## _cr06323 - Executive Summary ## Source details **Canonical URL:** [_cr06323 - Executive Summary](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06323.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06323.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06323.pdf.json) --- ### Recent developments - GDP growth was 3.9 percent in 2005 and is running at about 4 percent (2004–05). - Inflation accelerated to more than 6 percent in 2005; core inflation rose from almost zero in 2004 to 4 percent in 2005. - The current account deficit widened to 12½ percent of GDP in 2005 (also noted as 12.4 percent of GDP in 2005). - Public sector debt remains above 80 percent of GDP. - Credit to the private sector grew by 21.7 percent in 2005. - The central bank raised the minimum deposit rate by 250 basis points (four-step increase) to 4.75 percent in 2005. - Gross international reserves covered 3.5 months of imports by end-2005; reserves had been declining since 2003 but were supported by strong capital inflows, including a US$125 million sovereign bond issued in December 2005. - Nonperforming loans fell to 5.5 percent of total loans in 2005 (from 7.9 percent in 2002). - The capital adequacy ratio of the four locally-incorporated banks declined from 25 percent in 2003 to 13 percent in 2005. - The National Insurance Scheme (NIS) achieved a surplus of 3.3 percent of GDP in 2005. - Extrabudgetary capital expenditures ahead of the 2007 Cricket World Cup (CWC) increased to around 2 percent of GDP in 2005/06. ### Policy discussions and staff recommendations - Main policy objective: address macroeconomic imbalances to achieve sustainable growth and protect the exchange rate peg. - Monetary policy: - Staff recommended a further increase in policy rates to reduce credit growth and overheating risks. - Authorities had tightened policy in 2005 (250 basis points) and expected these increases to eventually reduce credit growth. - Fiscal policy: - Staff recommended avoiding a widening of the nonfinancial public sector deficit (expected to widen by 2½ percent of GDP in 2007/08 to about 3 percent) and instead pursue consolidation to bring the debt-to-GDP ratio to under 60 percent by 2011. - Authorities preferred a more gradual path of fiscal consolidation. - Exchange rate and structural policies: - Mission supported maintaining the currency peg conditional on correcting macroeconomic imbalances and strengthening structural reforms to enhance competitiveness. - Recommended structural reforms: trade liberalization, privatization, rationalization of sectoral incentive programs, and limiting support for the sugar adaptation strategy to commercially viable activities. - Financial sector: - Authorities agreed on monitoring banks’ asset quality and their net foreign asset position given large capital inflows and rapid domestic credit growth. - Authorities agreed on a gradual opening up of the capital account and reported measures to strengthen financial sector regulation and financial market infrastructure. ### Background and context - Barbados has favorable regional economic and social indicators, stable political institutions, tourism and financial services as major sources of employment and foreign exchange, and the highest per capita income in the region. - Political context: ruling Barbados Labor Party (BLP) led by Prime Minister Owen Arthur in office since 1994; next elections due in April 2008. - Historical macroeconomic shift: post-9/11 slowdown produced negative growth in 2001 and low growth in 2002–03; government “national emergency program” of public investment launched late-2001 revived activity but widened fiscal and external imbalances. - Recent structural reforms: cuts in income tax rates; further liberalization of the telecommunication sector; privatization of a major insurance company; formal membership arrangements for the CARICOM Single Market and Economy (CSME); reduction in foreign exchange controls facilitating CARICOM travel and foreign currency accounts. ### Medium-term outlook and risks - Near-term outlook (2006–07) improved because of preparations for the 2007 CWC, but significant macroeconomic imbalances create uncertainties. - Key risks: - Large current account deficit and rapid domestic credit expansion. - High oil prices. - Elevated levels of private and public debt. - Potential post-CWC growth slowdown. - Real estate/mortgage boom and absence of a real estate price index; anecdotal evidence of substantial property value increases and risk of correction. - Vulnerability to weather-related and external demand shocks. - Baseline medium-term scenario (2006–11) based on authorities’ policies: - Current account deficit falls slightly: around 10 percent of GDP in 2008 and then to 7 percent in 2011. - Under authorities’ policy to limit public sector external borrowing to at most cover amortization needs, the current account deficit net of private capital inflows would be financed out of reserves, with reserves declining to about 2½ months of imports in 2007–08 and to just above two months by 2010. - Public sector debt baseline: 75 percent of GDP in 2011; a combined shock to interest rates, GDP growth, and the primary fiscal balance would raise debt to 86 percent of GDP in 2011. - Policy implication: adjust domestic absorption rather than financing persistent higher oil payments with borrowing; improve current account and balance sheet positions to provide flexibility to cushion shocks. ### Key statistics and indicators (selected) - GDP growth: 3.9 percent in 2005; about 4 percent running rate. - Inflation: more than 6 percent in 2005; core inflation 4 percent in 2005. - Current account deficit: 12½ percent of GDP (also cited as 12.4 percent of GDP in 2005). - Public sector debt: above 80 percent of GDP. - Private sector credit growth: 21.7 percent in 2005. - Minimum deposit rate: increased by 250 basis points to 4.75 percent in 2005. - Gross international reserves: covered 3.5 months of imports by end-2005; projected to fall to about 2½ months in 2007–08 and to just above two months by 2010 under baseline. - Sovereign bond issuance: US$125 million in December 2005. - Nonperforming loans: 5.5 percent of total loans in 2005. - Capital adequacy (four locally-incorporated banks): declined from 25 percent in 2003 to 13 percent in 2005. - NIS surplus: 3.3 percent of GDP in 2005. - Extrabudgetary capital expenditures ahead of CWC: around 2 percent of GDP in 2005/06. - Projected NFPS deficit widening: 2½ percent of GDP in 2007/08 (to about 3 percent). - Mission fiscal consolidation target: bring debt-to-GDP ratio to under 60 percent by 2011. --- ### Macroeconomic diagnosis and policy direction (excerpted discussion) - Staff view: tightening fiscal policies is urgently needed to safeguard the external position and support the currency peg that has provided an anchor for price stability for three decades. - Policy history: recent direction broadly in line with Fund advice until the fiscal easing of the past year. - Authorities' stance: prefer a more gradual fiscal adjustment to sustain growth and employment. - Debt level highlighted: government debt close to 82 percent of GDP. ### Medium-term scenarios - Two scenarios: baseline (unchanged policies) and active (more ambitious adjustment and structural reforms). - Common near-term projection: continued rapid growth in 2006–07, slowdown thereafter. - Baseline: - Implies a deficit of 3 percent of GDP for the NFPS in 2007. - Leaves debt at around 75 percent of GDP in 2011. - Active: - Tighter monetary and fiscal policies reduce growth in 2007 but deliver higher growth from 2008 onward. - Brings debt-to-GDP to around 60 percent in 2011 and around 40 percent in 2015. - Higher VAT rates and public enterprise price adjustments raise inflation in 2006 in this scenario. - Less crowding out and higher deposit growth allow more room for private sector credit from 2007. ### Fiscal policy: findings and recommendations - Authorities consider a central government deficit of 2.5 percent of GDP sustainable and are committed to this target. - Risks to sustainability: - Capital and extrabudgetary expenditures remain relatively high in 2006/07 and 2007/08. - No new revenue-raising measures contemplated. - Removal of temporary 6 percent import tariff surcharge and the start of the sugar adaptation project project the overall NFPS deficit to rise to 3 percent of GDP in 2007/08. - Mission recommended fiscal adjustment strategy: - Increase NFPS primary surplus to 4.5 percent of GDP in 2006/07. - Revenue measures: increase VAT rates and reduce exemptions. - Price reforms: increase prices charged by major public enterprises; adopt more automatic and transparent pricing mechanisms; fully pass through oil price increases to consumers. - Expenditure measures: nominal freeze on discretionary spending, restraint on wage adjustments, postponement of some capital expenditures. - Sugar adaptation project: assume implementation over five rather than three years in the active scenario. - Authorities’ reaction: - Viewed the proposed adjustment as too sharp given CWC; would tighten further if decline in GIR is sharper than envisaged. - Aim to reduce public debt (including publicly-guaranteed debt) to 60 percent of GDP, preferring a 2015 horizon. - Mission longer-run advice: - After a pause in 2007/08 to avoid exacerbating a post-CWC slowdown, recommend further fiscal effort to bring the primary surplus above 5 percent of GDP and debt to safer levels. - Suggested lower extrabudgetary expenditures and winding down the sugar adaptation project to reach under 60 percent debt-to-GDP by 2011. ### Public debt and National Insurance Scheme (NIS) - Debt dynamics: - Baseline: debt-to-GDP falls from 82 percent in 2005 to 72 percent in 2007, then rises to 75 