IMF Deal To Anchor Fiscal Consolidation In Barbados

• Fitch forecasts that Barbados’ fiscal deficit will narrow to 1.4% of GDP in FY2023/24 (April 2023 – March 2024) and 1.0% in 2024/25, from an estimated 2.1% of GDP in FY2021/22.
• The agency anticipates that the Barbadian government will continue to prioritise fiscal consolidation under the framework of the Barbados Economic Recovery and Transformation (BERT) 2.0 plan, which was approved in October 2022, and a US$110Mn, three-year Extended Fund Facility (EFF) agreed with the IMF in December 2022.
• A primary goal of both the BERT 2.0 and IMF deal is to gradually increase Barbados' primary budget surpluses over the coming years to reduce the country's debt burden. As a result, public spending increases will be limited in the coming years, while above-trend GDP growth will promote robust revenue growth.
• In accordance with these developments, the government posted a primary surplus equal to 2.7% of GDP in FY2022/23, surpassing its initial target of 2.0% of GDP and compared to a 0.9% deficit in FY2021/22. Based on these factors, Fitch expects that this primary surplus will increase to 3.2% and 4.0% of GDP in 2023/24 and 2024/25, respectively.  

(Source: Fitch Solutions)