missions since 2024 (selected entries; refers to missions planned at the end of FY26) - Customs Administration - Implementing Fiscal Reforms to Ensure Debt Sustainability (no date provided) - Developing SOP for Suspended Duty Regimes — CARTAC Apr-26 - Risk Management on fuel exemptions — CARTAC Mar-26 - Developing customs review and appeal procedures — CARTAC Feb-26 - Establishing a Policy and Planning Unit — CARTAC Jun-25 - Fuel Exemptions Control/Risk Management based — CARTAC Mar and Apr 25 - Workload Assessment, Resource Deployment Review — CARTAC Jun-24 - Developing a Single ‘Omnibus’ Guarantee for Suspended Regime Management — CARTAC Mar-24 - Tax Administration - Medium-term Reform Agenda (Post-TADAT Mission) — FAD Mar-26 - VAT data analysis — CARTAC Jan-26 - Arrears management – Identifying Uncollectable Arrears — CARTAC Mar-26 - Repeat TADAT assessment — FAD Nov-25 - Developing a Compliance Strategy for High-Net-Worth Individuals — CARTAC Oct 25 - Strengthening Arrears Management — CARTAC Aug and Sep 25 - Tax arrears strategy — CARTAC Jan-25 - Tax Policy - Tax expenditure – Methodology and costing — FAD Nov-26 - Tax expenditure rationalization — FAD Dec-24 - Public Financial Management - Budget planning training — CARTAC May-26 - Public financial management rules 2026 — CARTAC Jan-26 - Sensitivity analysis – Fiscal risk unit — CARTAC Jan-26 - Developing a regulatory framework for Public-Private Partnerships — CARTAC Feb-25 - Project appraisal — CARTAC Dec-24 - Central Bank Operations and Financial Sector Supervision - Central bank refinancing instruments and ELA — MCM Jan-24 - Green taxonomies and climate information architecture — MCM Nov-26 - Regional seminar: Incorporating climate related financial risks in risk-based banking supervision — MCM and CARTAC Jun-25 - Reorganization of the supervision department — MCM and CARTAC Oct-24 - Climate risk analysis — MCM Jul-24 - Risk profile assessment and cyber risk — CARTAC Jun-24 - Macroeconomic Statistics - Expenditure-based GDP — CARTAC Apr-26 - GDP rebasing — CARTAC Mar and Apr 25 - GDP revision — STA Jun-24 - External sector statistics — CARTAC Mar-24 - GDP-review of administrative data — STA Feb-24 ### Implementation of the Fund’s past policy advice (Annex XIV) — key outcomes and ongoing actions - Fiscal consolidation - Implemented. The primary surplus rose from 2.2 percent of GDP in FY2022/23 to 4.0 percent of GDP in FY2024/25, with a further increase to 4.2 percent of GDP targeted in FY2025/26. - Public debt has declined to 96 percent of GDP at end-2025 and is on track to meet the 60 percent of GDP target by FY2035/36 under current projections. - SOE reforms - Ongoing. Steps included streamlining transfers to commercial SOEs, attempted divestment of the Barbados Agricultural Management Company, merger of Urban and Rural Development Commissions in April 2025, restructuring of the National Housing Corporation (commenced in 2023), a new phase to restructure the Transport Board in 2025, merger of the National Petroleum Corporation, the Barbados National Oil Company Ltd., and the Barbados National Terminal Company Ltd into the Barbados National Energy Company Ltd, and amalgamation of several social agencies into the Social Empowerment Agency. - Authorities plan a comprehensive stocktake of SOEs in 2027, including an updated financial dashboard. - PFM reforms - Ongoing. Action plan to implement the new PFM Act; rules to facilitate operationalization planned to be tabled in Parliament by end-2026. - Standard contracts implemented for routine procurement. - Fiscal risk register and heatmap produced with Fund TA to inform the annual fiscal risk statement. - Cash Management Unit implemented in 2024; responsibilities include day-to-day management of the Consolidated Account, monthly cash plans, bank reconciliation issues, and monitoring execution of ministries, departments, agencies, and SOEs. - Public investment management strengthened; digital platform to improve monitoring and execution of public sector investment developed. - Numerical fiscal rule: procedural fiscal rule implemented (with minor delays); drafting of a concept note on augmenting the procedural fiscal rule planned; authorities plan to begin publishing quarterly central government fiscal data by end-September, 2026. - Pension reform - Implemented. Amendments to the Public Pension Law came into effect in 2024 introducing employee contributions for new public employees and modifying parameters for calculating pension benefits. - Parliament approved parametric reforms in late-2023 for the NISSS, increasing retirement age and the contribution rate, including for the self-employed, and measures to reduce benefits under early retirement. - BCED and BRA reforms - Implemented/ongoing. Updated framework for tax and customs concessions being implemented; recertification of tax waivers/concessions granted prior to 2005 and comprehensive tax expenditure inventory with cost estimates planned by mid-2027. - BCED completed a workload and staffing study and developed a roadmap to fill critical vacancies. - BRA and BCED completed single registration process; new single-registry portal went live in May 2025. - Authorities plan to table a Tax Administration Procedures Bill in Parliament. - BRA developing a robust tax arrears management strategy; Large Taxpayer Unit operationalized compliance improvement plan and expanded use of third‑party data (early stage). - Customs Act regulations - Ongoing. Regulations drafted and expected to be published by end-September, 2026. Framework for review and appeal procedures being developed with Fund TA. - Monetary policy and reserves - Implemented. Gross international reserves remained at over US$1.5 billion at end-2025, equivalent to 6 months of imports of goods and services (around 195 percent of the Fund’s ARA metric). - CBB developed a daily liquidity forecasting framework and preliminary research on establishing a benchmark monetary policy rate; establishment of a policy rate and lending instruments remains a long-term objective. - Removal of the foreign exchange fee: not yet implemented; authorities open to considering removal once sustained, long-term stabilization in CIT collections is established. - Financial sector policy - Ongoing. Measures include adoption of an emergency liquidity assistance framework and new guidelines on systemically important financial institutions; work ongoing to update collateral policy and deposit insurance scheme; strategic plan for the Banking Supervision Department planned. - AML/CFT: Implemented. Barbados removed from FATF 'grey list' in February 2024. Post-removal actions include improved monitoring of non-profit organizations, requirements on tipping off and confidentiality, and asset recovery improvements. Authorities plan to table a progress report ahead of the FATF mutual evaluation in mid-2027. - Growth-enhancing policies - Ongoing. Business Barbados established; Talent and Retention Strategy launched; digitalization advances include a central online platform for government services, deployment of 5G, establishment of a data center, progress on an e-conveyancing platform, and creation of a cyber security operations center. - Authorities plan to establish a new Competitiveness and Productivity Commission by end-2026. - Increasing resilience to natural disasters and climate actions - Ongoing. RSF reforms mainstreamed climate in the budget, introduced ‘green PFM’, incentivized resilient infrastructure and renewable energy projects, and incorporated climate risks in CBB bank stress testing. - Catastrophe Fund repurposed into the RRF with expanded role; RRF to