WASHINGTON, CMC – Barbados will receive US$76 million from the International Monetary Fund (IMF) after the executive board of the Washington-based financial institution concluded the second review of the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) programs.
The IMF said that as a result of the successful review, Bridgetown will receive SDR 14.175 million (about US$19 million) under the EFF and SDR 42.525 million (about US$57 million) under the RSF.
“Barbados continues to advance the implementation of its comprehensive economic reform program and climate policy agenda. The economy has weathered the COVID-19 pandemic and other recent shocks well, and macroeconomic stability has been preserved.
“Economic activity has recovered strongly, with ten consecutive quarters of growth, driven by a rebound in tourism. In the context of an expanding economy, the authorities are placing renewed focus on structural reforms to achieve inclusive and sustainable growth and increase resilience to climate change while maintaining debt sustainability and social cohesion,” the IMF said.
It noted that after a 13.8 percent rebound in 2022, actual gross domestic product (GDP) will expand by about 4.5 percent in 2023. Inflation has fallen to 4.3 percent year-over-year as of mid-2023 from a peak of 6.7 percent recorded in May 2022.
The IMF said lower international fuel prices and freight costs contributed to the reduction in overall inflation. At the same time, prolonged drought conditions and higher demand for restaurants and recreational activities driven by the recovery in tourism pushed up the prices of some food items and domestic services.
“The economic recovery resulted in higher job growth, with the unemployment rate reverting to pre-pandemic levels. The fiscal position has strengthened, and international reserves remain ample, supporting the exchange rate peg.
“The economy is expected to continue growing and inflation to moderate, with real GDP and tourism returning to pre-pandemic levels soon. The current account deficit is expected to narrow as tourism and commodity prices fully normalize.”
IMF deputy managing director, Bo Li, said Barbados is advancing the implementation of its homegrown Economic Recovery and Transformation (BERT) Plan and its ambitious climate policy agenda, supported by the EFF and the RSF arrangements.
He said the focus of Barbadian authorities on reducing debt through higher primary surpluses while maintaining adequate social and capital expenditure is appropriate. He said the revenues arising from the corporate income tax reform are expected to increase public investment, including climate resiliency.
“Progress is being made on structural reforms, including steps to strengthen revenue administration, modernize the tax exemptions framework, enhance public financial management, and unlock the economy’s growth potential. Advancing pension and state-owned enterprise reforms is essential.
“Ample international reserves continue supporting the exchange rate peg, which remains a crucial anchor for macroeconomic stability. The authorities are working on enhancing their monetary policy toolkit and financial sector oversight. The significant progress in strengthening the AML/CFT framework is a significant achievement.
The IMF official said the authorities are advancing their ambitious climate policy agenda to increase resilience to climate change and green the economy.
“Important reforms are being implemented to achieve these objectives, including by incorporating climate considerations into the budget process, improving the disaster risk management framework, providing incentives for the purchase of electric vehicles, and addressing regulatory gaps to facilitate investments in renewable energy.
“The climate policy reforms are expected to help create an enabling environment that facilitates the mobilization of climate finance and private sector investment in climate-related projects.”
In its report, the IMF executive board said it agreed with the thrust of the staff appraisal that commended the authorities’ robust program implementation of their homegrown economic reform strategy and ambitious climate policy agenda under the EFF and RSF arrangements. The directors welcomed the economy’s robust recovery amid a rebound in tourism. They encouraged the authorities to maintain the reform momentum to achieve inclusive and sustainable growth, increase climate resilience, and maintain debt sustainability. They noted that continued capacity development assistance will be essential to support the authorities’ efforts.
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