Barbados has won praise for its ambitious economic reforms from the International Monetary Fund (IMF) but it warned that the country’s hard-won stability remains vulnerable to global shocks and climate risks, as it wraps up its Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) loans to the heavily indebted nation.
In a statement released on Friday following the final review, IMF Deputy Managing Director Bo Li praised the government’s implementation of economic reforms under the Economic Recovery and Transformation (BERT) programme, noting that the country remained committed to macroeconomic stability, structural transformation, and building resilience.
The IMF noted that Barbados had reached a critical milestone, having successfully completed all five reviews under the EFF and RSF programmes. However, alongside the praise came a strong caution that the economic outlook, while stable, remained “tilted to the downside” due to external shocks, climate-related risks, and a softening global growth environment.
Economic growth for 2025 is projected at 2.7 per cent, slightly down from three per cent in the previous review, due to a weaker global economy and an anticipated two per cent decline in tourism demand. In the medium term, the fund expects growth to moderate to around two per cent, stressing that large-scale tourism-related construction projects will be winding down.
Inflation is forecast to rise slightly to 2.6 per cent by the end of 2025, driven by the increased cost of non-fuel imports and agricultural products. The current account deficit is expected to widen to 6.4 per cent of GDP, but it would continue to be financed by foreign direct investment, projected at six per cent of GDP, which the IMF said was in line with historical averages.
The island’s important foreign reserves are expected to remain steady at around $3 billion.
The IMF highlighted what it saw as key policy priorities for Barbados in the coming years, and these included maintaining strong fiscal surpluses to reach the stated public debt target of 60 per cent of GDP, as well as strengthening revenue collection and public financial management.
The Washington-based multilateral institution identified reforms of several state-owned enterprises as among the necessary actions, transitioning to a digital payments system by next year, and boosting resilience to climate shocks by facilitating the shift to renewable energy.
The report stressed the importance of the exchange rate peg at one US dollar to two Barbados dollars as a “critical anchor” for economic stability and lauded the State’s efforts to modernise the monetary policy framework and enhance financial safety nets.
Of the dangers facing the island’s expected progress, the IMF said there were several vulnerabilities, including slowdowns in key tourism markets such as the United States, Canada and the United Kingdom, global supply chain disruptions, and volatile commodity prices.
At home, the IMF identified the threat of natural disasters and any “loss of momentum in economic reforms”. (IMC1)
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