Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the seventh and final Extended Fund Facility (EFF) review with Barbados. The completion of the review allows the authorities to draw the equivalent of SDR 17 million (about US$23 million), bringing total disbursements to the equivalent of SDR 322 million (about US$435 million), the full amount of the four-year extended arrangement under the EFF that was approved on October 1, 2018 (see Press Release No.18/370). The Executive Board’s decision was taken on a lapse-of-time basis.[1]
Program performance has been strong despite significant economic shocks associated with the COVID-19 pandemic, natural disasters, and the war in Ukraine . Macroeconomic stability was restored before the pandemic reached Barbados in March 2020, with a combination of fiscal consolidation, a comprehensive sovereign debt restructuring in 2018 and 2019, and structural reforms to enhance growth. This facilitated a countercyclical macroeconomic policy response in 2020 and 2021. Over the four-year program, the authorities have steadily moved ahead with their economic reform agenda including the introduction of a revised central bank law, state-owned enterprise (SOE) reform, and reforms of the customs department. International reserves, which reached a low of US$220 million (5-6 weeks of import coverage) in May 2018, are now at a comfortable level of US$1.5 billion.
Economic activity in Barbados is starting to recover from the COVID-19 shock. Tourism came to a virtual standstill in April 2020, and the economy contracted by 14 percent in 2020. A gradual economic recovery started in 2021 and gained momentum in recent months, with tourism now at about 60 percent of pre-pandemic levels. Medium-term growth prospects depend on accelerating structural reforms to improve the business climate, diversify the economy, and facilitating green and digital transformations.
Risk to the outlook remain high . The key risk to Barbados’ economic outlook is a further lengthening of the pandemic, with the recovery in tourism depending on developments in key source markets. An intensification of the war in Ukraine could further increase global commodity prices. Strengthening resilience to natural disasters and climate change, combined with an accelerated transition to renewable energy, is key to achieve more sustainable economic growth and reduce vulnerability to international oil price volatility.
[1]The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.