percent by 2011. - Active: debt-to-GDP around 60 percent in 2011 and around 40 percent in 2015. - Authorities’ asset argument: - Public sector debt net of NIS holdings falls from 64 percent of GDP in 2005 to 55 percent in 2011 in the baseline. - NIS facts: - NIS assets reached 27 percent of GDP by end-2005. - 2003 pension reform improved solvency; NIS provided more than 2 percentage points of GDP of funding to the rest of the NFPS in 2005. - Historical nominal returns of more than 6 percent. - Current portfolio: public sector exposure around 60 percent of total assets; objective to reduce that exposure and increase foreign asset allocation and long-term government and corporate debt holdings. - NIS total assets (Barbados dollars) 2000–2005: 1,272; 1,360; 1,335; 1,443; 1,575; 1,734. - NIS assets (percent of GDP) 2000–2005: 24.9; 26.8; 24.6; 26.5; 27.3; 27.3. - Asset shares (2000–2005, percent of total assets) include: Cash balances 1.0 2.4 0.6 -0.4 0.2 0.5; Deposits 16.2 16.4 15.7 20.2 18.6 19.9; Domestic investments 71.6 69.9 71.9 67.3 69.0 68.3; Debentures 53.8 52.0 54.9 52.4 48.5 46.6; Foreign assets 7.0 8.3 7.5 6.7 8.8 8.2; Other 4.2 3.2 4.3 6.2 3.5 3.1. ### Fiscal management and transparency recommendations - Broaden budget documentation to include operations outside central government and incorporate these into the new medium-term fiscal framework projected for implementation in 2007/08. - Undertake the fiscal module for the IMF’s ROSC for the next Article IV consultation. - Strengthen public debt management by focusing monitoring on the NFPS primary surplus and publishing an annual issuance calendar to aid institutional investors including NIS. --- ### Monetary and financial sector policies - Authorities announced no additional interest rate increases contemplated for 2006, expecting 2005 increases to reduce credit growth. - Credit growth: private sector credit growth above trend; mortgages have grown rapidly; preliminary Q1 2006 suggests credit growth slowed somewhat. - Mission view: further tightening of monetary policy is important to correct domestic and external imbalances because: - Real interest rates have declined close to zero as core inflation projected close to 5 percent in 2006. - International interest rates have risen; negative differentials might pressure the foreign exchange market. - Competition in banking has reduced spreads, requiring larger increases in minimum deposit rate to affect lending rates. - Recommendations: - Consider further policy rate increases; expand indirect monetary instruments gradually in preparation for phasing out capital account restrictions under the CSME. - Monitor banks’ net foreign asset position and currency mismatches across banks and corporates. - Vigilance on potential deterioration in credit quality, with attention to personal/mortgage sectors during inspections. - Encourage FSAP update in 2007 and support mutual evaluation of AML/CFT by CFATF in 2006. - Regulatory progress noted: - Guidelines on market risk for commercial banks and deposit insurance legislation expected before year-end; Basel II implementation expected for 2009. - Draft legislation to create a Financial Services Commission; large credit unions to be placed under central bank supervision. --- ### Exchange rate, external adjustment, and competitiveness - Mission supports maintaining the currency peg, conditional on correcting macroeconomic imbalances and accelerating structural reforms. - Expected effects of early fiscal tightening plus interest rate increases: - Reduce domestic demand growth to sustainable levels. - Lower current account deficit and keep GIR comfortably above three months of imports in the active scenario. - Adjustment shared by public and private sectors in proportion to their contributions to GDP (if recommendations followed). - External indicators: - Real exchange rate depreciated until 2005; increased domestic inflation and U.S. dollar strength since 2005 have eroded competitiveness gains. - Comparison of relative domestic price levels and relative per-capita income suggests an adequate exchange rate level given development. - A wage-productivity gap opened after 1995 has not been fully closed despite rapid productivity growth. - Tourism: Barbados’ share of Caribbean tourist arrivals has declined, although spending per tourist appears to have increased. --- ### Wage negotiations, structural reforms, and competitiveness priorities - Wage negotiations: - Mission recommended that the government exercise restraint in forthcoming wage negotiations to preserve competitiveness. - Upward inflation and tight labor markets increase negotiation difficulty; public sector wages cover a large fraction of the labor force. - Authorities emphasized reduction in personal income taxes and not simply passing past inflation into wage negotiations. - Structural priorities and mission recommendations: - Trade liberalization: current tariff rates about 22 percent (including import tariff surcharge); urged MFN liberalization and assessment of industries’ viability without government support. - Sectoral and energy conservation programs: coordinate incentive programs, limit duration, and assess costs/benefits; limit sugar adaptation support to commercially viable activities or redirect to social safety nets and infrastructure/human capital investments. - Privatization and investment climate: further privatization (including tourism); identify potential assets for near-term divestiture; improve port and distribution systems and real estate processes. - Capital market development: improve debt management practices; create benchmarks for private instruments; support stock market development regionally. - Labor market flexibility: examine streamlining unemployment and severance benefits given dual eligibility. - Disaster and risk mitigation: strengthen disaster preparedness; require insurance for hotels licensed after January 2006; encourage regional catastrophic risk pooling. - Numerical estimate cited: trade deficit expected to increase to US$1.8 million (0.1 percent of total exports of goods and services) by 2011; impact of sugar preference erosion on GDP expected to be marginal. --- ### Staff appraisal — growth, inflation, external balance, and policy implications - Growth and imbalances: - GDP growth running at about 4 percent; inflation accelerated to more than 6 percent; current account deficit widened to 12½ percent of GDP in 2005. - Strong capital inflows financed the external deficit in 2005, but financing conditions may deteriorate. - Recommendation on macro policy: - Early action to tighten macroeconomic policies would reduce overheating risks and help support the exchange rate. - Increases in oil prices partly explain inflation acceleration and widening external deficit; expansionary macro policies and rapid credit growth also contributed. - An early and decisive tightening is needed to address imbalances and help safeguard the fixed exchange rate regime. - Fiscal policy and public debt: - Return to fiscal consolidation is desirable. - Offset further extrabudgetary expenditures or PPPs that add to private sector buoyancy by reductions elsewhere. - Increase less distortionary indirect taxes in anticipation of removing the import tariff surcharge. - Improve pricing policies of major public enterprises and ensure full pass-through of international oil prices. - Reduce pension system exposure to the public sector and diversify NIS assets. - Monetary policy and financial stability: - Further monetary tightening would help contain inflation and curb excessive credit growth; consider tightening prudential standards if monetary measures fail to slow credit growth. - Continue developing money and capital markets and strengthen financial sector regulation. - Monitor risks from large capital inflows and rapid credit growth. --- ### Data, surveillance, and statistical issues - Statistical coverage generally adequate for surveillance but weaknesses remain, notably: - Exclusion of offshore enterprises from national and external accounts despite substantial onshore presence due to tax treaties. - Lack of timely, reliable source data on nonsugar agriculture, private construction, and nontourism services. - Constant price GDP estimates use a 1974 base year; authorities updating reference year to 2000. - No systematic property price index. - Under-reporting of off-budget transactions and lagged reporting of public enterprise data. - Monetary statistics residency concept not fully consistent with BPM5; need to extend coverage to include offshore bank accounts. - Lags in merchandise trade data compilation and need to strengthen financial account estimates. - Proposed actions: - Rebase national accounts and price indices; conduct economic census initiated June 2005. - Improve reporting of public enterprise operations to MFEA and move toward full accrual reporting for 2007/2008. - Strengthen quarterly balance of payments and data timeliness. --- ### Appendix VI — External debt and public debt sustainability (selected figures) - Baseline NFPS gross debt (percent of GDP): 2001: 82.9; 2002: 87.0; 2003: 84.1; 2004: 83.6; 2005: 81.6; 2006: 74.0; 2007: 71.8; 2008: 72.6; 2009: 73.5; 2010: 74.0; 2011: 74.8. - Of which foreign-currency denominated (percent of GDP) 2001–2011: 29.3; 28.0; 26.8; 27.1; 28.1; 25.2; 23.6; 23.0; 22.4; 21.8; 21.2. - Primary deficit (percent of GDP) 2001–2011: 2.4; 8.6; 2.2; -3.2; -2.9; -2.6; -0.4; -0.4; -1.5; -1.9; -1.8. - Gross financing need (percent of GDP) 2001–2011: 17.3; 24.6; 17.1; 12.0; 12.1; 13.3; 15.4; 15.4; 13.9; 14.7; 13.4. - External debt (percent of GDP, baseline) 2001–2011: 37.7; 40.2; 37.4; 37.6; 39.2; 36.7; 35.4; 35.6; 35.5; 34.7; 34.6. - Current account deficit excluding interest payments (percent of GDP) 2001–2011: -2.7; -4.6; -4.3; -10.1; -10.5; -10.1; -9.7; -8.6; -7.9; -6.6; -5.8. - Key macro assumptions (real GDP growth, percent) 2001–2011: -3.3; 3.5; 0.8; 6.2; 4.4; 3.7; 3.5; 2.0; 2.3; 2.5; 2.1. - Combined shocks and bound tests: - Combined shock raises external/public debt metrics materially (representative combined shock values and higher gross financing need shown in scenario boxes). --- *Source: IMF staff report — Executive Summary (document _cr06323).