BRIDGETOWN, Barbados – The Barbados government says the level of public debt has declined to slightly above 100 per cent of gross domestic product (GDP) and international reserves have risen to BDS$3.2 billion representing a very healthy 31 weeks of imports.
Minister in the Ministry of Finance, Ryan Straughn, presenting the government’s budget presentation on Monday evening, said as a result of this turnaround, the two to one peg of the Barbados dollar has been safeguarded for future generations, and reserves are set to remain at record levels, bolstering confidence in the economy and driving growth in the years ahead.
“In other words…the national debt today is lower than it was in 2018; the foreign reserves which give us cushion against external blows, or in more technical language exogenous shocks, are higher and at strong levels.”
Straughn said that of significance is the fact that the fear of every Barbadian that things were so precarious in the country and with the economy, that the dollar was going to be devalued, is now a thing of the past. He said what was a possibility and dominated daily conversations in Barbados, is now history.
But Straughn acknowledged that a lot has been said in the public domain about how much the country is borrowing as if that is the only side of the coin.
He said the only reason Barbados borrowed so much money was strictly because of COVID-19 pandemic which was entirely to support Mission Survival and to the tune of BDS$1,285.5 million.
“I want to make it clear …for the avoidance of any doubt, the debt level at the end of February 2025 was 101.1 per cent of GDP. If there was no COVID-19 pandemic… then the current debt level would have been 92.2 per cent today.”
Straughn said that debt is forecast to continue to fall as a share of GDP for several reasons, including continuing fiscal discipline that limits the amount of new debt which the government needs to take on annually as well as the terms of the debt which the government do take on are far lower than that agreed to by the previous government, largely due to the confidence and restoration of the country’s credit rating. He said also the rate of economic growth has returned to a healthy level.
Straughn said that the last time Barbados’ debt level was under 100 per cent was May 2012 “so I understand the psychological concerns citizens may have because it seems like a lifetime ago.
“But by the good grace of God, steady leadership and barring any unforeseen circumstances, Barbados will cross the 100 per cent threshold to double digits before the end of the next fiscal year. “
Straughn said that in the face of a hostile international climate, the Barbados economy continues to grow, jobs are being created, the debt is decreasing to more sustainable levels and the prudent management of the fiscal affairs.
He said Barbadians can rest comfortably at night knowing that what was in the Treasury last night, was there this morning.
H said Barbados does not want to experience an actual disaster in order to get debt relief, but rather it prefers to build resilience ahead of the disaster in order to minimise the social and economic dislocation and the attending costs.
“Therefore, the reform is important especially given the already tight fiscal space facing this country and other countries like our own, which are on the front lines of a climate crisis we did not cause and do not have the domestic resources to fight.”
He said Cabinet approved the Barbados 2035 Investment Plan in June 2024 and it is estimated that between now and 2035, an estimated BDS$23.2 billion will be needed to fund the priority projects outlined in the Investment Plan, of which there is a significant opportunity of BDS$13.2 billion for investment by the private sector, while the public funding component is estimated at BDS$10 billion over 10 years.
Straughn said it should be noted that whilst the plan identified 12 priorities, Barbados was hit by Hurricane Beryl, two weeks afterwards, causing the government to reorder the priorities list, as the repair of the Fishing Harbour, the Bridgetown Port, the Coast Guard Base and other key infrastructure which had sustained damaged now had to take immediate precedence.
The Minister said two weeks ago, Cabinet approved the Disaster Risk Financing Policy and last week, the Ministry of Finance successfully started negotiations with the World Bank for a Development Policy Loan with Catastrophe Deferred Drawdown Option (CAT DDO).
“The CAT DDO is a contingent financing line that provides immediate liquidity following a natural catastrophe including natural disasters and public health emergencies caused by a biological event. Funds become available for disbursement after the drawdown trigger, typically the country’s declaration of a state of emergency, is met.”
Straughn said that this is the finest example of what a responsible government looks like, by putting additional pre-arranged financing in place as it has done with the Inter-American Development Bank’s Contingent Credit Facility of US$80 million, in the event it is required. He said “this World Bank facility unlocks 0.5 per cent of GDP for Barbados to access should we need it”
Straughn said that over the next few months, Barbados will also pursue discussions with the Development Bank for Latin America and the Caribbean (CAF) to put a similar facility in place.
He said the passage of Hurricane Elsa in 2021 demonstrated why building resilience upfront is critical.
“As it stands, the Catastrophe Fund as currently structured only contemplates expenditures post-disaster. With Barbados being on the front line of the climate crisis, there is an urgent need to aggressively build greater resilience in the shortest possible time.
“The government of Barbados needs to be prepared to respond to current and future shocks, regardless of source, in order to mitigate the economic impact on businesses and livelihoods,” Straughn said, noting that during the COVID-19 pandemic “we also expanded the scope of the Catastrophe Fund to include businesses but given the reality of the economy at the time, we did not address how they would make their contribution”.
He said currently, only employees and self-employed persons contribute to the Catastrophe Fund at a rate of 0.1 per cent of their salary capped by the maximum insurable earnings ceiling which is currently BDS$1,219 per week or BDS$5,280 per month.
He said that this means that a person earning BDS$2,000 per month makes a contribution to the Catastrophe Fund of two dollars per month. However, a person who earns BDS$10,000 per month only contributes a maximum of BDS$5.28 per month to the Catastrophe Fund due to the application of the maximum insurable earning ceiling.
“Equity will suggest that someone earning BDS$10,000 per month Mr. Speaker should really be contributing $10 per month as opposed to BDS$5.28 per month. It is the government’s mission to move from the current posture to a more proactive approach to future-proof the Catastrophe Fund and accelerate the building of resilience.”
He said he proposes to expand its scope and repurpose it as a Resilience and Regeneration Fund to provide financial aid to eligible persons and qualifying businesses in need of such aid as a result of a catastrophe, mitigate against or remedy the adverse effects of a catastrophe, provide financing for resilience building activities and provide financing for regeneration building activities.
Straughn said that in order to future-proof the Resilience and Regeneration Fund, he is proposing that effective April 1, 2025, utilization of up to 50 per cent of unclaimed and undistributing assets including dormant accounts in commercial banks/credit unions and other deposit-taking institutions for use in the Resilience and Regeneration Fund to build climate resilience and regeneration activities.
The new measure will allow the Resilience and Regeneration Fund to accept grants, donations at large or donations for specific projects, other financial resources including pledges from planning gains to accelerate resilience and regeneration activities and allow the Fund to borrow or issue securities with the permission of the Minister responsible for Finance to accelerate the building climate resilience and regeneration activities.
In addition, the measure will increase the contribution rate from 0.1 per cent to 0.25 per cent for employees and self-employed persons and expand the contributor pool by requiring employers to match the contributions of each of their employees;
Straughn said that for the purpose of contributing to the Fund, the cap of the maximum insurable earning ceiling will no longer apply for the purpose of making contributions to the Fund for employees, self-employed persons and employers.
