REPORT TO CONGRESS ON

THE INTERNATIONAL MONETARY FUND’S

LOAN TO BARBADOS

A Report to Congress

United States Department of the Treasury

November 1, 2018
Introduction

This report provides an assessment of the likelihood that an International Monetary Fund (IMF) 

loan to Barbados, approved in October 2018, will be repaid in full. This report is required by 

section 1501 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010. 

Barbados’ public debt is equivalent to around 157 percent of its GDP, and the country is not 

eligible for assistance from the International Development Association. 

As directed by section 1501, and consistent with its longstanding practice with respect to all 

loans, the Office of the United States Executive Director (OUSED) at the IMF, in close 

coordination with the Treasury Department, conducted a careful and thorough evaluation of the 

proposed program for Barbados when it was submitted to the IMF Executive Board. The 

OUSED and Treasury will continue to monitor Barbados’ progress under the program.

Overview

On October 1, 2018, the IMF Executive Board approved a 4-year Extended Fund Facility (EFF) 

program of SDR 208 million (around U.S. $290 million at the time of approval) for Barbados. 

Over the last decade, the previous Barbadian government pursued undisciplined fiscal and 

structural policies inconsistent with the country’s exchange rate peg to the U.S. dollar, and the 

economy has been caught in a cycle of widening fiscal deficits and increasing debt. The new 

government, which took office in May 2018, inherited a precarious economic situation, with 

depleted foreign exchange reserves and an unsustainable debt position. Since taking office, the 

new government has demonstrated its commitment to pursuing significantly improved and 

extensive reforms to restore economic stability. The new government also has very strong 

political space for reforms, with Prime Minister Mottley’s party having won all of the seats in 

Parliament. 

IMF financing is aimed at supporting the government’s program to restore economic stability 

and debt sustainability, boost reserves, and raise growth over the medium-term. The main pillars 

of the EFF include: 1) decisive fiscal reform, including frontloaded fiscal consolidation

calibrated to be ambitious, but feasible; 2) monetary policy consistent with a pegged exchange 

rate; 3) a significant restructuring of public debt, both domestic and external; and 4) growthenhancing structural reforms, including reform of the over-sized, inefficient state-ownedenterprise (SOE) sector. 

Debt Status

At the time of program approval, Barbados’ public debt reached an unsustainable 157 percent of 

GDP. Of this, about 136 percent of GDP was issued by the central government, 10 percent of 

GDP was issued by SOEs and guaranteed by the central government, and domestic expenditure 

arrears amounted to over 11 percent of GDP. The overarching objective and long-term anchor of 

the IMF program is to reduce public debt to a more sustainable 60 percent of GDP by FY 

2033/34 (this target is consistent with other recent IMF programs in the region, such as Jamaica’s 

successful IMF-supported reform program). 
Debt Management Strategy

To meet the debt objective, the government is committed to running primary fiscal surpluses

over several years that reduce the need for public debt issuance. The government also has plans 

to undertake a significant debt restructuring that is aimed to deliver around 33 percent of GDP in 

debt relief, which will help reduce Barbados’ gross financing needs to a sustainable level. 

Barbados’ debt restructuring will primarily reduce its domestic debt, which makes up the large 

majority of public debt at 109 percent of GDP. In September 2018, the authorities launched an 

exchange of the sovereign debt held by domestic private creditors as a prior action in the IMF 

program. Barbados is aiming to restructure its debt by extending maturities, mainly to 15 years, 

and lowering interest rates, particularly for the next few years, to reduce gross financing needs. 

The domestic debt exchange subsequently gained the requisite agreement from creditors, and its 

implementation has already improved Barbados’ fiscal position relative to the IMF program’s

baseline assumptions. Since program approval, the government has also cleared around half of 

its domestic expenditure arrears and has plans to fully clear the remaining arrears over the 

medium term. The authorities continue to engage in intensive discussions with Barbados’ 

external official creditors. With the domestic debt exchange successfully completed, we expect 

the authorities to engage constructively with Barbados’ external private creditors with the 

intention of renegotiating these claims on appropriate terms, consistent with debt sustainability. 

To safeguard the gains from the domestic and external debt restructurings, the authorities plan to 

strengthen their debt management capacity under the program with the help of IMF technical 

assistance.

Vulnerabilities

The program involves significant risks, including limited implementation capacity coupled with 

the need to implement extensive structural reforms to boost growth; the need to sustain large 

fiscal surpluses over time; and risks inherent in the debt restructuring process. However, these

risks are mitigated by the government’s strong sense of urgency to address Barbados’

vulnerabilities and the authorities’ extensive outreach to build support for necessary economic 

reforms. The authorities have shown strong program ownership since taking office (in May 

2018) – including by taking key revenue and expenditure measures and initiating reforms to the 

SOEs, including stronger oversight, cost reduction, revenue enhancement, and mergers and 

divestment. In addition, the authorities have undertaken significant public outreach to build 

societal support for the program, including establishing an Economic Program Oversight 

Committee. 

Overall Assessment

Barbados is heavily indebted and vulnerable. However, the IMF-supported reform program 

provides the best opportunity for the country to restore macroeconomic and debt sustainability, 

rebuild international reserves, and undertake growth-enhancing structural reforms. The 

Barbadian authorities have demonstrated strong commitment to meeting IMF program objectives 

through their Economic Recovery and Transformation Plan, and the IMF program will help 

provide a framework for further action. Based on these factors and the IMF’s preferred creditor 

status, the Treasury Department assesses that the IMF’s loan to Barbados is likely to be repaid in 

full.