Barbadians have been paying about 21 per cent more for food and non-alcoholic beverages since 2020, with lower income households “likely disproportionately impacted” by the higher prices.
That is the assessment of the International Monetary Fund’s (IMF) staff, who are advising that “policy options to combat inflation vulnerability require a multi-pronged approach”.
They examined the issue in the analysis Inflation Vulnerability In Barbados, which is published in the IMF’s new Article IV Report on Barbados.
“Recently, Barbados households have faced higher inflation for staples, especially food and beverages. The consumption basket of a typical Barbados household is dominated by food and beverages, as well as utilities and transportation-related goods,” the staff report stated.
“Since 2020, the cost of food and non-alcoholic beverages has risen by approximately 21 per cent, double the ten per cent rise in prices for all core goods in the Retail Price Index.
“This development, alongside a large increase in costs of transportation-related goods (12 per cent), has likely disproportionately impacted lower income households, given that these households need to devote more of their incomes to these staple goods.”
The report said that policy options to combat inflation vulnerability included collaborative efforts to enhance connectivity and accessibility.
“Redoubling the focus on food security, including the efficiency and orientation of domestic production, can support product diversification and self-sufficiency,” they advised.
“Nevertheless, geographic limitations will remain a binding constraint, and therefore regional and international collaboration remains important to address food security, including by exploring a range of alternate suppliers within the region.
“In addition, pooling orders at a regional level – such as by creating a regional food hub – could help exercise greater market power in making purchases.
“Evidence in the literature shows that addressing food dependency can also pay dividends by reducing the exposure to broader structural vulnerability, implying important broader economic benefits from action in this area,” the staff analysis added.
The IMF publication said that inflation here “is expected to pick up to 3.1 per cent in 2026 from 0.9 per cent in 2025, driven by higher global commodity prices, and stabilise around the historical average of 2.4 per cent over the medium term”.
Staff members also presented An Illustrative Adverse Scenario where inflation “rises to 4.6 per cent in 2026 – 1.5 percentage points higher than the baseline – and stays elevated in 2027”.
In this scenario, “higher import prices are offset by policy measures that limit pass through to the cost of living through value added tax and excise duty exemptions, cuts, and ceilings and by a compression of domestic demand as incomes decline”.
It also entails an outcome where inflation remains subdued in the long term due to persistently weaker global demand, staying close to 2.3 per cent by 2030, 0.1 percentage points lower than the baseline.
The staff report explained that the 4.6 per cent inflation outcome was just a scenario predicated on external shocks which reflected the current global environment that is impacted by geopolitical tensions and global policy uncertainty.
“The scenario includes two shock layers: a large and persistent increase in global oil and food prices, and a further escalation of trade disruptions, leading to trade diversion and broader global protectionism, with the United States effective tariff rate rising by ten per cent,” the report noted.
“These shocks produce a significant reduction in tourism demand in Barbados’ key source markets. In addition, unfavourable external price pressures drive up import prices, while tighter global financial conditions increase financing costs, dampen growth, and curtail foreign direct investment.”
The IMF publication said that “as a small island developing state, Barbados is highly vulnerable to international commodity-price shocks”.
“Recent research shows that small island developing states (SIDS) are approximately twice as vulnerable to international food inflation shocks as non-SIDS,” it stated.
The report was referencing the working paper Global Commodity Inflation Pass-through: Vulnerability of Small Island Developing States, which was authored by IMF resident representative in Barbados, Patrick Blagrave and Laron Alleyne, the local economist at the resident representative’s office.
That study concluded: “In recognition of the well-documented vulnerabilities of SIDS to global and environmental shocks and evidence of shifting global inflation dynamics, estimates obtained with local projections for a sample of 168 countries suggest inflation in SIDS is approximately twice as vulnerable to international food inflation shocks as in non-SIDS.
“The level of vulnerability and disparity between SIDS and non-SIDS is less apparent with respect to international crude oil inflation shocks.
“These results hold under a range of alternate specifications and robustness tests, and point to the potential of global-supplychain connectivity issues and domestic market structures as major contributing factors to the inflation vulnerabilities of SIDS.
“In particular, the relative lack of pricing power of firms in SIDS may cause them to be more prone to global food inflation shocks,” Alleyne and Blagrave found.
The Article IV report included a view from Barbados authorities, which was that Government expected inflation “to remain contained, the current account to narrow, and the external position to remain strong with ample international reserves”.
“The authorities agreed on downside risks, which are predominantly external, but emphasised the upside from higher global growth, investment in renewable energy and construction, and stronger-than-expected dividends from BERT 2026 reforms,” they said.
The post 21% more for food and drink appeared first on nationnews.com.