* ### Executive Summary ...................................................................................................... ### _cr06323 - Executive Summary ### Recent developments - GDP growth was 3.9 percent in 2005 and is running at about 4 percent (2004–05). - Inflation accelerated to more than 6 percent in 2005; core inflation rose from almost zero in 2004 to 4 percent in 2005. - The current account deficit widened to 12½ percent of GDP in 2005 (noted elsewhere as 12.4 percent of GDP in 2005). - Public sector debt remains above 80 percent of GDP. - Credit to the private sector grew by 21.7 percent in 2005. - The central bank raised the minimum deposit rate by 250 basis points (four-step increase) to 4.75 percent in 2005. - Gross international reserves covered 3.5 months of imports by end-2005; reserves had been declining since 2003 but were supported by strong capital inflows, including a US$125 million sovereign bond issued in December 2005. - Nonperforming loans fell to 5.5 percent of total loans in 2005 (from 7.9 percent in 2002). - The capital adequacy ratio of the four locally-incorporated banks declined from 25 percent in 2003 to 13 percent in 2005. - The National Insurance Scheme (NIS) achieved a surplus of 3.3 percent of GDP in 2005. - Extrabudgetary capital expenditures ahead of the 2007 Cricket World Cup (CWC) increased to around 2 percent of GDP in 2005/06. ### Policy discussions and staff recommendations - Main policy objective: address macroeconomic imbalances to achieve sustainable growth and protect the exchange rate peg. - Monetary policy: - Staff recommended a further increase in policy rates to reduce credit growth and overheating risks. - Authorities had tightened policy in 2005 (250 basis points) and expected these increases to eventually reduce credit growth. - Fiscal policy: - Staff recommended avoiding a widening of the nonfinancial public sector deficit (expected to widen by 2½ percent of GDP in 2007/08 to about 3 percent) and instead pursue consolidation to bring the debt-to-GDP ratio to under 60 percent by 2011. - Authorities preferred a more gradual path of fiscal consolidation. - Exchange rate and structural policies: - The mission supported maintaining the currency peg conditional on correcting macroeconomic imbalances and strengthening structural reforms to enhance competitiveness. - Recommended structural reforms: trade liberalization, privatization, rationalization of sectoral incentive programs, and limiting support for the sugar adaptation strategy to commercially viable activities. - Financial sector: - Authorities agreed on monitoring banks’ asset quality and their net foreign asset position given large capital inflows and rapid domestic credit growth. - Authorities agreed on a gradual opening up of the capital account and reported measures to strengthen financial sector regulation and financial market infrastructure. ### Background and context - Barbados has favorable regional economic and social indicators, stable political institutions, tourism and financial services as major sources of employment and foreign exchange, and the highest per capita income in the region. - Political context: ruling Barbados Labor Party (BLP) led by Prime Minister Owen Arthur in office since 1994; next elections due in April 2008. - Historical macroeconomic shift: after eight years of about 3 percent average GDP growth in the 1990s, post-9/11 global slowdown led to negative growth in 2001 and low growth in 2002–03; government launched a “national emergency program” of public investment in late-2001 that revived activity but widened fiscal and external imbalances. - Recent structural reforms: cuts in income tax rates, further liberalization of the telecommunication sector, privatization of a major insurance company, formal membership arrangements for the CARICOM Single Market and Economy (CSME), and a reduction in foreign exchange controls facilitating CARICOM travel and foreign currency accounts. ### Medium-term outlook and risks - Near-term outlook (2006–07) is auspicious because of preparations for the 2007 CWC, but significant macroeconomic imbalances create uncertainties. - Key risks: - Large current account deficit and rapid domestic credit expansion. - High oil prices. - Elevated levels of private and public debt. - Potential post-CWC growth slowdown. - Real estate/mortgage boom and the absence of a real estate price index; anecdotal evidence suggests a substantial rise in property values and the risk of correction. - Vulnerability to weather-related and external demand shocks. - Baseline medium-term scenario (2006–11) based on authorities’ policies: - Current account deficit falls slightly: around 10 percent of GDP in 2008 and then to 7 percent in 2011. - Under the authorities’ policy to limit public sector external borrowing to at most cover amortization needs, the current account deficit net of private capital inflows would be financed out of reserves, with reserves declining to about 2½ months of imports in 2007–08 and to just above two months by 2010. - Public sector debt baseline: 75 percent of GDP in 2011; a combined shock to interest rates, GDP growth, and the primary fiscal balance would raise debt to 86 percent of GDP in 2011 (Appendix VI). - Policy implication: adjust domestic absorption rather than financing persistent higher oil payments with borrowing; improve current account and balance sheet positions to provide flexibility to cushion shocks. ### Key statistics and indicators (selected from the text) - GDP growth: 3.9 percent in 2005; about 4 percent running rate. - Inflation: more than 6 percent in 2005; core inflation 4 percent in 2005. - Current account deficit: 12½ percent of GDP (noted as 12.4 percent of GDP in 2005 in another paragraph). - Public sector debt: above 80 percent of GDP. - Private sector credit growth: 21.7 percent in 2005. - Minimum deposit rate: increased by 250 basis points to 4.75 percent in 2005. - Gross international reserves: covered 3.5 months of imports by end-2005; projected to fall to about 2½ months in 2007–08 and to just above two months by 2010 under baseline. - Sovereign bond issuance: US$125 million in December 2005. - Nonperforming loans: 5.5 percent of total loans in 2005. - Capital adequacy (four locally-incorporated banks): declined from 25 percent in 2003 to 13 percent in 2005. - NIS surplus: 3.3 percent of GDP in 2005. - Extrabudgetary capital expenditures ahead of CWC: around 2 percent of GDP in 2005/06. - Projected nonfinancial public sector deficit widening: 2½ percent of GDP in 2007/08 (to about 3 percent). - Fiscal consolidation target recommended by mission: bring debt-to-GDP ratio to under 60 percent by 2011. *Source: IMF staff report — Executive Summary (document _cr06323).* ### 16. Discussions focused on the need to tighten macroeconomic policies to reduce the ### _cr06323 - 16. Discussions focused on the need to tighten macroeconomic policies to reduce the ### Macroeconomic diagnosis and policy direction - Staff view: tightening of fiscal policies is urgently needed to safeguard the external position and support the currency peg that has provided an anchor for price stability for three decades. - Policy history: direction of policies over recent years broadly in line with Fund advice, until the fiscal easing of the past year. - Authorities' stance: current fiscal stance and a more gradual path of fiscal adjustment than suggested by the Fund would help sustain growth and employment. - Debt level highlighted: government debt now close to 82 percent of GDP. ### Medium-term scenarios and projections - Two scenarios prepared: baseline (unchanged policies) and active (more ambitious adjustment and structural reforms). - Common near-term projection: both scenarios envisage continued rapid growth in 2006–07, and a slowdown thereafter. - Baseline scenario: - Based on authorities’ fiscal targets. - Implies a deficit of 3 percent of GDP for the nonfinancial public sector (NFPS) in 2007. - Leaves debt at around 75 percent of GDP in 2011. - Active scenario: - Entails slower growth in 2007 than the baseline owing to tighter monetary and fiscal policies. - Results in higher growth from 2008 onward with greater progress in reducing public debt and enhanced structural reforms. - Brings debt-to-GDP ratio to around 60 percent in 2011, and around 40 percent in 2015. - Assumptions and mechanisms noted: - Higher VAT rates and public enterprise prices account for higher inflation in 2006 in the active scenario. - Less crowding out and higher deposit growth allow more room for credit to the private sector beginning in 2007. ### Fiscal policy: findings and recommendations - Authorities consider a deficit of 2.5 percent of GDP for the central government to be sustainable and are committed to this target. - Recent performance: continued discipline over current budgetary expenditures yielded a lower-than-expected central government deficit in 2005/06. - Risks to sustainability: - Policy initiatives likely to worsen the fiscal position over the medium term (capital and extrabudgetary expenditures remain relatively high in 2006/07 and 2007/08). - No new revenue-raising measures contemplated. - Removal of the temporary 6 percent import tariff surcharge and the start of the sugar adaptation project project the overall NFPS deficit