Barbados’ remarkable economic recovery

by KIMAR HINDS FROM 23 CREDIT DOWNGRADES, 177 per cent debt to Gross Domestic Product (GDP) and four weeks import coverage to placing the economy back on track.

Prior to the General Election of May 2018, Barbados was gripped by economic anxiety. Downgrade after downgrade by international credit agencies such as Standard & Poor’s and Moody’s decimated investor confidence and signalled the growing likelihood of a debt default. The ever-looming threat of devaluation of the Barbadian dollar dominated national discourse, as the island’s financial credibility eroded in both public and private sectors.

In a bold and unprecedented move, the Barbadian electorate placed full confidence in the Mia Amor Mottley-led administration to reverse the nation’s economic freefall. On May 24, 2018, voters delivered a historic mandate, awarding all 30 parliamentary seats to the Barbados Labour Party. This sweeping victory was a resounding statement of dissatisfaction with the island’s economic performance.

Over the preceding decade, Barbados received more than 20 credit downgrades, severely impairing its access to international financing. With debt levels soaring above 150 per cent of GDP, the country ranked among the most indebted globally. At the same time, foreign reserves had plummeted to nearly $400 million, barely enough to cover a month’s worth of imports.

Faced with the nation’s startling reality, newly elected Prime Minister Mia Amor Mottley, Barbados’ first female leader was left with no choice but to turn to the International Monetary Fund (IMF). The IMF is often viewed with great skepticism by Caribbean nations due to its reputation for imposing harsh austerity measures and conditionalities, which have historically and conversely yielded devastating economic results for other CARICOM nations including Jamaica and Guyana.

In her first national address, Prime Minister Mottley made it clear that the government’s immediate priority was economic stabilisation. This necessitated swift entry into an IMF-supported programme. One week later after assuming office, the Barbados Economic Recovery and Transformation (BERT) plan was launched with a four-year extended facility fund (EFF) arrangement of US$289.41 million.

The BERT programme outlined a comprehensive approach, focused on fiscal consolidation to achieve a higher primary surplus; debt restructuring to reduce high interest payments; and structural reforms to improve public financial management. In just two years, the debt to GDP ratio fell from a staggering 177 per cent to 109.9 per cent, while foreign reserves surged to $1.5 billion. This was not only clear evidence to Barbadians of the plan’s early success, but an early illustration that government can deliver on its commitments.

While Barbados was and remains not entirely out of the woods, what makes this “Septennium of Economic Transformation” so remarkable is how the country has not only stabilised but repositioned itself as a global leader among small island states.

This recovery came despite an array of compounding external shocks: the COVID-19 pandemic, the La Soufrière volcanic eruption, Hurricane Elsa, Hurricane Beryl, a freak storm, and persistent climate and geopolitical disruptions. Yet, the Barbadian economy has regained investor confidence with increased airlift, record tourism arrivals and several major hotel projects including Hyatt slated to commence. Once again Barbados has positioned itself as a destination for major investment and economic activity Barbadians can now breathe a sigh of relief, having begun to witness one of the most highly anticipated and significant paradigm shifts in small state economic governance. On May 7, 2025, the Central Bank of Barbados announced that the IMF had completed its fifth review of the BERT programme.

According to the Central Bank report, it affirmed that “Barbados had met all quantitative performance targets except one, transfers and grants to state-owned enterprises which was impacted by emergency COVID-19 response measures”.

Successfully completing an IMF programme is no small feat. Although Barbados has successfully completed IMF programmes in the past, the Caribbean has seen multiple countries enter such programmes only to emerge with devalued currencies, defaulted loans, and stunted economies. Barbados’ performance under extraordinary circumstances and being able to successfully negotiate IMF surcharges stands as a regional anomaly and triumph.

Evidence of strong economic recovery, guided by the BERT programme is reflected in Barbados’ most recent credit rating. Moody’s Ratings upgraded Barbados’ credit rating from B3 to B2, an encouraging sign of fiscal discipline and improved debt sustainability. The continued achievement of a primary surplus and a narrowing fiscal deficit has placed the country on a more secure economic path. Importantly, this strengthens Barbados’ capacity to weather future external shocks given the global uncertainty, including global trade disruptions and geopolitical instability.

This momentum presents a timely opportunity for government to expand its support for micro and small enterprises. Initiatives such as the Barbados Trust Loan Fund and Export Barbados play a pivotal role in catalysing private sector development and building a more dynamic market economy. On the other hand, entrepreneurs must demonstrate greater appetite for collaboration, export engagement, and scaling operations. By leveraging public financing mechanisms and agency support, businesses can access more competitive markets while managing costs and increasing long-term viability. Barbados’ journey from economic brinkmanship to recovery is a testament to strategic leadership, disciplined policy execution, and national resilience. Despite multiple global and environmental shocks, the country has restored macroeconomic stability and redefined what is possible for small island states in the current economic climate.

The success of the BERT programme not only reinstates confidence in the Barbadian economy but establishes a model for fiscal recovery in similarly vulnerable nations. While criticism and challenges remain inevitable, the government, its consultants and citizens must be commended for remaining steadfast in steering the economy back on track. Thankfully, Barbados is now poised for a future of sustainable growth, innovation, and inclusive development.

Kimar Hinds is an international business professional. This article was submitted as a Letter to the Editor.

(FP)