publish annual reports including summary of operations and latest financial statements. - 2024 debt-for-climate operation generated around US$125 million in fiscal savings for upfront investment. - 2025 World Bank Disaster Risk Management DPL secured US$30 million. - June 2025 international bond issuance included a natural disaster/pandemic deferral clause. ### Post‑RSF implementation and climate/energy highlights (Annex XVI) - Climate resilience and fiscal risk management - Barbados Environmental Sustainability Fund approved eight grants in late 2025 totaling approximately B$1.5 million. - FY2026 fiscal risk statement published in March 2026, incorporating impacts of climate-related shocks and temperature increases. - Fiscal Risk Unit developing a climate risk register and building capacity for scenario analysis of climate shocks on public finances. - Energy and mitigation measures - March 2026 Budget extended the excise and VAT waiver on EVs through March 31, 2029, with a 10 percent import duty applied. - Replacement batteries for EVs and hybrid vehicles eligible for a five-year income tax deduction. - Request for Proposals issued November 2025 for 60 MW of energy storage services; submission period closed end-April 2026 with 19 proposals received. - National Energy Efficiency Policy and Strategic Action Plan (NEPSAP) finalized June 2025. - Retrofits of 104 government buildings expected to yield estimated annual energy savings of 2,200MWh. - Regulations accompanying the Electricity Supply Act gazetted October 2025; Electricity Supply (Renewable Energy Procurement Committee) Regulations also gazetted. - National Energy Consultation Group established April 2026, with objective to achieve at least 50 percent of electricity generation from renewable sources by end-2027. - Transition risk mitigation and climate finance - 2024 Financial Stability Report (published July 2025) included thematic articles on climate risk by the CBB and the FSC. - Authorities expected to receive TA on green taxonomies and climate information architecture in the second half of 2026 and have interest in further TA on enhancing climate stress testing. *Source: 1brbea2026001 - 6. In the near term, Fund CD will continue to support the Barbadian authorities in* ### Appendix I. Letter of Intent ### Appendix I. Letter of Intent ### Program request and objectives - The Government of Barbados requests a 36-month precautionary Stand-By Arrangement (SBA) in an amount equivalent to SDR 189 million (around US$260 million), or 200 percent of Barbados’ IMF quota. - Objective of the SBA: provide insurance against external downside risks, preserve macroeconomic stability, and support transformational elements of the BERT 2026 reform agenda. - BERT 2026 overarching objective: transform Barbados into a high-performing, inclusive, and climate-resilient economy while reducing public debt to 60 percent of GDP by FY2035/36. ### Recent macroeconomic performance and near-term outlook - Real GDP growth has averaged 2.6 percent during 2023-25. - Public debt-to-GDP ratio declined from 178.9 percent of GDP in 2018 to 94.6 percent of GDP at 2025/26; elsewhere in the letter described as around 95 percent of GDP. - International reserves stand at around US$ 1.5 billion, approximately 6 months of import cover (as of end-2025). - The Government returned to international capital markets in June 2025 and made early repayments to the IMF. - The Government recorded a primary surplus of 4.2 percent of GDP in FY2025/26. - BERT 2026 is centered on five strategic pillars: (i) productivity and competitiveness; (ii) debt and fiscal sustainability; (iii) financial market development; (iv) climate resilience and the green economy; and (v) human capital and inclusion. ### Fiscal strategy and key policy priorities - Fiscal anchor: maintain a downward debt-to-GDP trajectory towards 60 percent by FY2035/36. - Commitment to maintain strong primary surpluses over the next three years to balance debt reduction with fiscal space for development, resilience building, and targeted social support. - Contingency planning: revenue-raising measures and expenditure prioritization options to respond to external shocks (e.g., sustained oil price increases). - Revenue overperformance use: rebuild buffers, finance priority capital and climate resilience spending, or reduce financing needs consistent with BERT 2026 targets. Key revenue and administration measures: - Complete recertification process for all tax waivers and concessions granted prior to 2005 and table in Parliament a comprehensive tax expenditure inventory, including cost estimates (structural benchmark for end-June 2027). The inventory will include a summary report with aggregated data on the number and estimated value of recertified and non-recertified waivers and concessions. - Barbados Revenue Authority (BRA) to complete a full review of accounts receivable to identify theoretically and realizable collectible debt. - BRA to table a Tax Administration Procedures Bill in Parliament (structural benchmark for end-December, 2026). Customs and trade facilitation priorities: - Barbados Customs and Excise Department (BCED) to publish regulations implementing the 2022 Customs Act (structural benchmark for end-September, 2026). - Full operationalization of the Barbados Electronic Single Window (ESW) will be completed during 2026 alongside digitalization of customs and logistics infrastructure. - Expansion of the Trusted Trader Programme with an urgent update to Risk Management profiles of participating companies. Public financial management and budget process: - Expand use of multi-year budgeting. - Full rollout of performance-based budgeting and digital expenditure tracking systems. - Ministry of Finance to develop and table in Parliament the PFM rules to support the 2019 PFM Act (structural benchmark for end-December, 2026), supported by a policy framework, PFM manual and training with IMF technical assistance. Fiscal oversight and transparency: - Fiscal Council (FC) to publish an annual fiscal performance report alongside the budget; GOB will share a draft budget in time to enable this. - With IMF technical assistance, GOB will draft a concept note to explore options on augmenting existing procedural fiscal rules (structural benchmark for end-December, 2027). - GOB will publish quarterly central government fiscal data on a timely basis (structural benchmark by end-September, 2026). ### Debt management and financing strategy - Continue operationalizing the 2024–2027 Medium-Term Debt Strategy (MTDS) to minimize borrowing costs while containing refinancing and exchange rate risks. - Liability management operations to include opportunistic debt swaps, buybacks, and extensions of maturities to smooth debt service profiles. - Increase capacity of the Debt Management Unit and enhance investor relations via greater transparency and improved publication of debt statistics. - Expand domestic debt auctions to bond issuances with Fund TA, enabling price discovery and development of a yield curve. - Continue limited and strategic engagement with international capital markets; the Government re-entered markets in June 2025 with natural disaster and pandemic clauses. ### Public sector and SOE reforms; PPPs; statistics - Rationalize high-transfer SOEs, including the QEH and CBC, through enhanced financial oversight and medium-term performance targets. - Comprehensive stock-take of SOEs, including an updated financial dashboard, to be undertaken with IMF TA (structural benchmark for end-March, 2027). - Implement PPPs in a fiscally sustainable manner: debt sustainability screening, value-for-money