to rise to 3 percent of GDP in 2007/08. - Mission recommendation (fiscal adjustment strategy): - Increase the NFPS primary surplus to 4.5 percent of GDP in 2006/07. - Revenue measures: increase VAT rates and reduce exemptions. - Price reforms: increase prices charged by major public enterprises; adopt more automatic and transparent pricing mechanisms; fully pass through oil price increases to consumers. - Expenditure measures: nominal freeze on discretionary spending, restraint on wage adjustments, postponement of some capital expenditures. - Specific project timing: active scenario assumes sugar adaptation project implemented over five rather than three years. - Authorities’ reaction: - Viewed proposed adjustment as too sharp; argued 2006 exceptional due to hosting the CWC. - Would tighten fiscal policy further if decline in GIR is sharper than envisaged. - Aim to reduce public debt, including publicly-guaranteed debt, to 60 percent of GDP (authorities prefer reaching the debt target in 2015). - Mission longer-run advice: - After a pause in 2007/08 to avoid exacerbating post-CWC slowdown, recommend further fiscal effort to bring the primary surplus to above 5 percent of GDP and debt to safer levels. - Suggested lower extrabudgetary expenditures and winding down the sugar adaptation project to bring debt-to-GDP under the 60 percent target by 2011 (contrasts with authorities’ preferred 2015 target). ### Public debt and National Insurance Scheme (NIS) - Debt dynamics: - Baseline: debt-to-GDP ratio declines from 82 percent in 2005 to 72 percent in 2007, but partial reversal implies ratio goes back up to 75 percent of GDP by 2011. - Active scenario: debt-to-GDP around 60 percent in 2011 and around 40 percent in 2015. - Authorities’ asset argument: - Public sector debt net of NIS holdings falls from 64 percent of GDP in 2005 to 55 percent in 2011 in the baseline scenario. - NIS assets are earmarked to meet future pension liabilities. - NIS performance and composition (end-2005 and recent years): - NIS assets reached 27 percent of GDP by end-2005. - 2003 pension reform improved solvency; NIS provided more than 2 percentage points of GDP of funding to the rest of the NFPS in 2005. - Historical nominal returns of more than 6 percent. - Current portfolio: public sector exposure around 60 percent of total assets; objective to reduce that exposure and increase foreign asset allocation and long-term government and corporate debt holdings. - NIS asset composition table (selected entries preserved as in source): - Total assets (Barbados dollars): 1,272; 1,360; 1,335; 1,443; 1,575; 1,734 (years 2000–2005 respectively). - In percent of GDP: 24.9; 26.8; 24.6; 26.5; 27.3; 27.3 (years 2000–2005 respectively). - Asset shares (2000–2005, percent of total assets): Cash balances 1.0 2.4 0.6 -0.4 0.2 0.5; Deposits 16.2 16.4 15.7 20.2 18.6 19.9; Domestic investments 71.6 69.9 71.9 67.3 69.0 68.3; Debentures 53.8 52.0 54.9 52.4 48.5 46.6; Treasury bills 0.0 0.0 0.0 0.0 1.2 1.4; Foreign assets 7.0 8.3 7.5 6.7 8.8 8.2; Other 4.2 3.2 4.3 6.2 3.5 3.1. - Recommendations for fiscal management and transparency: - Broaden budget documentation to include operations outside the central government and incorporate these into the new medium-term fiscal framework projected for implementation in 2007/08. - Undertake the fiscal module for the IMF’s Report on the Observance of Standards and Codes (ROSC) for the next Article IV consultation. - Strengthen public debt management by focusing monitoring on the NFPS primary surplus and publishing an annual issuance calendar to aid institutional investors including NIS. ### Monetary and financial sector policies - Authorities' announced stance: no additional increases in interest rates contemplated for 2006, expecting 2005 rate increases to reduce credit growth. - Credit growth: private sector credit growth above trend; mortgages have grown fast enough to satisfy standard definitions of a credit boom (see cited literature); preliminary Q1 2006 figures suggest credit growth slowed somewhat but still uncertain. - Mission view: further tightening of monetary policy is important to correct domestic and external imbalances. - Reasons: - Real interest rates have declined close to zero as core inflation projected to be close to 5 percent in 2006. - International interest rates have continued to rise; negative differentials might lead to foreign exchange market pressures. - Competition in banking has reduced spreads, requiring larger increases in minimum deposit rate to affect lending rates. - Authorities expect market-driven rate increases due to tight liquidity; would adjust policy rates if market rates do not rise. - Recommendation to expand indirect monetary instruments gradually in preparation for phasing out capital account restrictions under the CSME; increased use would deepen financial markets and improve bank efficiency. - Supervisory and stability recommendations: - Monitor banks’ net foreign asset position and currency mismatches across banks and corporates. - Vigilance on potential deterioration in credit quality, with attention to personal/mortgage sectors during inspections. - Encourage FSAP update in 2007 and support mutual evaluation of AML/CFT by CFATF in 2006. - Regulatory progress noted: - Guidelines on market risk for commercial banks and deposit insurance legislation expected before year-end. - Implementation of Basel II regulations expected for 2009. - Draft legislation to create a Financial Services Commission; large credit unions to be placed under central bank supervision. ### Exchange rate, external adjustment, and competitiveness - Mission supports maintaining the currency peg, conditional on correcting macroeconomic imbalances and accelerating structural reforms. - Expected effects of recommended policy package (early fiscal tightening plus interest rate increases): - Reduce domestic demand growth to sustainable levels. - Lower current account deficit and keep gross international reserves (GIR) comfortably above three months of imports in the active scenario. - Adjustment shared by public and private sectors in proportion to their contributions to GDP (subject to mission’s recommendations being followed). - External indicators and competitiveness concerns: - Real exchange rate depreciated until 2005; increased domestic inflation and U.S. dollar strength since 2005 have eroded competitiveness gains. - Comparison of relative domestic price levels and relative per-capita income suggests an adequate exchange rate level given development. - A gap between wages and productivity that opened after 1995 has not been fully closed despite rapid productivity growth. - Tourism: Barbados’ share of Caribbean tourist arrivals has declined, although spending per tourist appears to have increased; data sources differ (central bank vs. CTO). - Charts referenced in source: - Private Sector Credit/GDP and Mortgages/GDP trends (1980–2004). - NFPS overall balance and total government debt (2005–2011) comparing Baseline and Active scenarios. - GIR (months of imports) and Current Account Deficit (percent of GDP) series (2005–2011) comparing Baseline and Active scenarios. - Selected competitiveness indicators (1999–2006): Real Effective Exchange Rate; Domestic Price Level relative to US Prices vs. GDP per capita; Tourist arrivals and tourism expenditure; Real Wage Index and Labor Productivity (Index 1995 = 100). *Source: IMF staff report excerpt, _cr06323 - 16. Discussions focused on the need to tighten macroeconomic policies to reduce the (PDF).* ### 36. The mission recommended that the government exercise restraint in forthcoming ### _cr06323 - 36. The mission recommended that the government exercise restraint in forthcoming ### Wage negotiations and competitiveness - The mission recommended that the government exercise restraint in forthcoming wage negotiations to preserve competitiveness—alongside tightening macro policies and enhancing structural reforms. - Drivers and risks: - Upward trend in inflation and tight labor markets set the stage for difficult wage negotiations. - Public sector wages cover a large fraction of the labor force and spillovers to private contract negotiations could risk losses in competitiveness. - The mission welcomed emphasis by the authorities on the reduction in personal income taxes (which has boosted take-home pay), and on not simply passing past inflation into wage negotiations. ### Structural issues and prioritized reforms - The mission encouraged focusing reform efforts on: further opening up the economy; improving efficiency and flexibility of capital and labor markets; and placing greater reliance on private sector initiative and competition. - Specific priority areas (mission recommendations): - Trade liberalization: - Current tariff rates are about 22 percent (including the import tariff surcharge). - Urged to complement planned CSME liberalization with more MFN liberalization. - Recommended assessing whether some industries can operate without government support, given robust job growth forecast over the next few years. - Sectoral and energy conservation programs: - Noted ongoing initiatives to better coordinate sectoral incentive programs and avoid duplication. - Scope for careful assessment of costs and benefits and additional streamlining. - Programs—including for restructuring—should be of limited duration. - Concern with potential fiscal costs of the sugar adaptation strategy; recommended limiting activities to those commercially viable and able to survive without government support, including raw sugar production. - If activities are not viable, consider redirecting support to social safety net payments for affected workers and programs to strengthen infrastructure and human capital. - Numerical