Barbados is set to launch a US$500 million (BDS$1 billion) international bond aimed at refinancing debt and freeing up hundreds of millions for social programmes, in a move the government said would bolster economic resilience and protect vital public services.
The measure was debated in the upper house on Wednesday during a resolution related to the External Loan Act.
Leader of government business in the Senate, Senator Lisa Cummins, explained that the bond issuance would allow Barbados to repay over US$300m (BDS$600m) of a bond originally scheduled to mature in 2029, while also freeing up significant financial resources for national priorities.
“The operation is meant to free up approximately $372m in net terms for the remainder of 2025 through calendar year 2026. Over the next two years, it gives Barbados a buffer, a cushion, a risk mitigator of $372m,” she said. “This significant reduction in outflows from the country will also help the government and the Central Bank that is responsible for fiscal management, to ensure that we can maximise our reserve levels over the period, to boost our resilience to external shocks, and to support our work so that we can benefit from continued upgrades from the international agencies.”
She explained that the transaction is part of the government’s broader debt management strategy, aimed not only at easing debt service obligations but also at ensuring adequate liquidity to sustain vital social programmes and investments in infrastructure and education.
Senator Cummins described the move as critical to maintaining Barbados’s social safety net and improving everyday life for citizens. She said it was part of a deliberate effort to “create fiscal space”, allowing the government to reallocate financial resources to meet national needs.
The new bond facility carries an 8 per cent interest rate, with a five-year grace period on principal payments. Following the grace period, the government will make 10 equal annual payments until final maturity in June 2035. While the new interest rate is higher than the 6.5 per cent attached to the 2029 bond it replaces, Senator Cummins noted that this is largely due to global market shifts.
She identified the reasons as “the maturity, which is 5.5 years longer in weighted average terms, and the increase in underlying US dollar interest rates, which globally have increased by approximately 2.8 percentage points since the 2029 bond was issued in 2019.”
In a related development, the government is also planning to prepay part of its existing loan from the International Monetary Fund (IMF), with three major objectives in mind.
“By prepaying the IMF loan, we hope to eliminate the need to repay principal between July 2025 and June 2027,” Senator Cummins said. “We also intend to reduce our IMF debt exposure from 505 per cent of our quota to approximately 300 per cent, giving us room to access emergency facilities if needed, especially in the case of a natural disaster.”
Additionally, she said the prepayment will reduce interest costs, including time-based surcharges, by around 50 per cent.
Senator Cummins stressed that the measures form part of a carefully constructed fiscal policy aimed at improving reserve levels, strengthening economic resilience, and ensuring continued support from international credit rating agencies.
“This significant reduction in outflows from the country will help the government and the central bank to maximise our reserve levels, to boost our resilience to external shocks, and to support our work so that we can benefit from continued upgrades from the international agencies,” she said. (SB)
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