Barbados - Policy-Based Loan (2016)
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The post-2008 global economic and financial crisis exacerbated Barbados’ fiscal position which was already tenuous. The economy contracted in 2008, 2009 and 2010 due to declines in the key economic sectors. The crisis also exacerbated the country’s fiscal deficit which had already started to increase since 2005 on the back of a rapid expansion in public expenditure. In 2009, the economic downturn further restricted revenue intake, but necessitated counter-cyclical spending, exacerbating the already weak fiscal position of Central Government (CG). CG’s debt-to Gross Domestic Product (GDP) ratio had been on a steady increase, especially since 2007 given the fiscal deterioration and an increase in contingent liabilities. Meanwhile, interest payments as a ratio of total revenues increased. Barbados’ foreign currency bond rating had been downgraded by two international rating agencies in June and November 2009.