This paper discusses key findings of the Financial System Stability Assessment Report on Barbados. Barbados has a relatively well-developed financial system, including a large offshore sector. The onshore system is dominated by large, regionally active banks. Banking services to the population are also provided by the credit union sector. With a deteriorating fiscal situation and weak growth prospects, Barbados faces considerable macroeconomic vulnerabilities. Although the financial system does not appear to be a source of immediate risk, its position appears to be deteriorating, with implications for systemic stability.

The Barbados Tenantries Programme provides an example of what can take place when the state elects to intervene in low-income housing. This work offers an empirical study of the plantation tenantries since the upgrading programme began in the 1980s, examining different aspects of 150 tenantries.

Despite a series of economic shocks, Barbados has made good progress in implementing its Economic Recovery and Transformation (BERT) plan since the government led by Prime Minister Mia Mottley took office in May 2018. Macroeconomic stability was restored with a combination of comprehensive sovereign debt restructuring, fiscal consolidation, and structural reforms to reduce fiscal dominance and enhance growth. International reserves have increased to US$1.4 billion by end-September 2022 from a historical low of US$220 million in 2018. While fiscal consolidation was interrupted by the COVID-19 pandemic, public debt was put back on a downward path starting in FY2021/22. Building on the successful completion of a 2018-22 Extended Fund Facility (EFF), the authorities have requested a successor EFF program along with a Resilience and Sustainability Facility (RSF) to strengthen fiscal sustainability, support the structural reform agenda, and increase resilience to climate change.

The technical assistance encompassed a comprehensive review of all pertinent aspects aimed at enhancing the joint financial stability report (FSR) of the Central Bank of Barbados (CBB) and the Barbados Financial Services Commission (FSC). The mission determined that the development of a detailed FSR production plan is critical and has the potential to facilitate improvements and synergies among various experts involved in the report’s production. The preparation of a communication plan for the report is another essential step that needs to be taken by the CBB and FSC. The broader macroeconomic context and a more forward-looking perspective should be reflected in the FSR, which needs to be streamlined to follow the central risk story with key messages that are clear and easy to understand to readers with limited knowledge of the financial system in Barbados. The report should reflect all important elements of financial stability assessment, such as the regulatory framework and the analysis of the real sector. The quality of the FSR could be further enhanced through advancements in the financial stability analytical toolkit. Finally, the mission reviewed and provided recommendations on the use of existing as well as potential new data sources that should be fully utilized for financial stability purposes.