estimate: The trade deficit is expected to increase from a minimal amount in 2006 to US$1.8 million (or 0.1 percent of total exports of goods and services) by 2011; the impact of sugar preference erosion on GDP is expected to be marginal. - Privatization and investment climate: - Endorsed intention to further privatize—including in the tourism sector—and urged explicit identification of potential assets for near-term divestiture. - Suggested improvements in port and distribution systems, and the process for buying and selling real estate. - Capital market development: - Government role: improve debt management practices and create benchmarks for private instruments. - Supported efforts to further develop the stock market in a regional context. - Labor market flexibility: - Noted increased flexibility in context of the CSME, which helped contain wage pressures amid rapid employment growth. - Urged examination of scope for streamlining unemployment and severance benefits given dual eligibility of workers for both benefits. - Disaster and risk mitigation: - Welcomed efforts to strengthen disaster preparedness, including requirement of insurance for all hotels licensed after January 2006. - Encouraged regional efforts for pooling catastrophic risk. ### Staff appraisal — growth, inflation, and external balance - Growth and imbalances: - Barbados’ economy continued to grow in 2005, but macroeconomic imbalances worsened. - GDP growth is running at about 4 percent and is expected to continue at this fast pace in 2006 and 2007. - Inflation accelerated to more than 6 percent. - Current account deficit widened to 12½ percent of GDP in 2005. - Strong capital inflows financed the external deficit in 2005, but financing conditions may deteriorate in the years ahead. - Recommendation on macro policy: - Early action to tighten macroeconomic policies would reduce risks of overheating and help support the exchange rate. - Increases in oil prices partly explain inflation acceleration and widening external deficit; expansionary macro policies and rapid credit growth also contributed to acceleration in core inflation and imports over the last two years. - An early and decisive tightening of macroeconomic policies is needed to address imbalances and help safeguard maintenance of the fixed exchange rate regime. ### Fiscal policy and public debt - Fiscal policy: - Return to the fiscal consolidation path of recent years would be desirable. - On expenditures: further increases in extra budgetary expenditures or PPPs that add to an already buoyant private sector should be offset by reductions in other outlays. - Less distortionary indirect taxes could be increased in anticipation of the removal of the import tariff surcharge. - Better pricing policies could consolidate finances of major public enterprises. - Public debt: - Public debt levels are being lowered, but should be brought down to safer levels at a faster pace. - Rating agencies and market participants consider high public debt a key weakness; current debt path would only gradually reduce debt ratios. - Currently favorable cyclical and interest rate conditions will bring debt-to-GDP ratios down in the near term, but reversal of these conditions would partly undo progress. - Pension system exposure to the public sector should be reduced. ### Monetary policy, banking sector, and financial stability - Monetary policy: - Further monetary tightening would help contain inflation and curb excessive credit growth. - Real interest rates are low; prospects of higher international rates and uncertainties about monetary transmission suggest further increases in policy rates are warranted. - If monetary measures fail to slow credit growth, tightening of prudential standards might be considered. - Continued efforts to develop money and capital markets would facilitate gradual introduction of indirect instruments of monetary policy. - Banking and financial sector: - Official banking indicators appear sound and regulations are being strengthened. - Important to monitor risks from large capital inflows and rapid domestic credit growth. - Authorities introduced measures to strengthen the regulatory framework and develop financial market infrastructure. - Financial indicators lag credit and liquidity problems; potential deterioration in credit quality and reductions in net foreign assets need careful monitoring—especially with increasing competition from regional banks. ### Competitiveness and external adjustment - Strengthening competitiveness could facilitate external adjustment in the medium run. - Structural reforms—trade liberalization, rationalization of incentive programs, and privatization—are preferred over selective sector support. - Support for the sugar adaptation strategy should be limited to commercially viable activities. - Flexible labor markets and deeper capital markets are likely to enhance medium-term growth. ### Data and surveillance - Statistical information provided by Barbados is broadly adequate for surveillance purposes, but weaknesses remain. - Coverage and transparency of data on public sector entities and capital account transactions could be improved. - It is proposed that the next Article IV consultation with Barbados take place on the standard 12-month cycle. ### Boxed analytical findings (selected) - Box 1 — Inflation Dynamics in Barbados: - The acceleration in inflation over the last two years was driven largely by imported oil prices, but more recently domestic demand pressures have played a bigger role. - From January 2004 until mid-2005, overall inflation was higher than nontraded goods price inflation, reflecting increases in imported oil prices; since July 2005, nontraded goods inflation surpassed the overall CPI index. - Core inflation converged to the broader index over the last six months prior to the report. - Variance decomposition from a macroeconometric model indicates: - Oil shocks contribute to inflation in the short run (less than one year). - Impact of credit to the private sector on prices operates with longer lags; the relative importance of credit shocks grows with the forecast horizon and is as important as oil price shocks for a horizon of about three years. - Model specification: four variable vector autoregression (VAR), quarterly data from 1974Q1 to 2005Q4; variables: international oil prices (oil), consumer prices (cpi), bank credit to private sector (credit) and the interest rate on treasury bills (t-bill). - Box 2 — Barbados: Fiscal Policy Stance, 2001–11: - Fiscal policy was countercyclical in the first half of the decade (fiscal expansion 2001–02 when growth was below trend; fiscal impulse negative in 2003–04 during rebound). - Fiscal policy turned procyclical in 2005; fiscal impulses under the baseline are expected to continue to exacerbate the cyclical expansion. - Expenditures associated with the CWC and other public projects will extend the expansionary stance to 2007. - Fiscal policy becomes neutral in 2008 when projected economic growth would be below potential output growth while the output gap remains positive. - An early adjustment, as in the staff’s active scenario, would avoid tightening policies further in the aftermath of the CWC. *IMF staff report content (excerpt).* ### Box 3. Implications of the CARICOM Single Market and Economy for Barbados ### Box 3. Implications of the CARICOM Single Market and Economy for Barbados ### CSME timeline and phases - The single market phase of the CARICOM Single Market and Economy (CSME) was formally launched on January 1, 2006 with six members. - The single economy phase, which will involve harmonization of laws, and coordination/convergence of economic, monetary and fiscal policies, is expected to be implemented by end-2008. - Announcement of a commitment date for full capital account liberalization has been deferred until 2007. ### Trade and services implications - Barbados is expected to reap net benefits in the area of trade, particularly trade in services. - High production costs, related in part to high wages, put Barbados at a comparative disadvantage in the production of most goods. - Significant opportunities to diversify into cross-border financial and service-related activities are expected. ### Labor mobility and labor-market effects - The provision for the free movement of labor covers five categories of workers: media workers, university graduates, musicians, artists and athletes. - Free movement of these categories is expected to facilitate labor market flexibility. ### Capital movement and policy stance - Barbados has adopted several measures to facilitate free movement of capital. - To minimize the risks associated with capital outflows, the authorities are proceeding cautiously with the implementation of full capital account liberalization. - Announcement of a commitment date for full capital account liberalization has been deferred until 2007. *Box 3. Implications of the CARICOM Single Market and Economy for Barbados — IMF staff report excerpt* ### Introduction of a value-added tax. ### Introduction of a value-added tax. ### Active Inter-American Development Bank (IDB) operations to Barbados (as of June 9, 2006) - Solid Waste Management: Approval Date Oct. 1998; Amount 13.0; Amount Disbursed 0.0; Amount Available 13.0 (In millions of U.S. dollars). - Education Sector Enhancement: Approval Date Dec. 1998; Amount 85.0; Amount Disbursed 28.2; Amount Available 56.8. - Administration of Justice: Approval Date Aug. 2001; Amount 8.8; Amount Disbursed 0.6; Amount Available 8.2. - Coastal Infrastructure: Approval Date Jan. 2002; Amount 17.0; Amount Disbursed 2.7; Amount Available 14.3. - Modernization of Customs, Excise and VAT Areas: Approval Date Nov. 2005; Amount 4.4; Amount Disbursed 0.0; Amount Available 