IMF Executive Board Concludes 2023 Article IV Consultation and Second Reviews Under the Extended Fund Facility and the Resilience and Sustainability Facility with Barbados

IMF News, December 18, 2023

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Executive Board concluded the Article IV consultation with Barbados and completed the second reviews of the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) arrangements.
Completion of the reviews permits draws of:
- SDR 14.175 million (about US$19 million) under the EFF
- SDR 42.525 million (about US$57 million) under the RSF

Economic recovery:
- Ten consecutive quarters of growth, driven by a rebound in tourism.
- After a 13.8 percent rebound in 2022, real GDP is projected to expand by about 4.5 percent in 2023.
Inflation and prices:
- Inflation fell to 4.3 percent year-over-year as of mid-2023, down from a peak of 6.7 percent recorded in May 2022.
- CPI inflation (average) and (end of period) in projections: 2022: 5.0 (average); 5.7 (end of period). 2023: 4.4 (end of period). 2024: 2.8 (end of period).
- Lower international fuel prices and freight costs helped reduce overall inflation; prolonged drought and higher demand for restaurants and recreational activities pushed up some food items and domestic services prices.
Labor market:
- Higher job growth; unemployment rate reverted to pre-pandemic levels.
- Unemployment rate (2022): 7.2
External sector and reserves:
- International reserves remain ample, supporting the exchange rate peg.
- Gross international reserves (US$ million): 2022: 1,385; 2023: 1,565; 2024: 1,600.

Growth and inflation:
- Economy expected to continue growing and inflation to moderate; real GDP and tourism returning to pre-pandemic levels in the near term.
External balances:
- Current account deficit expected to narrow as tourism and commodity prices fully normalize.
- Current account balance (percent of CY GDP): 2022: -10.7; 2023: -8.1; 2024: -7.2.
- Capital and financial account balance (percent of CY GDP): 2022: 11.0; 2023: 7.7; 2024: (not provided explicitly beyond 2023).
- Overall balance (percent of CY GDP): 2022: -0.6; 2023: 0.5.

Fiscal outcomes (percent of FY GDP; fiscal year is from April to March):
- Revenue and grants: 2022: 29.0; 2023: 28.5; 2024: 30.2.
- Expenditure: 2022: 31.0; 2023: 30.4; 2024: 31.4.
- Fiscal Balance: 2022: -2.0; 2023: -1.8; 2024: -1.2.
- Interest Expenditure (2022): 5.2 (percent of FY GDP).
- Primary Balance: 2022: 2.5; 2023: 3.4.
Public sector debt (percent of FY GDP; including government-guaranteed debt, expenditure and debt arrears (if any), and IMF loans provided to the CBB for BOP support under the 2018 EFF):
- Public sector debt: 2022: 119.6; 2023: 114.7; 2024: 106.9.
- External: 2022: 45.1; 2023: 46.8; 2024: 44.2.
- Domestic: 2022: 74.5; 2023: 67.9; 2024: 62.6.
Nominal GDP:
- Nominal GDP, CY (BDS$ millions): 2022: 11,681; 2023: 12,772; 2024: 13,725.
- Nominal GDP, FY (BDS$ millions): 2022: 12,238; 2023: 13,025; 2024: 13,937.

Authorities are focusing on structural reforms to achieve inclusive and sustainable growth and increase resilience to climate change while maintaining debt sustainability and social cohesion.
Progress highlighted on:
- Strengthening revenue administration.
- Modernizing the tax exemptions framework.
- Enhancing public financial management and investment management.
- Restarting domestic capital markets.
- Advancing pension and state-owned enterprise (SOE) reforms.
- Enhancing financial supervision and developing monetary policy tools (including liquidity management instruments).
- Significant progress in strengthening the AML/CFT framework.

Authorities advancing an ambitious climate policy agenda; reforms include:
- Incorporating climate considerations into the budget process.
- Improving the disaster risk management framework.
- Providing incentives for the purchase of electric vehicles.
- Addressing regulatory gaps to facilitate investments in renewable energy.
Revenues from the corporate income tax reform are expected to be used to increase public investment, including on climate resiliency.
Climate policy reforms aim to facilitate mobilization of climate finance and private sector investment in climate-related projects.

Directors agreed with the thrust of the staff appraisal and commended strong program implementation under the EFF and RSF.
Key Director recommendations and observations:
- Maintain reform momentum to achieve inclusive and sustainable growth, increase climate resilience, and maintain debt sustainability.
- Continue capacity development assistance to support implementation.
- Maintain strong primary surpluses to continue reducing the public debt-to-GDP ratio and achieve the long-term debt target.
- Use revenue gains to increase public investment, including climate resilience.
- Continue steady implementation of structural reforms to preserve fiscal sustainability and create space for higher public investment.
- Further enhance the monetary policy toolkit and develop liquidity management instruments.
- Continue strengthening financial supervision.
- Build on AML/CFT progress and aim for timely exit from the FATF grey list.
- Unlock growth potential by enhancing the business environment, investing in skills and education, and promoting digitalization to increase public sector efficiency, facilitate access to credit, enhance labor participation, and support human capital.

Population (2022 est., thousand): 289.4
Adult literacy rate (2014): 99.6
Per capita GDP (2022 est., US$ thousand): 20.2
Poverty rate (individual, 2010): 19.3
Life expectancy at birth in years (2019): 79.2
Gini coefficient (2010): 47.0
Rank in UNDP Development Index (2019): 58
Unemployment rate (2022): 7.2
Main products, services, and exports: tourism, financial services, rum, sugar, and chemicals.

Source: IMF press release, December 18, 2023.