Caribbean & Central America - August 2024

Following its third review of the Barbadian economy at the end of June, the International Monetary Fund (IMF) gave the green light for further disbursements.

The IMF is assisting Barbados with two major loans, the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). It said that all performance criteria and indicative targets for the third review had been met, allowing the immediate disbursement of US$19m under the EFF and US$37m under the RSF. Total cumulative disbursements under the two facilities are currently around US$187m.

In its review the IMF said the economy has recovered to levels registered prior to the coronavirus (Covid-19) pandemic and will remain strong this year due to a good performance by tourism and related sectors. GDP rose by 4.4% last year while inflation moderated despite bad weather, which put some pressure on food prices. By the end of this year annual inflation is being predicted at 3.1%.

The Bajan economy’s large current account deficit has begun to narrow, from 9% of GDP last year to a projected 7.4% this year. The IMF is not too concerned however, since the country is deemed to have ample foreign currency reserves, equivalent to over seven months’ worth of imports.

On the budget front the government exceeded the agreed primary surplus target for the 2023/2024 fiscal year (FY) and is now seeking a surplus equivalent to 4% of GDP in 2024/2025. Total public debt as a proportion of GDP has fallen back to pre-pandemic levels and the Bridgetown government has ratified its promise to reduce it further to no more than 60% of GDP by 2035.

The IMF notes a number of reforms and new initiatives are ongoing and designed to improve climate change resilience. They include a new Stormwater Management Act and an efficiency framework for government agencies and public lighting.