Barbados’ 2018–19 Sovereign Debt Restructuring–A Sea Change?

IMF Working Papers, February 21, 2020

Source details

Examines the causes, processes, and outcomes of Barbados’ 2018–19 sovereign debt restructuring—its first ever.
Characterizes the restructuring as comprehensive and featuring several rarely used approaches:
- Restructuring of treasury bills.
- Use of a retrofitted collective action mechanism.
Concludes the restructuring has helped to set Barbados’ public debt on a clear downward trajectory.
Notes that a sustained reform effort will be needed to gradually reduce public debt from about 160 percent of GDP before the restructuring to the country’s 60 percent debt-to-GDP target.
Publication type: IMF Working Papers.

The 2018–19 operation was Barbados’ first sovereign debt restructuring.
The restructuring included nonstandard elements for sovereign restructurings:
- Treasury bills were restructured.
- A retrofitted collective action mechanism was used.
The restructuring placed public debt on a downward trajectory, contingent on continued fiscal and structural measures.
Debt reduction target specified: from about 160 percent of GDP (pre-restructuring) to 60 percent of GDP (target).

Sustained reform effort required, including:
- Maintaining high primary surpluses.
- Implementing ambitious structural reforms.
These measures are necessary to realize the gradual reduction in public debt toward the 60 percent debt-to-GDP target.