4.4. - Total: Approval Amount 128.1; Amount Disbursed 29.4; Amount Available 98.7. ### IDB convertible resources: net cash flow and activity (1998–2006 projections) - Loan approvals (selected years): 1998: 98.0; 2002: 8.7; 2003: 17.0; 2006 (p): 51.2. - Repayments (selected years): 1998: 7.5; 2001: 8.1; 2002: 7.3; 2003: 7.3; 2004: 8.1; 2005: 7.7; 2006 (p): 13.8; later entries: 12.2, 19.4. - Disbursements (selected years): 1998: 17.9; 2001: 5.8; 2002: 10.4; 2003: 24.2; 2004: 15.8; 2005: 14.4; 2006 (p): 7.9; later entries: 4.4, 12.2. - Net loan flow (selected years): 1998: 10.4; 1999: -2.3; 2000: 3.1; 2001: 16.9; 2002: 7.7; 2003: 6.7; 2004: -5.9; 2005: -7.7; 2006 (p): -7.2. - Interest and charges (selected years): 1998: 8.2; 1999: 9.7; 2000: 10.0; 2001: 8.7; 2002: 7.2; 2003: 7.4; 2004: 7.4; 2005: 7.1; 2006 (p): 8.9. - Net cash flow (selected years): 1998: 2.2; 1999: -12.0; 2000: -6.9; 2001: 8.2; 2002: 0.5; 2003: -0.7; 2004: -13.3; 2005: -14.8; 2006 (p): -16.1. - Debt service (selected years): 2001: 15.7; 2002: 17.8; 2003: 17.3; 2004: 16.0; 2005: 15.3; 2006 (p): 15.1; later: 21.2, 19.3, 28.3. - Debt outstanding (selected years): 1998: 143.9; 1999: 141.6; 2000: 127.0; 2001: 143.9; 2002: 151.6; 2003: 156.6; 2004: 150.7; 2005: 146.1; 2006 (p): 158.8. - Source: Inter-American Development Bank. P= Projections. ### Caribbean Development Bank (CDB) approvals to Barbados (1970–May 2006) - Total approved: US$226.6 million (represents 8.6 percent of CDB approvals to borrowing members). - Sectoral allocation (US$ million and percent): - Productive sector: 61.8; 27.3 percent. - Agriculture: 4.2; 1.9 percent. - Manufacturing: 45.5; 20.1 percent. - Tourism: 12.0; 5.3 percent. - Mining: 0.1; 0.0 percent. - Economic infrastructure: 111.6; 49.2 percent. - Power and energy: 0.1; 0.0 percent. - Water: 0.8; 0.3 percent. - Transportation: 55.4; 24.4 percent. - Housing: 1.4; 0.6 percent. - Education: 50.7; 22.3 percent. - Health: 3.2; 1.4 percent. - Multisector: 53.3; 23.5 percent. - Total: 226.6; 100.0 percent. - Recent approvals: 2003 multisector loans ~US$13.5 million; no new loans in 2004 and 2005; 2006 through May: technical assistance loan US$3.5 million. - Source: Caribbean Development Bank. ### Follow-up on key recommendations of the 2002 Financial Sector Assessment Program (FSAP) - Banking sector recommendations and actions: - Financial Institutions Act (FIA): Recommendation to amend FIA to strengthen CBB independence, impose aggregate limits on large exposures and connected lending, facilitate license revocation and distressed bank resolution, and require CBB’s prior approval of external auditors. - Action: FIA expected to be revised. Guidelines on market risk, large exposures, outsourcing, corporate governance (including connected lending) drafted. No specific approval date; CBB expects some decisions in the second half of 2006. - On-site examinations: Recommendation to boost CBB supervisory resources to conduct regular on-site exams of all onshore and offshore banks on an 18–24 months cycle. - Action: CBB conducted more regular on-site examinations during 2005. - Deposit Insurance Act: Recommendation to design and implement deposit insurance to contain potential financial instability and facilitate license revocation and distressed bank resolution. - Action: Deposit Insurance Act drafted; expected to be passed by Parliament of Barbados in 2006. Scheme will facilitate license revocation and distressed bank resolution. - Credit unions: - CBB assisted on-site examinations: High priority to complete CBB-assisted on-site exams of five large credit unions and make them regular. - Action: Two rounds of joint inspections (CBB and Co-operative department) of larger credit unions during 2005. - Credit Union Law: Consider introducing separate credit unions law; strengthen Registrar of Cooperatives’ supervisory capacity. - Action: Amendment to credit union legislation and new prudential guidelines to be implemented in next months. New legislation and guidelines expected to be passed before the Financial Services Commission Act. Financial Services Commission Act expected to be approved in June 2007. - Insurance sector: - Supervisory resources: Need to increase supervisory resources for on-site inspections supported by analytical off-site review. - Action: Four supervisory positions created in FY 04/05 and four more to be created this year. Currently two teams for on-site inspections; additional team to be formed with new positions. - Solvency margins: Develop solvency margin requirement for life insurers and review provisioning rules and asset requirements. - Action: Legislation regarding minimum continuing capital and surplus requirements for life insurance companies, and a minimum capital test for regulated general insurance companies, will be submitted to Parliament of Barbados in October 2006. - Circulars: Issue circulars to codify understandings on corporate governance and internal controls. - Action: Authority to issue circulars contemplated in new Insurance Core Principles Regulations (Regulation 246); regulation to be submitted to Parliament in October 2006 to complement the Insurance Act. - Independence and transparency: Supervisor to publish information about operations and market to promote independence and compliance. - Action: Financial Services Commission (single regulatory agency for non-banking sector), expected to be approved in June 2007, will increase independence and transparency of insurance sector regulation. - Capital markets: - Securities Commission: Well-drafted legislation and efforts reflected in IOSCO Principles assessment; SC not fully staffed or operational earlier. - Action: Inspection and enforcement of the Security Act improved since the Securities Commission became fully operational in 2003. - Securities settlement period: Move toward DVP principles and T+3 settlement cycle. - Action: Effective January 1st 2006, securities clearing and settlement cycle reduced to T+3. ### Statistical issues and data weaknesses (surveillance relevance) - General: - Barbados participates in the GDDS. Metadata and plans for statistical improvements are posted on the Fund’s DSBB. - Real sector: - National accounts compiled according to 1968 SNA. - Exclusion of offshore enterprises from national and external accounts is a major concern due to substantial onshore presence because of tax treaties. - Lack of timely, reliable source data on nonsugar agriculture, private construction, and nontourism services adversely affects production-based GDP estimates. - June 2005: authorities initiated a census of economic activity covering tourism, financial businesses, transport and communications. - Expenditure-based GDP: household survey provides a reliable but out-of-date aggregate consumption estimate; external trade and investment surveys have weaknesses. - Constant price GDP estimates have a 1974 base year; authorities currently updating reference year to 2000 to facilitate CARICOM comparison. - CARTAC provided assistance to develop a supply and use table to support rebasing and better sector estimates. - Prices and production indices: - No systematic index of property prices; potential misalignments in real estate prices unattended. - CPI uses expenditure basket for 1998–99 for its July 2001=100 series introduced January 2002. Comparisons of CPI data prior to 2002 with data after 2002 should be undertaken with care. - Index of industrial production based on sectoral weights from 1982; authorities working to rebase series to 1994. - Nonfinancial public sector: - Above-the-line data for general government fairly comprehensive and timely, but lags in reporting transfers. - Under-reporting of off-budget transactions causes significant discrepancy between overall balance and financing data. - Public enterprise data not systematically or promptly reported to MFEA; figures on transfers and capital spending often differ from MFEA data. - Financial sector data on public sector net domestic borrowing often cannot be reconciled with above-the-line fiscal data due to limited nonbank financial sector information. - Authorities plan full accrual reporting for 2007/2008; to be discussed with planned FAD ROSC mission in November 2006. - Financial sector (monetary accounts): - Residency concept in monetary statistics not consistent with fifth edition Balance of Payments Manual. - CBB classifies some loans to and deposits of non-residents as credit to private sector and part of broad money instead of net foreign assets of commercial banks. - Non-national individuals recognized as residents only after 3 years continuous residence. - Need to extend coverage to include offshore bank accounts. - Accounting conventions: CBB reports data on a cash basis excluding accrued receivables/payables; commercial banks recorded on accrual basis but accrued interest classified under other assets/liabilities rather than domestic credit. - Marketable securities recorded at acquisition cost and revalued to market value annually as of December 31. - Short-term zero-coupon securities (treasury bills) recorded at acquisition cost and not revalued until redemption at maturity. - IMF positions (SDR holdings, Reserve Tranche Position, SDR Allocation) valued at IMF holdings rate rather than end-of-period market rate. - Issues being addressed in GDDS context. - External sector: - Lags in merchandise trade data compilation limit timeliness of external current account estimates, especially offshore sector activity. - Components of financial account estimates need strengthening. - Quarterly balance of payments estimates no longer provided. - October 2005: Barbados provided STA with 1987–2004 annual balance of payments data. ### Table of common indicators required for surveillance (as of July 5, 2006) — selected entries