assessments, and transparent reporting. A PPP Committee within the Ministry of Finance will evaluate concepts and feasibility studies. - Develop a database for all existing and future PPP projects and initiate annual reporting on execution and performance of all PPPs (structural benchmark for end-June, 2027). - Barbados Statistical Service to conduct a review of institutional arrangements and resources and develop a plan to address shortcomings. ### Conditionality, program monitoring, and transparency commitments - The Government will maintain standard Article VIII obligations: non-imposition/intensification of restrictions on payments and transfers for current international transactions; non-introduction/modification of multiple currency practices; non-conclusion of bilateral payments agreements inconsistent with Article VIII; non-imposition/intensification of import restrictions for balance of payments reasons. - Structural benchmarks and performance on quantitative targets under the SBA are presented in Tables 1 and 2 of the MEFP. - The Government will publish this letter on the websites of the Ministry of Finance, Economic Affairs and Investment and the Central Bank of Barbados, and authorizes the Fund to publish this letter, together with the Staff Report and its attachments. *Source: Letter of Intent and Memorandum of Economic and Financial Policies (Attachment I) — Barbados, June 4, 2026.* ### 16. The GOB will continue to prioritize enhancements to the Central Bank of Barbados’ ### 16. The GOB will continue to prioritize enhancements to the Central Bank of Barbados’ ### Monetary policy framework and CBB resilience - The exchange rate peg to the US dollar has been maintained since 1975 and remains a central policy objective; Social Partners and stakeholders are committed to its maintenance. - Fiscal and structural policies will be implemented to support the peg and sustain adequate international reserves balances. - Gradual and targeted approach to relaxing exchange controls: - Since August 2019, Barbadians may open foreign-currency denominated accounts; proceeds from the sale of assets may be repatriated in foreign currency or kept locally in these foreign-currency accounts. - Select foreign exchange limits (e.g., personal travel facilities) have been gradually increased in recent years. - Authorities are committed to the eventual removal of the 2 percent foreign exchange transaction fee and will identify offsetting revenue measures as necessary, consistent with fiscal and debt sustainability objectives. - CBB recapitalization plan: - Approved plan entails initially rebuilding capital through profit retention and keeping the plan under review to ensure the Bank’s capital position strengthens over time. - Objective: support institutional resilience of the CBB, reinforce capacity for monetary and financial stability operations, and safeguard confidence in the fixed exchange rate regime. ### Deepening financial intermediation and access to finance - BERT 2026 will expand tools, infrastructure, and regulatory reforms to improve financial inclusion and investment mobilization, with emphasis on SMEs and new industries. Key initiatives: - Strategic plan for the CBB Banking Supervision Department to prioritize prudential supervision, strengthen risk management, and safeguard financial stability (structural benchmark for end-November, 2026). - Consultation paper for a resolution framework for financial institutions, with support from Fund TA. - Collateral registry for movable assets and establishment of a factoring framework for small suppliers, particularly those interacting with GOB. - Strengthening credit bureau reporting, building on the Fair Credit Reporting Act, and expansion of financial literacy initiatives through the Financial Literacy Bureau. - Greater use of credit rating and monitoring services, including development of minimum CariCris ratings for financial instruments offered to the public; support for SMEs to obtain and maintain ratings; complementary partial guarantees and co-financing schemes to incentivize lending to rated SMEs. - October 2025: launch of the Junior Stock Exchange, the Innovation Growth Market (IGM), to support SME equity capital raising; operationalization and linkage to advisory, investor, and business development networks to continue. - June 2026: CBB to launch national instant payment system, BiMPay, to modernize payments, increase speed and accessibility, and support financial inclusion. - Strengthening regulatory framework for Fintech, insurance, and pensions, emphasizing innovation, consumer protection, and risk-based supervision. ### AML/CFT and supervisory priorities - Barbados removed from the FATF grey list in February 2024; focus now on effective implementation and enforcement in supervision, investigations, prosecutions, and asset recovery ahead of updated mutual evaluation in June 2027. - At individual institution level: ongoing updating of licensee risk profiles. - Structural benchmark: a report detailing status of implementation efforts to be tabled in Parliament (structural benchmark for end-March, 2027). ### Growth-enhancing reforms: diversification and sector initiatives - Economic diversification prioritized toward agribusiness, life science & health, technology & innovation, supported by AI, cybersecurity, Fintech, and digital services. - Announced measures: - Launch of the Green Industrialization Gateway Advantage led by Export Barbados to transform into a hub for advanced manufacturing, agro-processing, AI infrastructure, life sciences, and global digital services. - Establishment of the Economic Diversification and Growth Fund (EGDF) in December 2025 to target established firms in identified sectors; the EGDF will provide financial support to qualifying companies to increase employment, earnings of foreign exchange, and contribute to economic growth. - Definition: "Qualifying company means a company which has a substantial economic presence in a jurisdiction other than Barbados and engages in, or intends to engage in, real and substantial activity in Barbados." ### Productivity, competitiveness, and digitalization - BERT 2026 targets productivity-led growth through removing structural rigidities, enabling private investment, upgrading regulatory and technological environment, and raising labor productivity. - Digital Productivity State objectives: once-only data principles, shared registries, automated licensing and permits, and digital payments; Single Digital ID and Business Identity System to underpin interoperability, reduce fraud, and improve compliance. - Key initiatives: - Establish Competitiveness and Productivity Commission (structural benchmark for end-December, 2026) to focus on end-to-end process redesign, automation, and KPI reporting across permits, customs clearance, construction approvals, company registration, and work permits. - Implement second phase of Business Barbados modernization to merge business registration, payment, and verification into a single digital platform. - Strengthen the Investment Facilitation Centre and launch the Barbados Investment Plan targeting logistics, high-end tourism, agro-processing, blue economy industries, and renewable energy services. - Energy Transition Investment Plan approved by Cabinet in March 2025 to anchor public and private investment in the energy sector. - Strengthen Invest Barbados and Export Barbados as central agencies for inward investment and export promotion. - Implement Single Digital ID and Business Identity System supported by legislative and cybersecurity reforms. - Establish Barbados Global R&D Hub