The International Monetary Fund said on Wednesday that its staff has agreed on some $293 million in new financing for Barbados, including $183 million via a new trust fund created to help vulnerable middle-income and island countries.
The staff-level agreement is the first under the Resilience and Sustainability Trust approved by the IMF board in April, the IMF said. The Fund also said it reached agreement with Barbados on a new, 36-month Extended Fund Facility (EFF) loan of about $110 million.
Both agreements need approval from the IMF Executive Board, which is expected to consider the staff agreement in November or December, Bert van Selm, IMF mission chief for Barbados, told reporters.
Van Selm, who announced the agreements in Barbados with Prime Minister Mia Mottley, said the Caribbean nation was ideally suited to be the first country to use the new trust given its successful execution of an earlier IMF program, its location in a region exposed to climate change, and Mottley's leadership.
He said Barbados had not completed all the reforms intended during its previous four-year EFF programme due to the COVID-19 pandemic and had sought a follow-on program to complete those efforts. He said it needed to reduce its debt and was planning to start carrying out financial stress tests in coming years that took climate risks into account, he said.
The new trust expands access to low-interest loans to about 140 countries, double the number that could tap such resources under the IMF's Poverty Reduction and Growth Trust. That will be a big help for middle income countries, such as those in the Caribbean, that were hard hit by a loss of tourism during the pandemic and are highly vulnerable to climate change.
"It's obvious to everybody that climate change is the major challenge of our day, and we need to address it, if we can," van Selm said.
IMF managing director Kristalina Georgieva first discussed the new trust in June 2021, telling Reuters it would help a broader range of countries get the aid they needed to tackle climate change and other sustainability challenges.
Bangladesh and Argentina have also expressed interest in tapping funds under the trust, which offers 20-year financing. Van Selm said a few more countries were in talks with the IMF and he expected more announcements before the end of the year.