and frequencies - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation 3/31/06; Date received 4/29/06; Frequency of Data M; Frequency of Reporting M; Frequency of publication W. - Reserve/Base Money: Latest observation 3/31/06; Date received 5/03/06; Frequency M/M/M. - Broad Money: Latest observation 2/28/06; Date received 5/03/06; Frequency M/M/M. - Central Bank Balance Sheet: Latest observation 3/31/06; Date received 5/03/06; Frequency M/M/M. - Consolidated Balance Sheet of the Banking System: Latest observation 2/28/06; Date received 5/03/06; Frequency M/M/M. - Interest Rates: Latest observation 2/28/06; Date received 5/03/06; Frequency M/M/M. - Consumer Price Index: Latest observation 03/06; Date received 4/31/06; Frequency M/M/M. - Revenue, Expenditure, Balance and Composition of Financing – General Government: Latest observation 3/31/06; Date received 5/08//06; Frequency Q/Q/Q. - External Current Account Balance: Latest observation 12/05; Date received 5/08/06; Frequency A/A/Q. - GDP/GNP: Latest observation 2005; Date received 5/08/06; Frequency A/A/Q. - Gross External Debt: Latest observation 12/05; Date received 5/08/06; Frequency A/A/M. - Note: Frequency codes — Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA). ### Debt-stabilizing projections and baseline debt dynamics (selected figures) - Baseline: External debt (percent of GDP): 2001: 37.7; 2002: 40.2; 2003: 37.4; 2004: 37.6; 2005: 39.2; 2006: 36.7; 2007: 35.4; 2008: 35.6; 2009: 35.5; 2010: 34.7; 2011: 34.6. - Change in external debt: 2001: 8.6; 2002: 2.5; 2003: -2.8; 2004: 0.1; 2005: 1.7; 2006: -2.5; 2007: -1.3; 2008: 0.2; 2009: -0.1; 2010: -0.8; 2011: -0.1. - Identified external debt-creating flows (4+8+9): 2001: -0.7; 2002: 2.8; 2003: -2.5; 2004: 9.3; 2005: 0.5; 2006: 2.2; 2007: 2.7; 2008: 2.2; 2009: 1.9; 2010: 0.2; 2011: 0.4. - Current account deficit, excluding interest payments (percent of GDP): 2001: 2.7; 2002: 4.6; 2003: 4.3; 2004: 10.1; 2005: 10.5; 2006: 10.1; 2007: 9.7; 2008: 8.6; 2009: 7.9; 2010: 6.6; 2011: 5.8. - Deficit in balance of goods and services (percent of GDP): 2001: 3.7; 2002: 6.7; 2003: 6.3; 2004: 10.4; 2005: 9.9; 2006: 10.6; 2007: 9.9; 2008: 8.7; 2009: 7.9; 2010: 6.5; 2011: 5.6. - Exports (percent of GDP): 2001: 53.5; 2002: 50.4; 2003: 51.8; 2004: 52.7; 2005: 57.2; 2006: 54.3; 2007: 55.1; 2008: 54.6; 2009: 54.5; 2010: 55.4; 2011: 55.3. - Imports (percent of GDP): 2001: 57.2; 2002: 57.1; 2003: 58.1; 2004: 63.2; 2005: 67.2; 2006: 64.9; 2007: 65.0; 2008: 63.3; 2009: 62.4; 2010: 61.9; 2011: 61.0. - Net non-debt creating capital inflows (negative, percent of GDP): 2001: -5.3; 2002: -3.8; 2003: -5.8; 2004: -0.4; 2005: -8.1; 2006: -8.1; 2007: -7.2; 2008: -7.1; 2009: -6.6; 2010: -6.8; 2011: -5.8. - Automatic debt dynamics (percent of GDP): 2001: 1.9; 2002: 2.0; 2003: -1.0; 2004: -0.4; 2005: -2.0; 2006: 0.2; 2007: 0.2; 2008: 0.7; 2009: 0.5; 2010: 0.4; 2011: 0.5. - Contribution from nominal interest rate (percent): 2001: 1.6; 2002: 2.0; 2003: 1.9; 2004: 1.6; 2005: 1.5; 2006: 1.5; 2007: 1.4; 2008: 1.4; 2009: 1.3; 2010: 1.2; 2011: 1.1. - Contribution from real GDP growth (percent): 2001: 1.0; 2002: -1.3; 2003: -0.3; 2004: -2.2; 2005: -1.5; 2006: -1.3; 2007: -1.2; 2008: -0.7; 2009: -0.8; 2010: -0.8; 2011: -0.7. - Residual, incl. change in gross foreign assets (2-3) (percent): 2001: 9.2; 2002: -0.3; 2003: -0.3; 2004: -9.2; 2005: 1.2; 2006: -4.8; 2007: -4.0; 2008: -2.0; 2009: -1.9; 2010: -1.0; 2011: -0.5. - External debt-to-exports ratio (percent): 2001: 70.4; 2002: 79.9; 2003: 72.3; 2004: 71.2; 2005: 68.5; 2006: 67.5; 2007: 64.2; 2008: 65.2; 2009: 65.1; 2010: 62.6; 2011: 62.5. - Gross external financing need (in billions of US dollars): 2001: 0.1; 2002: 0.1; 2003: 0.1; 2004: 0.3; 2005: 0.3; 2006: 0.4; 2007: 0.4; 2008: 0.3; 2009: 0.3; 2010: 0.2; 2011: 0.3. - Gross external financing need (percent of GDP): 2001: 3.5; 2002: 5.0; 2003: 4.4; 2004: 9.9; 2005: 10.7; 2006: 10.4; 2007: 9.7; 2008: 8.7; 2009: 8.0; 2010: 5.3; 2011: 5.8. ### Key macroeconomic assumptions underlying baseline projections (selected) - Real GDP growth (percent): 2001: -3.3; 2002: 3.5; 2003: 0.8; 2004: 6.2; 2005: 4.4; 2006: 3.7; 2007: 3.5; 2008: 2.0; 2009: 2.3; 2010: 2.5; 2011: 2.1. - GDP deflator in U.S. dollars (change in percent): 2001: 2.5; 2002: -3.5; 2003: 6.8; 2004: -0.5; 2005: 5.5; 2006: 7.1; 2007: 4.6; 2008: 2.2; 2009: 2.0; 2010: 2.0; 2011: 2.0. - Nominal external interest rate (percent): 2001: 5.6; 2002: 5.3; 2003: 5.0; 2004: 4.6; 2005: 4.3; 2006: 4.3; 2007: 4.2; 2008: 4.0; 2009: 3.8; 2010: 3.6; 2011: 3.4. - Growth of exports (U.S. dollar terms, percent): 2001: -1.5; 2002: -6.0; 2003: 10.7; 2004: 7.7; 2005: 19.5; 2006: 5.4; 2007: 9.8; 2008: 3.3; 2009: 4.2; 2010: 6.2; 2011: 4.0. - Growth of imports (U.S. dollar terms, percent): 2001: -4.4; 2002: -0.5; 2003: 9.6; 2004: 15.0; 2005: 17.1; 2006: 7.4; 2007: 8.4; 2008: 1.5; 2009: 2.8; 2010: 3.7; 2011: 2.5. - Current account balance, excluding interest payments (percent of GDP): 2001: -2.7; 2002: -4.6; 2003: -4.3; 2004: -10.1; 2005: -10.5; 2006: -10.1; 2007: -9.7; 2008: -8.6; 2009: -7.9; 2010: -6.6; 2011: -5.8. - Net non-debt creating capital inflows (percent of GDP): 2001: 5.3; 2002: 3.8; 2003: 5.8; 2004: 0.4; 2005: 8.1; 2006: 8.1; 2007: 7.2; 2008: 7.1; 2009: 6.6; 2010: 6.8; 2011: 5.8. *Source: IMF staff report "Introduction of a value-added tax."* ### Appendix VI. Barbados: External Debt Sustainability Framework, 2001–11 ### Appendix VI. Barbados: External Debt Sustainability Framework, 2001–11 ### External debt sustainability — bound tests and scenarios - External debt (in percent of GDP): baseline and scenario boxes present average projections; actual data 2001-2005. - Individual shocks are permanent one-half standard deviation shocks; combined shocks use permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and current account balance. - One-time real depreciation scenario: real depreciation of 30 percent occurs in 2006. - Representative scenario box averages (as shown in figure captions): - Interest rate shock: baseline 35 - Baseline and historical scenarios: Historical 29; Baseline 35 - Current account (CA) shock: CA shock 35; Baseline 30/35/40/45/50 across years shown - Combined shock: Combined shock 41; Baseline 35 - Real depreciation shock (30% depreciation): 33; Baseline 35 - Growth shock: Growth shock 36; Baseline 35 - Gross financing need under baseline (right scale) presented in figures (values shown in tables below). ### Public sector debt projections and debt-stabilizing primary balance (tabled projections) - Baseline: Nonfinancial public sector gross debt (percent of GDP) 1/: - 2001: 82.9 - 2002: 87.0 - 2003: 84.1 - 2004: 83.6 - 2005: 81.6 - 2006: 74.0 - 2007: 71.8 - 2008: 72.6 - 2009: 73.5 - 2010: 74.0 - 2011: 74.8 - Of which: foreign-currency denominated (percent of GDP): - 2001: 29.3; 2002: 28.0; 2003: 26.8; 2004: 27.1; 2005: 28.1; 2006: 25.2; 2007: 23.6; 2008: 23.0; 2009: 22.4; 2010: 21.8; 2011: 21.2 - Change in public sector debt (percent of GDP): - 2001: 8.9; 2002: 4.0; 2003: -2.9; 2004: -0.5; 2005: -2.0; 2006: -7.5; 2007: -2.2; 2008: 0.7; 2009: 1.0; 2010: 0.5; 2011: 0.8 - Identified debt-creating flows (4+7+12) (percent of GDP): - 2001: 6.9; 2002: 12.9; 2003: -3.8; 2004: -4.5; 2005: -7.9; 2006: -7.1; 2007: -2.7; 2008: -0.1; 2009: -1.5; 2010: -2.2; 2011: -1.8 - Primary deficit (percent of GDP): - 2001: 2.4; 2002: 8.6; 2003: 2.2; 2004: -3.2; 2005: -2.9; 2006: -2.6; 2007: -0.4; 2008: -0.4; 2009: -1.5; 2010: -1.9; 2011: -1.8 - Revenue and grants (percent of GDP): - 2001: 41.1; 2002: 42.3; 2003: 42.0; 2004: 43.4; 2005: 43.6; 2006: 41.7; 2007: 41.1; 2008: 41.4; 2009: 41.5; 2010: 41.7; 2011: 41.9 - Primary (noninterest) expenditure (percent of GDP): - 2001: 43.5; 2002: 51.0; 2003: 44.2; 2004: 40.2; 2005: 40.7; 2006: 39.1; 2007: 40.7; 2008: 41.0; 2009: 40.0; 2010: 39.8; 2011: 40.1 - Automatic debt dynamics 2/ (percent of GDP): - 2001: 4.5; 2002: 4.3; 2003: -2.5; 2004: -1.3; 2005: -4.5; 2006: -4.5; 2007: -2.3; 2008: 0.3; 2009: 0.1; 2010: -0.3; 2011: 0.0 - Contribution from interest rate/growth differential 3/ (percent of GDP): same as automatic debt dynamics line above. - Of which contribution from real interest rate (percent of GDP): - 2001: 2.0; 2002: 7.2; 2003: -1.9; 2004: 3.6; 2005: -1.1; 2006: -1.7; 2007: 0.1; 2008: 1.7; 2009: 1.6; 2010: 1.5; 2011: 1.5 - Of which contribution from real GDP growth (percent of GDP): - 2001: 2.5; 2002: -2.9; 2003: -0.7; 2004: -4.9; 2005: -3.3; 2006: -2.8; 2007: -2.4; 2008: -1.4; 2009: -1.6; 2010: -1.8; 2011: -1.5 - Contribution from exchange rate depreciation 4/: shown as 0.0 for 2001–2005; projections include exchange rate changes on residual line. - Other identified debt-creating flows (percent of GDP): - 2001: 0.0; 2002: 0.0; 2003: -3.5; 2004: 0.0; 2005: -0.5; 2006–2011: 0.0 - Privatization receipts (negative) (percent of GDP): - 2003: -3.5; 2005: -0.5; others 0.0 - Residual, including asset changes (2-3) 5/ (percent of GDP): - 2001: 1.9; 2002: -8.9; 2003: 0.9; 2004: 4.0; 2005: 5.9; 2006: -0.4; 2007: 0.5; 2008: 0.8; 2009: 2.4; 2010: 2.6; 2011: 2.6 - Public sector debt-to-revenue ratio 1/: - 2001: 201.7; 2002: 205.5; 2003: 200.2; 2004: 192.7; 2005: 187.0; 2006: 177.7; 2007: 174.7; 2008: 175.4; 2009: 176.9; 2010: 177.4; 2011: 178.5 - Gross financing need 6/ (percent of GDP): - 2001: 17.3; 2002: 24.6; 2003: 17.1; 2004: 12.0; 2005: 12.1; 2006: 13.3; 2007: 15.4; 2008: 15.4; 2009: 13.9; 2010: 14.7; 2011: 13.4 - Gross financing need in billions of U.S. dollars: - 2001: 0.4; 2002: 0.6; 2003: 0.5; 2004: 0.3; 2005: 0.4; 2006: 0.5; 2007: 0.6; 2008: 0.6; 2009: 0.6; 2010: 0.6; 2011: 0.6 - Scenario summaries: - Scenario with key variables at their historical averages 7/: projections shown (example values in table: 74.0, 72.9, 72.2, 73.0, 74.1, 75.1, -0.3) - Scenario with no policy change (constant