Programme to attract frontier research partnerships and convert innovation into patents, investable firms, and export revenues. - Integrate health and wellness into productivity strategy, with Ministries of Health and Labor tracking workforce health indicators and reporting impacts on productivity. ### Human capital and skills - BERT 2026 centers people: broaden access to skills, jobs, finance, housing, ownership, and enterprise opportunities with targeted social spending. - Digital skills deficit highlighted by 2025 IDB supported Labour Skills Assessment for the Digital Economy: - 75 percent of surveyed firms had completed or were undertaking digital transformation. - 47 percent of employees, including 40 percent of managers and 31 percent of professionals, lacked at least some of the digital skills required for their roles. - 63 percent of employees required AI related skills, while 71 percent lacked some of those required skills. - Initiatives to address skills gaps: - Revision of the Education Act, phasing out of the 11-Plus exam, and curriculum reform to prioritize STEAM, critical thinking, and digital literacy. - Scaling of the National Transformation Initiative (NTI) to provide access to training in digital, climate, and entrepreneurial skills. - Targeted digital upskilling programmes emphasizing basic and intermediate digital skills, AI readiness, data analysis, cybersecurity awareness, and practical digital tools. - Expansion of the Barbados Youth Advance Corps, Apprenticeship Scheme, and First Jobs Initiative. - Implementation of the Population Policy 2023–2024 to promote active ageing, labor force participation, and skills attraction and retention. - Construction of affordable, green homes through innovative public-private delivery models and social enfranchisement initiatives. ### Climate resilience and sustainability - Barbados commits to 2035 Net-Zero Target and aims to meet 50 percent of electricity generation needs from renewable sources by December 2027 to reduce fossil fuel dependence, foreign exchange leakage, and strengthen energy security. - Citizen participation in climate transition via community solar projects, household access to green bonds, and opportunities for local investors in renewable energy and resilience investments. - Policy focus under BERT 2026: - Climate-smart infrastructure investments, including climate-smart agricultural infrastructure and development of a national food terminal through a PPP arrangement. - Execution of the Electricity Supply Bill to enable fair and efficient participation in renewable energy generation, storage, and grid access; supports objective of meeting 50 percent of energy needs from renewable sources by December 2027. - Full operationalization of the Resilience and Regeneration Fund financing resilient house construction, home retrofitting and rebuilding, community shelters, and green infrastructure; Government to table an annual report including a summary of operations and financial statements (structural benchmark for end-March, 2027). - Expansion of the electric vehicle (EV) fleet and further incentives for private EV adoption. - Implementation of climate budget tagging and green public procurement regulations across all Ministries and SOEs. - Explore regional pooling solutions and establishment of a Caribbean reinsurance facility in partnership with CARICOM, CCRIF, and development banks to build local and regional insurance/reinsurance capacity. - Rollout of solar, water, and other efficiency technologies in public buildings, housing projects, farms, and school infrastructure to support Net Zero 2035 ambition. - 2025 expansion of energy democratization by embedding unit trust structures within large renewable projects to enable ordinary Barbadians to become owners of projects at scale. ### Program monitoring and quantitative targets under the Proposed Standby Arrangement - SBA subject to semi-annual reviews with first, second, and third reviews occurring on or after December 1, 2026, June 1, 2027, and December 1, 2027, respectively. - Selected targets (Amounts in millions of Barbados dollars unless otherwise indicated): - Fiscal Targets — Performance Criteria and Indicative Targets: - Floor on the CG Primary Balance: - Target end June 2026 (IT): 184 - Target end September 2026 (PC): 370 - Target end December 2026 (IT): 461 - Target end March 2027 (PC): 590 - Target end June 2027 (IT): 194 - Ceiling on the Non-accumulation of CG External Debt Arrears: - All target dates: 0 - Ceiling on the Stock of Public Debt (stock): - Target end June 2026 (IT): 15400 - Target end September 2026 (PC): 15400 - Target end December 2026 (IT): 15400 - Target end March 2027 (PC): 15420 - Target end June 2027 (IT): 15470 - Monetary targets: - Floor on Net International Reserves: - Target end June 2026 (IT): 1720 - Target end September 2026 (PC): 1510 - Target end December 2026 (IT): 1560 - Target end March 2027 (PC): 1780 - Target end June 2027 (IT): 1730 - Indicative Targets — Fiscal: - Ceiling on the Stock of Domestic CG Expenditure Arrears: - end June 2026 (IT): 180 - end September 2026 (PC): 171 - end December 2026 (IT): 163 - end March 2027 (PC): 154 - end June 2027 (IT): 145 - Floor on CG Social Spending: - end June 2026 (IT): 33 - end September 2026 (PC): 75 - end December 2026 (IT): 110 - end March 2027 (PC): 138 - end June 2027 (IT): 36 - Ceiling on the Stock of Public Institutions Expenditure Arrears: - end June 2026 (IT): 30 - end September 2026 (PC): 25 - end December 2026 (IT): 20 - end March 2027 (PC): 15 - end June 2027 (IT): 10 - Ceiling on CG Transfers and Grants to Public Institutions: - end June 2026 (IT): 118 - end September 2026 (PC): 264 - end December 2026 (IT): 453 - end March 2027 (PC): 551 - end June 2027 (IT): 110 - Indicative Targets — Monetary: - Ceiling on the Stock of Net Domestic Assets of the CBB: - end June 2026 (IT): 1375 - end September 2026 (PC): 1475 - end December 2026 (IT): 1350 - end March 2027 (PC): 1350 - end June 2027 (IT): 1325 - Items feeding into Debt, and NIR adjustors: - Budget support: - end June 2026 (IT): 0 - end September 2026 (PC): 0 - end December 2026 (IT): 0 - end March 2027 (PC): 300 - end June 2027 (IT): 0 - Grants: - end June 2026 (IT): 0 - end September 2026 (PC): 0 - end December 2026 (IT): 0 - end March 2027 (PC): 9 - end June 2027 (IT): 0 - Projected project grants: - end June 2026 (IT): 20 - end September 2026 (PC): 80 - end December 2026 (IT): 125 - end March 2027 (PC): 159 - end June 2027 (IT): 28 - Projected Fuel Price (USD$ per barrel): - end June 2026 (IT): 98 - end September 2026 (PC): 92 - end December 2026 (IT): 86 - end March 2027 (PC): 80 - end June 2027 (IT): 78 - Fuel Imports net of Re-Exports (In thousands barrels per quarter): - end June 2026 (IT): 966 - end September 2026 (PC): 966 - end December 2026 (IT): 966 - end March 2027 (PC): 981 - end June 2027 (IT): 981 - Notes on targets: - Test dates for periodic Performance Criteria (PC) will be end-March and end-September of each calendar year. There will be Indicative Targets (IT) at end-June and end-December. - PCs and ITs are further defined in the Technical Memorandum of Understanding (TMU). - Figures are based on program exchange rates defined in TMU where applicable. - Flow (cumulative over the fiscal year) indicators are noted where applicable. - Continuous performance criterion and stock definitions are indicated in the program tables. - Including pre-TAMIS legacy arrears formally recognized in FY2022/23 where specified. - The floor on CG Social Spending excludes operational expenses of social programs. - The ceiling on CG Transfers and Grants to Public Institutions excludes earmarked transfers and capital transfers to SOEs. *Source: IMF staff summary of the GOB’s BERT 2026 program and proposed Standby Arrangement tables.