Barbados has become the first country in the world to reach an agreement with the International Monetary Fund (IMF) for a Resilience and Sustainability Trust (RST) program.
“We welcome the staff-level agreement reached between the government of Barbados and the IMF team on access to the IMF’s new Resilience and Sustainability Trust to build resilience against climate change with affordable, long-term financing at 150 percent of quota, about US$183 million,” said Bert van Selm, who headed an IMF delegation to the island.
He said the RSF will be accompanied by a 36-month arrangement under Extended Fund Facility (EFF) for approximately US$110 million to maintain and strengthen macroeconomic stability and continue the implementation of the structural reform agenda.
“The combined RST and EFF program aims 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. The agreement is subject to approval by the IMF Executive Board.”
He said the proposed arrangement under the RSF will provide financing to support the country’s climate change adaptation and mitigation efforts, and support Barbados’ ambitious goal of transitioning to a fully renewable-based economy by 2030.
The Fund’s RSF and the proposed broad set of reform measures are expected to catalyze financing from other international financial institutions as well as from the private sector.
“Reforms under the RSF would include the mainstreaming of climate change in the budget and enhancement of risk management, including for the financial sector; the introduction of ‘green public financial management,’ including in procurement; and adoption of measures that would incentivize private sector investments in climate resilient infrastructure and into renewable energy projects,” van Selm said.
He said these measures will be closely coordinated with the World Bank and other international partners and that executive board consideration of Barbados’ request for support under the RSF can take place once this new instrument has become operational.
“Barbados continues to confront economic challenges owing to the global pandemic and higher global commodity prices, but the recovery is now well underway. Inflation has been rising since the second half of 2021 owing to supply chain disruptions and increasing global food and oil prices, fueled in 2022 by Russia’s war in Ukraine.
“With a strengthening in tourism to about 60 percent of pre-pandemic norms, economic growth is projected at ten percent in 2022. A gradual economic recovery is expected over the medium term, but downside risks to the outlook remain high,” he said.
The IMF official said despite this challenging environment, Barbados has made good progress in implementing its Economic Recovery and Transformation (BERT) plan.
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