primary balance) in 2006-2011: debt projections include 74.0, 69.6, 68.1, 68.0, 67.7, 67.7; primary balance change 0.0 ### Key macroeconomic and fiscal assumptions underlying baseline - Real GDP growth (in percent): - 2001: -3.3; 2002: 3.5; 2003: 0.8; 2004: 6.2; 2005: 4.4; 2006: 3.7; 2007: 3.5; 2008: 2.0; 2009: 2.3; 2010: 2.5; 2011: 2.1 - Average nominal interest rate on public debt (in percent) 8/: - 2001: 5.1; 2002: 5.0; 2003: 4.5; 2004: 4.0; 2005: 4.3; 2006: 5.0; 2007: 4.9; 2008: 4.7; 2009: 4.4; 2010: 4.2; 2011: 4.1 - Average real interest rate (nominal rate minus change in GDP deflator, in percent): - 2001: 2.6; 2002: 8.5; 2003: -2.3; 2004: 4.5; 2005: -1.3; 2006: -2.1; 2007: 0.3; 2008: 2.5; 2009: 2.4; 2010: 2.2; 2011: 2.1 - Nominal appreciation (increase in U.S. dollar value of local currency, in percent): 0.0 for 2001–2005; projections indicated as "..." where unspecified. - Inflation rate (GDP deflator, in percent): - 2001: 2.5; 2002: -3.5; 2003: 6.8; 2004: -0.5; 2005: 5.5; 2006: 7.1; 2007: 4.6; 2008: 2.2; 2009: 2.0; 2010: 2.0; 2011: 2.0 - Growth of real primary spending (deflated by GDP deflator, in percent): - 2001: 8.7; 2002: 21.1; 2003: -12.5; 2004: -3.5; 2005: 5.7; 2006: -0.4; 2007: 7.9; 2008: 2.7; 2009: -0.2; 2010: 1.9; 2011: 2.8 - Primary deficit (repeated): see table above. - Footnotes and definitions summarized exactly as presented: - 1/ Nonfinancial public sector. Fiscal year starts in April 1st. Gross debt is used. - 2/ Derived as [(r - p(1+g) - g + ae(1+r)]/(1+g+p+gp)) times previous period debt ratio, with r = interest rate; p = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency denominated debt; and e = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar). - 3/ The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g. - 4/ The exchange rate contribution is derived from the numerator in footnote 2/ as ae(1+r). - 5/ For projections, this line includes exchange rate changes. - 6/ Defined as public sector deficit, plus amortization of medium and long-term public sector debt, plus short-term debt at end of previous period. - 7/ The key variables include real GDP growth in fiscal year; real interest rate; and primary balance in percent of GDP. - 8/ Derived as nominal interest expenditure divided by previous period debt stock. - 9/ Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year. ### Public debt sustainability — bound tests (public debt in percent of GDP) - Appendix VI. Figure 2 key points: - Actual data from 2001 to 2005; individual shocks are permanent one-half standard deviation shocks. - One-time real depreciation of 30 percent and 10 percent of GDP shock to contingent liabilities occur in 2006 in one scenario (real depreciation defined as nominal depreciation minus domestic inflation). - Representative scenario box averages (as shown): - Growth shock: Growth shock 89/75/86 (figure annotations across panels) - Primary balance (PB) shock: PB shock 75; Baseline 68/65/70/75/80/85/90 across years shown - Interest rate shock: i-rate shock 80; Baseline 75/70/75/80/85/90 across years shown - Combined shock: Combined shock 86; Baseline 75 - Real depreciation and contingent liabilities shocks: 30% depreciation scenario shows 88; contingent liabilities shock illustrated as 85/70/75/80/85/90 across years - Gross financing need under baseline (right scale) and primary balance shock / no policy change scenario values shown in figure annotations: - No policy change baseline: 1.9; Scenario: 3.4; Historical: 2.3 (example annotations) - Baseline: 1.2; Scenario: -1.1; Historical: 1.2 - Baseline: 2.5; Scenario: 1.0; Historical: 2.7 ### IMF staff developments and assessments (statement and PIN) - Statement by the IMF Staff Representative, August 4, 2006: - Revisions of preliminary 2005 data reduced the current account deficit from $380.9 million to $367.8 million, and from an estimated 12.4 percent of GDP to 11.9 percent; estimated real GDP growth in 2005 increased from 3.9 percent to 4.1 percent. - Preliminary data for first half 2006: real GDP growth around 4 percent; end of period inflation slowed to 6.5 percent by end-June 2006; gross international reserves declined from about $620 million at end-December 2005 to around $580 million at end-June 2006. - Credit to the private sector grew at an annual rate above 20 percent in early 2006, slowed to 19 percent in the 12 months to June 2006; staff report projection for end-2006 private credit growth is 13 percent. - Standard & Poor's revised Barbados’ sovereign outlook from BBB+/negative to BBB+/stable, citing expected fiscal adjustments; noted risk of reversal if high current account deficits persist and/or fiscal deficit not reined in. - Public Information Notice (PIN) No.06/106, September 13, 2006 — IMF Executive Board conclusions on the 2006 Article IV consultation: - Background and developments: - Per capita income US$17,300 (PPP basis); highest in region. - Post-9/11 slowdown led to macroeconomic imbalances; national emergency public investment program launched late-2001 widened overall budget deficit and government debt. - Growth rebounded to 4 percent in 2004–2005; unemployment fell to 9 percent; higher inflation via oil price pass-through and domestic demand pressures—core inflation rose from almost zero in 2004 to 4 percent in 2005. - Overall fiscal position deteriorated slightly in 2005 due to extrabudgetary capital expenditures; central government balance strengthened due to buoyant tax revenues; National Insurance Scheme surplus 3.3 percent of GDP. - Monetary policy tightened in 2005 with 250 basis points increase in minimum deposit rate to 4.75 percent; private sector credit rose 21.7 percent in 2005; commercial banks reduced excess reserves and net foreign assets to finance credit expansion; banking system indicators judged sound. - External current account deficit reached 12.4 percent of GDP in 2005; gross international reserves stabilized; increased oil imports and rapid private spending contributed to current account deterioration; strong capital inflows in 2005 helped curb reserve decline. - Structural reforms: cuts in income tax rates, further liberalization of telecommunications, privatization of a major insurance company, arrangements for formal membership in CARICOM Single Market and Economy (CSME), reduction in foreign exchange controls. - Executive Board assessment and recommendations: - Welcomed strong growth but noted macroeconomic imbalances: accelerating inflation and large external current account deficit. - Recommended early tightening of policies to reduce overheating risks and support exchange rate peg. - Identified expansionary macroeconomic policies and rapid credit growth as contributors to core inflation and import acceleration. - Fiscal recommendations: - Return to fiscal consolidation efforts. - Postpone or offset further extrabudgetary expenditures or PPP projects that add stimulus. - Increase value-added tax revenue in anticipation of removal of import tariff surcharge. - Conduct comprehensive review of pricing policies of public enterprises. - Ensure full pass-through of international oil prices to consumers. - Consider a fiscal Report on the Observance of Standards and Codes to improve fiscal transparency. - Debt and financial sector: - Noted envisaged reduction in public debt ratios but urged faster pace of adjustment to reduce vulnerability to exogenous shocks. - Commended public pension system performance and recommended diversification away from public sector assets. - Recommended further monetary policy tightening to contain inflation, curb excessive credit growth, and support the peg; pointed out low real interest rates and prospects of higher international rates. - Welcomed plans to develop money and capital markets and strengthen financial sector regulation; emphasized monitoring risks from large capital inflows and rapid credit growth. - Structural reform recommendations: - Strengthen competitiveness through trade liberalization, rationalization of incentive programs, and privatization rather than selective sectoral support. - Limit support for the sugar adaptation strategy to commercially viable activities. - Data and transparency: - Statistical information broadly adequate; suggested improvements to coverage and transparency of public sector entities and capital account transactions. ### Barbados: Selected economic indicators (excerpted series and key values) - Output and prices (annual percentage changes): - Real GDP: shown series with values including -2.6, 0.5, 1.9, 4.8, 3.9 (layout in source table). - Consumer Prices (12-month increase): 2.8, 0.2, 1.6, 1.4, 6.0 (values provided in table). - Tourism: -5.9, -2.8, 7.0, 9.4, -3.9 (values shown in table). - Unemployment: 9.9, 10.3, 11.0, 9.6, 9.0 (values shown). - Money and credit 1/ (percent changes): - Net domestic assets: -8.6, 5.7, 0.8, 25.2, 10.9 - Public sector credit (net): 8.1, 12.2, 3.6, 4.1, -5.7 - Private sector credit (net): -0.3, 2.4, 0.6, 11.0, 14.3 - Broad money (M2): 5.6, 10.4, 6.5, 16.4, 7.3 - Public sector operations (percent of GDP) 2/: - Overall balance 3/: -6.2, -12.8, -5.9, 0.0, -0.3 - Central government balance: -4.3, 5.6, -2.4, -2.5, -0.9 - National Insurance Scheme Balance: 2.5, 2.5, 2.6, 3.5, 3.3 - Public enterprises balance: -2.6, -2.3, -2.5, -1.2, -0.7 - Extrabudgetary expenditure: -1.8, -7.5, -3.5, 0.1, -2.0 - External sector: - External current account balance (percent of GDP): -3.7, -7.5, -6.9, -11.9, -12.4 - Public sector external debt (percent of GDP) 4/: 29.3, 28.0, 26.8, 27.1, 28.1 - Gross international reserves (in millions of US dollars): 707, 683, 752, 595, 619 *Sources: International Monetary Fund, Country desk data, and staff estimates; Barbadian authorities; IMF staff estimates.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06323.pdf_