* ### 1. BCED to publish ### 1. BCED to publish ### Structural Benchmarks: Customs, Tax Administration, and Tax Expenditures - Benchmark: BCED to publish regulations implementing the 2022 Customs Act. - Objective: Strengthening customs administration to support improvements in customs policies, underpinning fiscal sustainability, trade facilitation and border security. - Indicative timing: end-September 2026 - Policy area: Tax Administration Pillar 2: Debt and Fiscal Sustainability - Benchmark: Government to table in Parliament a Tax Administration Procedures Bill to homogenize, modernize and enhance the administration and enforcement functions and powers of the BRA. - Objective: Improving tax administration to strengthen compliance, enforcement of tax laws, and foster voluntary compliance; support revenue mobilization and fiscal sustainability. - Indicative timing: end-December 2026 - Policy area: Tax Expenditures Pillar 2: Debt and Fiscal Sustainability - Benchmark: Government to complete the recertification process for all tax waivers and concessions granted prior to 2005 and table in Parliament a comprehensive tax expenditure inventory, including cost estimates, ahead of the annual budget estimates. Inventory to include a summary report with aggregated data on the number and estimated value of recertified and non-recertified waivers and concessions. - Objective: Rationalizing and reporting tax expenditures to protect the tax base, mobilize revenues, improve transparency, strengthen public accountability, and foster more equitable and efficient use of public resources. - Indicative timing: end-June 2027 ### Public Sector Reform, Fiscal Data, and Fiscal Framework - Benchmark: Government to begin publishing quarterly central government fiscal data, with a one-month lag. - Objective: Improving fiscal transparency to strengthen public understanding and government accountability, contributing to stronger fiscal policies. - Indicative timing: end-September 2026 - Policy area: Fiscal Framework Pillar 2: Debt and Fiscal Sustainability - Benchmark: Government to draft a concept note on augmenting the procedural fiscal rules, with support from Fund TA. - Objective: Strengthening fiscal rules to promote budgetary discipline, enhance credibility of the fiscal framework, and safeguard debt sustainability. - Indicative timing: end-December 2027 - Policy area: PFM Pillar 2: Debt and Fiscal Sustainability - Benchmark: Ministry of Finance to develop and table in Parliament PFM rules to support the 2019 PFM Act. - Objective: Strengthening budgetary controls, execution and oversight to support fiscal discipline and accountability and the proper management of resources. - Indicative timing: end-December 2026 - Policy area: PFM Pillar 2: Debt and Fiscal Sustainability ### PPP Monitoring, SOE Reform, and Public Asset Oversight - Benchmark: Develop a database for all existing and future PPP projects and initiate annual reporting on execution and performance, aligned with requirements of the PFM Act. - Objective: Managing and mitigating contingent liabilities and long-term fiscal risks, to safeguard debt sustainability. - Indicative timing: end-June 2027 - Policy area: PPP Monitoring / Reporting Pillar 2 Financial Market Development - Benchmark: Government to conduct a comprehensive stocktake of SOEs, including an updated financial dashboard, with support from Fund TA. - Objective: Strengthening SOE oversight to enhance transparency and accountability, mitigate contingent liabilities and fiscal risks, and support debt sustainability. - Indicative timing: end-March 2027 - Policy area: SOE Reform Pillar 2: Debt and Fiscal Sustainability ### Financial Sector Strengthening and AML/CFT - Benchmark: Develop a strategic plan for the CBB Banking Supervision Department, including: prioritization of its core prudential supervision mandate; reassignment of non-core tasks outside the BSD; allocation of staff to the maintenance, production, and indexing of prudential returns, along with their associated data analytics; and narrowing the scope of non-licensing matters to approvals that warrant prudential attention. - Objective: Strengthening bank supervision to improve risk management and safeguard financial stability. - Indicative timing: end-November 2026 - Policy area: Financial Supervision Pillar 3: Financial Market Development - Benchmark: An implementation status note to be tabled in Parliament outlining progress in key areas of AML/CFT including supervision, investigations, prosecutions, and asset recovery, ahead of the FATF mutual evaluation in June 2027. - Objective: Continued AML/CFT reforms to maintain macroeconomic stability, protect financial integrity, and underpin good governance. - Indicative timing: end-March 2027 - Policy area: AML/CFT Pillar 3: Financial Market Development ### Growth, Resilience, and Competitiveness - Benchmark: Government to table in Parliament an annual report for the Resilience and Regeneration Fund, including a summary of operations and latest financial statements. - Objective: Building fiscal buffers to enhance resilience, management of risks and shocks, and support long-term growth. Ex-ante investments under the RRF and build-back-better approach to improve prospective BOP stability. - Indicative timing: end-March 2027 - Policy area: Growth and Resilience Resilience Pillar 4: Climate Resilience and the Green Economy Transition - Benchmark: Establishment of the Competitiveness and Productivity Commission. - Objective: Encourage private investment by reducing structural rigidities, upgrading the regulatory and technological environment, and enhancing labor productivity. - Indicative timing: end-December 2026 - Policy area: Growth and Competitiveness Pillars 1 and 5: Productivity and Competitiveness / Human Capital and Inclusion ### Technical Memorandum of Understanding: Key Program Definitions and Quantitative Performance Criteria (PCs) and Indicative Targets (ITs) - General: - The TMU sets out definitions of quantitative performance criteria and indicative targets for the program supported by the Standby Arrangement (SBA). Structural benchmarks are listed in Table 2 of the MEFP. - All foreign currency-related assets, liabilities and flows will be evaluated at “program exchange rates” except items affecting Government fiscal balances, which will be measured at current exchange rates. The program exchange rates are those that prevailed on May/12/2026. - The Central Government (CG) consists of the set of institutions currently covered under the state budget. - CG revenues and expenditures will cover all items included in the CG budget as approved by Parliament, including self-generated revenues of, and transfers to, State-Owned Enterprises (SOEs). - Fiscal year: starts on April 1 and ends on March 31. - Debt definition: as in paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements (Decision No. 16919-(20/103), October 28, 2020); includes loans, suppliers’ credits, and leases as specified. - External CG debt: debt contracted or guaranteed by the CG in foreign currency. Domestic CG debt: debt contracted or guaranteed by the CG in Barbados dollars. - CG debt is considered contracted when authorized by Barbadian law or approved by Parliament and signed or accepted by the relevant authority. - Program Exchange Rates (5/12/2026) 1/ (Average daily selling rates as reported by the CBB): - Barbadian dollar to the US dollar: 2.00000 - Barbadian dollar to the SDR: 2.74730 - Barbadian