Barbados: Seventh Review Under the Extended Fund Facility Arrangement-Press Release; and Staff Report

IMF Staff Country Reports, June 21, 2022

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Canonical URL: Barbados: Seventh Review Under the Extended Fund Facility Arrangement-Press Release; and Staff Report

Despite significant economic shocks from the COVID-19 pandemic, twin natural disasters, and the war in Ukraine, Barbados has made good progress implementing the Economic Recovery and Transformation (BERT) plan to:
- restore fiscal and debt sustainability,
- rebuild reserves, and
- increase growth.
International reserves increased to US$1.5 billion at end-2021, supported by IFI loans.
A successful 2018-19 public debt restructuring contributed to rebuilding confidence in the macroeconomic framework.

Economic growth is projected at 11 percent for 2022, premised on a robust recovery of tourism.
Tourism is expected to return to pre-pandemic levels by 2024.
The outlook is highly uncertain and risks are elevated, including:
- higher global commodity prices following the Russian invasion of Ukraine feeding into inflation,
- vulnerability due to high import dependence for food and energy.

To contain retail price increases for energy, the government adopted temporary VAT caps on oil products (fiscal cost of 0.3 percent of GDP).
While fiscal accommodation was necessary to respond to the pandemic and natural disasters, the authorities are committed to running primary surpluses from FY2022/23 onwards.
Primary surplus targets need to reach 5-6 percent of GDP in three years to be consistent with meeting the 60 percent of GDP debt target by FY2035/36.

International reserves: US$1.5 billion (end-2021)
Projected GDP growth: 11 percent (2022)
Tourism recovery timing: return to pre-pandemic levels by 2024
Fiscal cost of temporary VAT caps on oil products: 0.3 percent of GDP
Primary surplus target: reach 5-6 percent of GDP in three years (from FY2022/23)
Public debt target: 60 percent of GDP by FY2035/36

Source: Barbados: Seventh Review Under the Extended Fund Facility Arrangement-Press Release; and Staff Report