The Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed Barbados’ credit rating of CariBB (local currency) and CariBB- (foreign currency) in its latest assessment on the new republic.

The ratings with a stable outlook indicate that the level of creditworthiness of this obligor, adjudged in relation to other obligors in the Caribbean is below average. CariCRIS said the ratings of the Government of Barbados are supported by:

• Fiscal consolidation, which continues despite COVID-19 pressures and other unanticipated shocks;
• Comfortable and growing foreign currency reserves;
• Good financial sector stability indicators, and
• Strong tourism fundamentals that suggest robust post-COVID rebound potential.

The rating agency said its ratings of Barbados were tempered by the country’s high debt-to-GDP ratio and the uncertainty of its economic recovery.

CariCRIS said its stable outlook on the ratings “is based on our expectation of a successful realignment of the home-grown Barbados Economic Recovery and Transformation (BERT) programme with the International Monetary Fund (IMF) that is expected to reduce debt to GDP to 60 per cent by 2035/36 and introduce more stringent fiscal planning and accountability.”

Possible upgrade of rating

CariCRIS added that could upgrade its rating opinion as BERT objectives are achieved, “however, the stable outlook balances the preceding with the challenge of creating sustained and moderate economic growth as well as current risks to achieving a post-COVID economic recovery, such as, the emergence of new variants that stifle tourism as well as vaccine hesitancy hindering herd immunity.”

Earlier this month, the IMF said it was making available to Barbados US$24 million after indicating that the island continues its strong implementation of the BERT, which is aimed at restoring fiscal sustainability, increasing reserves, and unlocking growth potential through structural reforms.

On November 5, the Washington-based financial institution concluded the Article IV consultation with Barbados as well as its sixth review of Barbados’ economic reform programme supported by an arrangement under the Extended Fund Facility.

IMF assessment under the BERT plan

The IMF noted that the prolonged global coronavirus pandemic, along with the twin natural disaster shocks of volcanic ashfalls from neighbouring St. Vincent in April and category 1 Hurricane Elsa in July, poses a major challenge for the tourism-dependent economy.

It said reform efforts include enhancing adaptation measures towards increasing vulnerabilities emanating from climate change and natural disasters. Given the outlook remains uncertain, IMF Deputy Managing Director Bo Li, said the authorities in Barbados need to maintain sound policies and their strong reform momentum to safeguard macroeconomic stability and boost potential growth.

He said a temporary relaxation of the primary balance target for fiscal year 2021/22 is appropriate given the lingering impact of the pandemic and unexpected spending needs to address the impact of Hurricane Elsa and ashfalls from nearby volcanic eruptions.

Li said the Barbadian authorities took an appropriate monetary and financial policy response to the pandemic and that they plan to recapitalise the central bank gradually.