dollar to the euro: 2.35520 - Barbadian dollar to the Canadian dollar: 1.46496 - Barbadian dollar to the British pound: 2.72610 - Barbadian dollar to the Chinese renminbi: 0.29432 - Barbadian dollar to the East Caribbean dollar: 0.74075 - Barbadian dollar to the Saudi Arabian Riyal: 1.87500 - Note: For currencies not listed, cross-exchange rates to the U.S. dollar on May 12, 2026 will be applied. ### Quantitative Performance Criteria: Definitions and Monitoring Modalities - A. Floor on the CG Primary Balance - Definition: CG primary balance = total revenues and grants minus primary expenditure; covers non-interest Government activities as specified in the budget. Measured cumulatively over the fiscal year and monitored from above the line. - Revenues: recorded when funds are transferred to a Government revenue account; tax revenues net of tax refunds; tax refunds recorded when funds for repayment are transferred to the BRA from the Barbados Treasury Department; revenues include grants. Capital revenues exclude revenues from non-financial asset sales from divestment operations. - Central Government primary expenditure: recorded on a cash basis and includes recurrent expenditures and capital spending; includes transfers to SOEs. Primary expenditures settled with bonds or other non-cash liabilities treated as one-off adjustments, recorded above-the-line and financed with debt issuance. - Adjustor: Primary balance target adjusted upward (downward) by the surplus (shortfall) in disbursements of grants relative to the baseline projection. - Monitoring: data provided to the Fund monthly with a lag of no more than four weeks from end-of-period. - B. Ceiling on the Non-Accumulation of CG External Debt Arrears - Definition: CG will not incur new arrears in payments of its external debt obligations at any time during the program. External arrears = delay in payment beyond grace period in loan/debt contracts. Arrears from agreed clearance frameworks or ongoing restructurings are excluded. - Application: continuous basis under the program. - Monitoring: data on external arrears by creditors reported immediately. - C. Ceiling on the Stock of Public Debt - Definition: Public debt = domestic and external CG debt, SOE debt guaranteed by the CG, and domestic CG expenditure arrears. Includes outstanding obligations to the IMF related to EFF/RSF/SBA budget support. Interest and penalties arrears from non-payment on external commercial debt subject to restructuring excluded. - Measurement: stock of CG and CG guaranteed debt measured on the disbursement basis excluding valuation effects. Program FX rates (Table 1) used to value debt in FX. - Adjustor: Ceiling adjusted upwards by full amount of surplus in disbursements of program or project financing from multilateral institutions (CDB, IDB, CAF, IBRD, OFID) relative to baseline projection. - Monitoring: CG debt and CG guaranteed debt data by issuer, creditor, maturity, and currency reported quarterly with a lag of no more than four weeks from end-of-period. Data on external and domestic arrears reported as set in TMU. - D. Floor on Net International Reserves (NIR) - Definition: NIR = reserve assets minus reserve liabilities with maturity less than one year. - Reserve assets: readily available claims on nonresidents in foreign convertible currencies, including CBB holdings of monetary gold, SDRs, foreign currency cash, foreign currency securities, deposits abroad, and reserve position at the Fund. Excluded: sinking funds’ assets and any assets pledged, collateralized, or otherwise encumbered; claims on residents; claims in foreign exchange arising from derivatives vis-a-vis domestic currency; precious metals other than gold; assets in nonconvertible currencies; and illiquid assets. - Reserve liabilities: (1) all foreign exchange liabilities to residents and nonresidents with maturity of less than one year, including commitments to sell foreign exchange arising from derivatives; (2) all liabilities outstanding to the IMF, including EFF/RSF/SBA disbursements used for budget support. - Adjustors: - NIR target adjusted upward (downward) by surplus (shortfall) in program loan disbursements from multilateral institutions (CDB, IDB, CAF, IBRD, OFID) relative to baseline projection. Program loan disbursements defined as external loan disbursements from official creditors usable for financing the CG. - NIR target adjusted upward (downward) by surplus (shortfall) in disbursements of budget support grants relative to baseline projection. - NIR target adjusted downward (upward) to reflect any increase (decrease) in fuel prices relative to program baseline, up to a cap of BD$300 million in either direction. Any deviation beyond the cap will be discussed with staff and addressed in the context of the next review. Adjustment calculated as cumulative quarterly difference between realized fuel price (WEO average petroleum spot price of West Texas Intermediate, U.K. Brent, and Dubai Fateh crude) and projected fuel price under the program baseline, multiplied by volume of total fuel imports (net of BNECL re-exports) in the baseline. - For monitoring, average fuel price for the test period defined as the simple quarterly average of the WEO fuel price (USD per barrel). Program baseline fuel price and net import volumes for the test period are set out in Appendix I, Attachment I, Table 1. - Monitoring: data reported by the Central Bank on a weekly basis with a lag of no more than one week from end-of-period. *Source: IMF Technical Memorandum of Understanding and Table 2 structural benchmarks (MEFP).* ### 14. The stock of domestic expenditure arrears of the CG is defined as the sum of: (a) any ### 1brbea2026001 - 14. The stock of domestic expenditure arrears of the CG is defined as the sum of: (a) any ### Definitions and scope of arrears (paragraphs 14, 18) - The stock of domestic expenditure arrears of the CG 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) non-contributory pension transfers (by CG only), wages and pensions contributions to the NISSS for which payment has been pending for longer than 60 days; - (c) rent and loan payments to the NISSS pending for longer than 60 days; and - (d) arrears on refunds of Personal Income Tax (PIT), Corporate Income Tax (CIT), and Value Added Tax (VAT). Tax refund arrears are defined as obligations on tax refunds in accordance with tax legislation that remain unpaid six months after the filing date. - 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 NISSS 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. ### Monitoring and reporting of arrears and related aggregates (paragraphs 15, 20, 22) - Data on CG expenditure arrears and its components by creditors: - Measured as stock observed as at test date. - Reported on a monthly basis, with a lag of no more than four weeks from the end-of-period. (Section C, Table 3) - Data on SOE (public institutions) expenditure arrears and components by creditors: - Measured as stock observed as at the test date. - Reported on a monthly basis, with a lag of no more than four weeks from the end-of-period. (Section C, Table 3) - CG Transfers and Grants to Public Institutions: - Include recurrent cash transfers and grants to entities listed in paragraph 3, excluding capital transfers separately approved and reported under the capital budget, unless otherwise specified. - Measured as cumulative over the fiscal year and reported on a monthly basis, with a lag of no more than four weeks from the end-of-period. (Section C, Table 3) ### Indicative floor on CG social spending (paragraphs 16–17) - The indicative floor applies only to expenditures