The International Monetary Fund (IMF) is hopeful that Barbados will start its economic recovery this year, as it admits that the global coronavirus pandemic is causing a deep recession on the Caribbean island.

In its just completed staff visit, the IMF Mission team highlighted that the implementation of the Barbados Economic Recovery and Transformation (BERT) program remains strong, despite the COVID-19 shock. Also all the program targets under the IMF supported BERT for the end of December 2020 were met.

The IMF observed that Barbados’ international reserves reached more than US$1.3 billion at the end of December. At the request of the Government of Barbados, the IMF team led by Bert van Selm conducted its staff visit via videoconferencing between February 2-5, 2021.

The team discussed with the Bajan authorities the implementation of the BERT plan, which is being supported by the fund under its Extended Fund Facility EFF with the Mia Mottley administration.

Mission chief’s observation on the performance of the Barbados economy

In his report at the end of the staff visit, van Selm reported that, “the prolonged COVID-19 pandemic continues to have a major impact on Barbados. The economy is estimated to have contracted by about 18 percent in 2020 with a gradual recovery projected to start in 2021.”

Tourism arrivals remain at a fraction of normal levels and recent increases in COVID-19 cases in key source markets, including the United States and the United Kingdom will likely delay the recovery. In addition, a recent outbreak of COVID-19 in Barbados led to an ongoing lockdown that will reduce economic activity in the first quarter of this year. 

According to the IMF mission chief, “In this very challenging environment, Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform program, while expanding critical investments in social protection. Key indicative targets for end-December under the EFF were met.

International reserves, which reached a low of US$220 million, which represented five to six weeks of import coverage at end-May 2018, increased to more than US$1.3 billion at the end of 2020.

Strong stems made in structural reforms

van Selm pointed out that strong steps have been made in implementing structural reforms pointing to a new central bank law, aimed at strengthening the autonomy of the bank while limiting the provision of credit to the government, was adopted by parliament in December 2020.

He noted that an actuarial review of the civil service pension system was completed in November 2020, providing the basis for upcoming public pension reform.

This is in addition to a new procurement law to strengthen the fairness, integrity and transparency of the procurement process that is expected to be submitted to parliament in February.

“The team is looking forward to conducting discussions for the fifth review under the EFF in May and would like to thank the authorities and the technical team for their openness and candid discussions,” the IMF mission chief said in concluding.