PM warns of inflation threat as Gulf war squeezes global energy supply

Barbados has secured a US$260m ($520m) precautionary credit line from the International Monetary Fund, as Prime Minister Mia Mottley warned that escalating global conflict and oil market disruption could trigger economic shocks for the island.

The country on Thursday cleared one of two stages in finalising the stand-by arrangement with the International Monetary Fund (IMF) for what Mottley described as an insurance policy in case the money is needed.

Visiting IMF mission chief Michael Perks announced during a press conference at Ilaro Court that Barbados had reached the accord at staff level on a three-year arrangement, which must now go to the fund’s executive board for likely approval in June.

Flanked by Central Bank governor Dr Kevin Greenidge and Marsha Caddle, minister for economic affairs and planning, and joined virtually by finance minister Ryan Straughn, the prime minister insisted that Barbados does not need any of the IMF money now. 

The government was simply ensuring that access to the financing was a phone call away if economic adversity struck without warning due to the volatile and unpredictable events playing out on the global stage, such as the war between Iran, the United States and Israel, she said.

The deal was not an IMF programme in the usual sense, which would have required predetermined sums to be identified and allocated for disbursement at fixed times, she added.

Mottley told journalists: “[The IMF] are not asking me to do anything. I have a home-grown programme that we put to the Bajan public in the last election. We got a resounding mandate on it. On the basis of that mandate, I have gone to them [IMF] and said ‘this is Barbados’ programme and trajectory. These are our numbers. Can you park for me US$260m in the event that I need it?’ I pray that I will never need it. But if I need it, I know that within 24 hours it can be sent down, or any portion thereof.” 

She added: “[It] has nothing at all to do with the development projects that we still need to go and still raise funds for; has nothing at all to do with the larger financing programmes of the government. This is just immediate liquidity support should we have a balance of payments problem that is thrust upon us because of external conditions.” 

According to the prime minister, while Barbados’s current economic position provides a sense of “reasonable” comfort and elbow room to meet salary increases for public servants this year and finish the state-owned enterprises reforms, the country must still be prepared for the pending rise in inflation being triggered by a loss in oil capacity, along with the fallout from the war in the Middle East.

She said: “The world has lost 10 billion barrels a day for over a hundred days. That is more than a billion barrels of oil. You have a reduced flow coming because you have destroyed capacity. So, you will not be able to recover. We have heard that from most of the major oil companies now. So, we expect that there is going to be some kind of long-term consequence that we will have to manage as the year goes forward. What it is, and to what extent it will be? We don’t know. But at the same time, we are satisfied that we ease our foot off a little bit, so that instead of running a four per cent primary surplus, that we will run 3.5 per cent. That means a difference roughly, of about $80m, and half of one per of GDP [gross domestic product].”

Mottley argued that this gives finance minister Straughn a little more leeway to deal with some of the issues still to be addressed, such as health, security and coastal defence.

She stressed that the IMF standby arrangement was not the only such tool that the government was pursuing as an emergency source of financing.

“This is only but one of the precautionary tools that the government of Barbados is putting in place. We are also going to be undergoing extensive discussions within the next few weeks, as whether there should be any other further precautionary lending, particularly given the trajectory of interest rates over the course of the next year, given the uncertainty of the geopolitical environment.”

IMF mission chief Perks told reporters that the new SBA will provide Barbados with insurance in a shock-prone external environment, while helping preserve macroeconomic stability and supporting reforms under the homegrown Barbados Economic Recovery and Transformation Plan 2026 (BERT 2026).

He said: “BERT 2026 marks the next phase of Barbados’ reform journey, moving from stabilisation and growth toward long-term transformation into a high-performing, inclusive, and climate-resilient economy.”

“Barbados enters the proposed arrangement from a position of strengthened macroeconomic credibility. Growth remains solid, fiscal performance continues to be strong, public debt remains on a declining path, international reserves remain ample, and Barbados successfully returned to international capital markets in 2025,” he stated.

“However, the outlook remains subject to downside risks, including heightened global policy uncertainty, commodity price pressures, and Barbados’ vulnerability to natural disasters.”

(EJ)