incurred by the CG on specified plans and programs, excluding operating expenditure, intended to have a positive impact on education, health, social protection, housing and community services and recreational activities. Covered programs include: - Social Empowerment Agency spending cash transfers and household support, including: assistance for house rents, utilities, food, and education; protection of vulnerable children; the Multiple Birth Cash Grant; - BRA reverse tax credits, providing income support to lower-income working households; - One Family programme targeting vulnerable households; - Alternative Care for the Elderly programme targeting the elderly transferred to private care; - Provision of medication to HIV patients; - Provision of non-contributory pensions. - For monitoring, social spending data: - Measured as cumulative over the fiscal year; - Reported on a quarterly basis, with a lag of no more than four weeks from the end-of-period (Section C, Table 3). ### Ceiling on stock of Net Domestic Assets (NDA) of the Central Bank of Barbados and fuel-price adjustor (paragraphs 23–24, Adjustors) - Net Domestic Assets (NDA) of the CBB defined as: - The difference between the monetary base and the sum of the NIR (as defined in section I, D above, excluding IMF disbursements used for budget support) and commercial banks’ and Part III companies’ foreign currency deposits at the CBB. - The monetary base includes currency in the hands of the non-bank public plus vault cash held in the banking system, statutory cash reserve requirements, and the current account of commercial banks and non-bank financial institutions (Part III companies) comprising of credit balances held at the Central Bank. - NDA reporting frequency: - Reported on a monthly basis, with a lag of no more than two weeks from the end-of-period (Section D, Table 3). - NDA adjustor for fuel prices: - NDA target will be adjusted upward (downward) to reflect any increase (decrease) in fuel prices relative to that assumed in the program baseline, up to a cap of BD$300 million, in either direction. Any deviation beyond the cap will be discussed with staff and addressed in the context of the next review. - Adjustment calculation: cumulative quarterly difference between the realized fuel price (as reported by the WEO average petroleum spot price of West Texas Intermediate, U.K. Brent, and Dubai Fateh crude) and the projected fuel price under the program baseline, multiplied by the volume of total fuel imports (net of BNECL re-exports) in the baseline. - For program monitoring, the average fuel price for the test period is defined as the simple quarterly average of the WEO fuel price (USD per barrel). The program baseline fuel price and net import volumes for the test period are as set out in Appendix I, Attachment I, Table 1. ### Fuel hedging assumption and projected/realized fuel price calculations (footnotes 3, 4, 5, 6 and Table 2) - Hedge treatment: - Heavy fuel oil accounts for 30 percent of energy imports. - To account for hedges executed by the authorities on heavy fuel oil: - Projected fuel price for the June 2026 test date = 0.3*92 + 0.7*(WEO futures oil price for 2026Q2). - Projected fuel price for the September 2026 test date = 0.3*85 + 0.7*(WEO futures oil price for 2026Q3). - Realized fuel price for the June 2026 test date = 0.3*92 + 0.7*(quarterly average WEO fuel price in 2026Q2). - Realized fuel price for the September 2026 test date = 0.3*85 + 0.7*(quarterly average of WEO fuel price in 2026Q3). - Definitions: - The program net import volume is an index obtained by dividing the aggregate net fuel import value by the reference fuel price. - For the purpose of program monitoring, the average fuel price for the test period is the simple quarterly average of the WEO fuel price (USD per barrel). - Table 2: Program Monitoring - Proposed Fuel Assumptions for NIR adjustor under the SBA (values as presented): - Target end June 2026 / Target end September 2026 / Target end December 2026 / Target end March 2027 / Target end June 2027 - ITITIT - Projected Fuel Price (USD$ per barrel)9892868078 - Fuel Imports net of Re-Exports (In thousands of barrels per quarter)966966966981981 - Sources: Fund staff estimates. ### Program reporting requirements — Summary of data to be reported to the IMF (Table 3) - General note: Financial Sector and External sector data to be provided by the CBB; Real and Fiscal sector data by the MOF, in consultation with relevant agencies unless otherwise noted. Authorities will transmit promptly any data revisions and other information necessary to monitor the SBA. - A. Real Sector - Monthly (lag no more than four weeks): RPI index, its components, and weights. - Quarterly (lag no more than four weeks): Nominal and real GDP. - Annual (within 6 weeks of the end-of-period): Nominal and real GDP and its components from the demand and supply side (provided by the MOF). - B. External Sector - Weekly (lag no more than one week): CBB NIR, as defined in section I; CBB GIR. - Monthly (lag no more than four weeks): BOP trade balance data; CBB’s Cashflow Table deriving GIR and NIR; Landed cost and volume of fuel imports and re-exports. - Monthly: Share of import / export transactions and share of importing/exporting companies using Tax Information Numbers. - C. Fiscal Sector - Monthly (lag no more than four weeks): CG budgetary accounts; Net Domestic Financing and its components; Net External Financing and its components; Grants and transfers to public institutions listed in paragraph 3 as defined in Section II; Stock of CG external arrears (interest, principal, and penalty amounts separately) by creditor and its components as defined in Section I (reported immediately); Program loan disbursements from multilateral institutions, including the CDB, the IDB, the CAF, OPEC 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 3 by creditor and its components as defined in Section II. - Quarterly (lag no more than four weeks): Social expenditure and its components as defined in Section II; 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 I. - Quarterly (lag no more than six weeks): Financial position of public institutions listed in paragraph 3 including non-audited income statement, balance sheet and profit and loss accounts. - D. Financial Sector - Monthly (lag no more than two weeks): CBB NDA, as defined in section II; CBB survey showing detailed composition of net foreign assets (NFA), net claims on the central Government (NCCG), claims on other depository corporations (CODC), claims on other sectors of the economy (COSE), other items net (OIN), and monetary base (MB); CBB purchases and sales of foreign exchange; Amounts offered, demanded, and placed in Government auctions and primary issues; Statement of use and outstanding balance of the CG deposit in the CBB. - Monthly (lag no more than six weeks): Other Depository Corporations (ODC) survey showing gross items for NFA, claims on the CBB, net claims on the CG (NCCG), COSE, OIN, deposits included in broad money (BM), deposits excluded from BM, and liabilities to the CBB; Depository Corporations (DC) survey as 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): CBB Balance sheet. - Quarterly (lag no more than six weeks): Financial soundness indicators by bank and by sector, including but not limited to: 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. - Quarterly (lag no more than eight weeks): Aggregate financial soundness indicators for credit unions including: Reserves to total liabilities ratio; Loan to deposit ratio; Nonperforming loans ratio; Provisions to total loans ratio; Return on assets. - E. Other Data - Annual (within 6 weeks): Audited financial statements of Public Institutions listed in Paragraph 3 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. - Annual (within 6 months): Audited financial statements of Commercial Banks. *Source: Excerpt from the IMF staff report informational annex provided in the supplied content.