Press Release No. 22/417

IMF Executive Board Approves US$113 Million under the Extended Fund Facility and US$189 Million under the Resilience and Sustainability Facility for Barbados

December 7, 2022

• The Executive Board of the International Monetary Fund (IMF) approved a 36-month Extended Fund Facility (EFF) in the amount of US$113 million, in addition to a Resilient and Sustainability Fund (RSF) in an amount of US$189 million.
• The new IMF-supported program will build on the achievements of Barbados’ 2018-22 EFF and draw on the authorities’ updated economic reform program (BERT 2022), including on efforts focusing on building resilience to natural disasters and climate change as well as reducing greenhouse gas emissions and transition risks.
• Despite a series of global and regional economic shocks, Barbados continues its strong implementation of its ambitious economic reform program aimed at restoring fiscal sustainability, increasing reserves, and unlocking growth potential. Economic activity in Barbados is starting to recover from the COVID-19 pandemic but risks to the outlook remain elevated, with higher global commodity prices pushing up inflation.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved a 36-month arrangement under the Extended Fund Facility (EFF) in an amount equivalent to SDR 85.05 million (about US$113 million) and an arrangement under the Resilience and Sustainability Facility (RSF) in an amount equivalent to SDR 141.75 million (about US$189 million) for Barbados to maintain and strengthen macroeconomic stability, support the structural reform agenda, and increase resilience to climate change.

Despite a series of economic shocks, Barbados continues its strong implementation of its comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal sustainability, increasing reserves, and unlocking growth potential. The new IMF-supported program will build on the achievements of Barbados’ 2018-22 EFF and draw on the authorities’ updated economic reform program (BERT 2022). The global coronavirus pandemic and higher global commodity prices, along with Barbados’ exposure to climate change and natural disasters, are posing major challenges for the tourism-dependent economy. Reform efforts focus on building resilience to natural disasters and climate change as well as reducing greenhouse gas emissions and transition risks.

Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair of the Board, issued the following statement:

“Barbados continues to make good progress in implementing its homegrown Economic Recovery and Transformation Plan, despite a very challenging global economic environment. Macroeconomic stability was restored in 2018 and 2019 with a combination of fiscal consolidation, comprehensive debt restructuring, and structural reforms to support growth. This created space for a countercyclical policy response to the COVID-19 pandemic in 2020 and 2021. Public debt was put back on a clear downward trajectory starting FY2021/22.

“While Barbados continues to confront challenges owing to the global pandemic and Russia’s invasion of Ukraine, the economic recovery is now well underway. Inflation has been rising since the second half of 2021 owing to supply chain disruptions and increasing global food and oil prices. The economic recovery is expected to continue over the medium term, but downside risks to the outlook remain high.

“Building on the successful completion of a 2018-22 Extended Fund Facility (EFF), the new EFF arrangement aims to maintain and strengthen hard-won macroeconomic stability and promote the unfinished structural reform agenda. Key elements of the program would be the gradual and sustained increase in primary surpluses and ambitious structural reforms, such as strengthening of tax and customs administration as well as Public Financial Management (PFM), adoption and implementation of pension reform, the rationalization and consolidation of State-Owned Enterprises (SOEs), and growth-enhancing measures, including additional steps to improve the business climate. The program targets a primary surplus of 2 percent of GDP in FY2022/23, up from minus 1 percent of GDP recorded in both FY 2020/21 and FY 2021/22.

“The arrangement under the RSF will provide financing to support the country’s climate change adaptation and mitigation efforts, and support Barbados’ ambitious goal of transitioning to a fully renewable-based economy by 2030. Reforms under the RSF include the mainstreaming of climate change in the budget, the introduction of ‘green Public Financial Management’, including in procurement, and measures that would incentivize private sector investments in climate resilient infrastructure and into renewable energy projects. These measures were identified in close coordination with the World Bank and other international partners.”