The United States believes Barbados “is likely to repay” all of the $1.48 billion Government has borrowed from the International Monetary Fund (IMF) over the past seven years.
US authorities, however, said that the country’s strategy for reducing debt was facing some “key risks”.
Those flagged in a new US Department of the Treasury report include “limited implementation capacity of the Government; the potential for reform fatigue, which could limit the Government’s willingness to maintain fiscal discipline in the long-term in cases of lower-than-projected growth; and vulnerability to external shocks, particularly those that affect tourism”.
Information from the IMF is that Government borrowed about $870 million under its first arrangement, via an Extended Fund Facility (EFF), between 2018 and 2022.
In the successor programme under another EFF and the new Resilience and Sustainability Facility (RSF) between 2022 and this year, the IMF said Barbados borrowed another $618 million.
In its report to Congress on the IMF’s loans to Barbados and Suriname last month, the US Treasury Department said its assessment was that based on various factors and the IMF’s status as a preferred creditor, “the Treasury Department assesses that Barbados is likely to repay its IMF loan in full”.
The factors mentioned included that “Barbados has continuously overperformed its targets under its IMF-supported reform programme due to the authorities’ strong commitment to reforms”.
“The public debt burden has drastically declined since 2018 and has helped put Barbados on a path towards sustainability. The IMF assesses Barbados’ public debt level is sustainable,” the Department stated.
“Although some areas of adjustment have been challenging for the population, the Government’s resounding re-election in January 2022 underscored the breadth of social buy-in for the reform programme.
“The EFF, in tandem with the RSF, provided a helpful framework to enable significant fiscal consolidation while improving resilience to the impacts of natural disasters.”
Commenting on Government’s debt management strategy, the report noted that “following the Government’s comprehensive restructuring of its domestic debt, the authorities’ main goal was to re-establish a sustainable debt trajectory and composition while undertaking complementary fiscal reforms related to revenue policy and administration and [state-owned enterprises] reform to bolster fiscal sustainability”.
“The programme’s design supports private sector-led investment and growth and is aimed at restoring confidence in the economy,” it stated.
The US Department of the Treasury mentioned several “vulnerabilities” facing Government in its quest to fulfil debt reduction strategy objectives.
“Barbados remains highly exposed to the risk of significant natural disasters, including hurricanes
and volcanic activity in neighbouring St Vincent,” the report said.
“Key risk mitigants include collaboration with development partners, such as the Inter-American Development Bank, to enhance public sector efficiency; the Government’s continuing strong political mandate which implies policy continuity; investments in disaster risk management; and nascent efforts to diversify the economy.”
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