* ### 2026. Through sustained primary surpluses, stronger revenue administration, prudent expenditure ### 2026. Through sustained primary surpluses, stronger revenue administration, prudent expenditure management, and broad fiscal reforms, our authorities have moved from chronic fiscal imbalances to sustained consolidation. ### Fiscal consolidation, debt reduction, and fiscal strategy - Public debt reduced from "over 170 percent of GDP in 2018" to "around 95 percent of GDP at end-FY2025/26." - Authorities remain committed to reducing public debt to "60 percent of GDP by FY2035/36," while protecting critical social spending and growth-enhancing capital investment. - The FY2026/27 budget: - "maintains a strong primary surplus" - "creates space for priority investments in infrastructure, climate resilience, education, health, digitalization, and institutional capacity." - The request for a "36-month precautionary SBA" is presented as consistent with past performance and a prudent step to safeguard macroeconomic stability. ### Fiscal reforms under BERT 2026 (revenue mobilization, spending efficiency, institutions) - Priorities include: - "strengthening revenue policy and administration" - "rationalizing tax concessions" - "improving compliance" - "modernizing customs and tax administration" - "enhancing public financial management" - Institutional and oversight measures: - Establishment/role of the Fiscal Council to "help strengthen accountability and public confidence in the fiscal framework." - Continued SOE reforms, a planned SOE stocktake, and improved financial monitoring to "support better oversight of contingent liabilities." - A PPP framework and database to ensure private investment supports development objectives while safeguarding fiscal sustainability. ### Debt profile, liability management, and borrowing strategy - Debt viewed as sustainable, supported by: - "strong primary balances" - "improved growth" - "a favorable debt service profile" - Recent actions and outcomes: - Liability management operations and successful return to international capital markets have "helped extend maturities, reduce refinancing risks, and diversify financing sources." - Policy stance: - Commitment to "prudent borrowing, proactive debt management, and rebuilding fiscal buffers to strengthen resilience against external shocks and natural disasters." ### Monetary policy, financial stability, and external position - Exchange rate regime: - "The exchange rate peg remains the cornerstone of Barbados’ macroeconomic framework." - Authorities "remain fully committed to preserving the peg." - International reserves and external indicators: - Reserves increased "from less than three weeks of import cover during the crisis period to approximately US$1.5 billion." - Return to international capital markets, recent rating upgrades, and continued investor confidence noted as supportive of external position and policy credibility. - Financial sector modernization and stability measures: - Reforms to "strengthen Central Bank operations, improve liquidity management, and enhance financial safety nets" are advancing. - Launch of BiMPay, "the national instant payment system," to modernize payment infrastructure, improve transaction efficiency, and support financial inclusion. - Financial sector fundamentals: "strong capital and liquidity buffers, declining non-performing loans, and continued growth in private sector credit." - Ongoing commitment to "strengthening supervision, developing a resolution framework, and enhancing deposit insurance." - AML/CFT: - Following "Barbados’ removal from the FATF grey list in 2024," continued focus on "effective implementation, supervision, investigations, prosecutions, and asset recovery ahead of the next mutual evaluation." ### Growth, economic transformation, and institutional capacity - BERT 2026 shifts focus from stabilization and recovery toward "economic transformation." - Key priorities: - "improving the business environment" - "advancing digital transformation" - "expanding economic opportunities" - "equipping workers with the skills needed for a modern and resilient economy" - Institutional capacity actions: - Continued strengthening of "public sector effectiveness, policy implementation, governance, and service delivery" to support project execution and implementation of BERT 2026 reforms. - Data and statistics: - Authorities consider Barbados’ data "adequate for surveillance and program monitoring," while recognizing areas needing strengthening. - Progress cited includes "GDP rebasing, the updated Supply and Use Table, progress toward expenditure-based GDP estimates, and the compilation of BPM6-based balance of payments and International Investment Position statistics." - Authorities welcome a comprehensive review of the Barbados Statistical Service, supported by Fund technical assistance, to address institutional capacity and publication constraints. ### Climate resilience and disaster risk financing - Climate resilience integrated across budgeting, procurement, energy policy, infrastructure, and community development as a central pillar of economic strategy. - Renewable energy and resilience initiatives: - Advancing "battery storage, electricity grid modernization, and a utility-scale wind project to support the 2035 renewable energy goal." - Mobilization of innovative climate finance, including "pioneering use of debt for climate swaps" and the launch of the "Blue Green Bank." - Layered disaster risk financing framework combining: - Risk retention - Risk transfer (including "CCRIF coverage for tropical cyclone, earthquake, and excess rainfall risks") - Contingent financing (contingent credit lines from the "IDB and World Bank") - Natural disaster clauses across nearly the entire restructured debt stock - Natural disaster and pandemic debt service suspension clauses in recent international bond issuance - Domestic Resilience and Regeneration Fund to support resilience investment, disaster recovery, and post-disaster reconstruction - Complementarity of instruments: - Parametric insurance provides rapid liquidity - Contingent credit lines offer larger pre-arranged financing - Debt clauses provide cash-flow relief during recovery - Domestic funds support resilience-building and reconstruction - External engagement: - Authorities view the precautionary SBA as an additional layer of protection against residual financing gaps from low-probability, high-impact shocks. - Barbados plays a leadership role through the Bridgetown Initiative and leadership of the V20 group of climate vulnerable economies. ### Conclusion and policy commitments - Progress since BERT launch in 2018 attributed to "strong ownership, disciplined implementation, decisive leadership, and sustained partnership with the Fund." - Authorities commit to: - Maintaining fiscal discipline - Protecting the exchange rate peg - Strengthening institutions - Reducing debt - Building resilience - Pursuing inclusive growth - Authorities "look forward to continued constructive engagement with the Fund." *Source: 1brbea2026001 - 2026. Through sustained primary surpluses, stronger revenue administration, prudent expenditure management, and broad fiscal reforms (PDF chapter).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1brbea2026001.pdf_