IMF Agrees $293Mn Financing For Barbados, First Deal Under New Trust Fund

  • On September 28, the International Monetary Fund agreed on providing approximately $293Mn in new financing for Barbados, including $183Mn via a new trust fund created to help vulnerable middle-income and island countries.
  • The staff-level agreement is the first under the Resilience and Sustainability Trust (RST) approved by the IMF board in April. The Fund also said it reached an agreement with Barbados on a new, 36-month Extended Fund Facility (EFF) loan of about $110Mn.
  • Van Selm, who announced the agreements in Barbados with Prime Minister Mia Mottley, said the Caribbean nation was ideally suited to be the first country to use the new trust given its successful execution of an earlier IMF program, its location in a region exposed to climate change, and Mottley's leadership.
  • In 2018, the IMF institution approved a US$290Mn Extended Arrangement under the EFF for Barbados, noting then that the program was aimed at helping the island restore debt sustainability, strengthen the external position, and improve growth prospects.
  • Despite the sovereign not being able to complete all the reforms intended during its previous four-year EFF program due to the COVID-19 pandemic, it sought a follow-on program to complete those efforts. This included the reduction of its debt levels and the commencement of a series of financial stress tests incorporating climate risks in the coming years.
  • The new trust expands access to low-interest loans to about 140 countries, double the number that could tap such resources under the IMF's Poverty Reduction and Growth Trust. This will in turn assist middle-income countries, such as those Caribbean countries that experienced a virtual halt in tourism during the pandemic and are highly vulnerable to climate change.
  • The combined RST (approx. US$110Mn) and EFF (approx.US$183Mn) program aim to strike a balance between enhancing resilience to climate change while also focusing on Barbados’ continued efforts to reduce public debt and facilitate capital expenditure to boost growth.

(Source: Reuters)