Government will have a $1 billion deficit in its budget for the new fiscal year starting on April 1 and it will be relying on domestic financing to make up the shortfall.
With higher debt repayments plus interest predicted to account for $1.76 billion of expenditure in 2025-2026, the Ministry of Finance, Economic Affairs and Investment expects to benefit from a primary surplus of $613.6 million.
This is detailed in the 2025-2026 Estimates of Revenue and Expenditure which was laid in Parliament on Tuesday. It will be the focus of debate on the Appropriation Bill, 2025 when it starts in the House of Assembly on Monday.
Reacting to the fiscal projections, University of the West Indies Professor of Finance Justin Robinson’s verdict was that Government’s budget was “a manageable risk”.
However, he said the numbers revealed “a delicate balance between economic growth and a persistent debt burden [and] suggest a Government walking a tightrope between investment and fiscal responsibility”.
“The Government’s budget strategy prioritises fiscal balance and investment, but with large amounts of debt maturing, the debt stock will remain elevated,” Robinson added.
Debt to GDP ratio
“Unless there is further austerity in the form of aggressive revenue-enhancing reforms or expenditure cuts, policy should focus on growing the economy and maintaining fiscal prudence so as to reduce the debt to GDP ratio in line with the Barbados Economic Recovery and Transformation programme.”
The Ministry of Finance said that on the accrual basis, Government’s revenue for the next fiscal year is projected at $3.98 billion, while on the cash basis it is projected at $3.88 billion, an increase of $110.3 million.
Total expenditure on the accrual basis will be $5.13 billion, and $5.08 billion on the cash bases.
This means that Government’s fiscal deficit on the accrual basis is projected to be $1.15 billion on the accrual basis and nearly $1.2 billion on the cash basis.
“Expenditure on goods and services is expected to increase by $79.9 million over the revised figure for 2024-2025 to $645.5 million. Current transfers are projected to increase by $45.1 million or 4.3 per cent to $1.08 billion.”
In his examination of the Estimates on the cash basis – the method used by the Accountant General – Robinson said “a striking 44 per cent increase in non-tax revenue points to a greater reliance on levies, fees, and service charges, raising concerns about potential cost increases for businesses and individuals”.
“While this diversifies revenue streams, the sustainability of this approach remains uncertain,” he observed.
He noted that $720.4 million (14.2 per cent of total spending) of the projected 10.1 per cent increase “is tied to debt repayments rather than development”.
He also said “despite a successful debt swap reducing service costs, high interest payments (14.2 per cent of revenues) and recurrent expenses (53.8 per cent of spending) limit the Government’s fiscal flexibility”.
His view was that “this leaves less room for social services, infrastructure, and economic stimulus measures”.
Robinson said regarding the fiscal deficit and debt burden that while the fiscal deficit on the cash basis is $1.2 billion, lower than 2024-2025’s $1.45 billion shortfall, “when maturing debt of $1.07 billion is subtracted, the actual need for fresh borrowing is significantly lower”.
While seeing Government’s continued projection of a primary surplus as a positive indicator, he pointed out that “the sheer volume of debt rollover keeps total debt stock elevated”.
Government is planning to fund its fiscal deficit with foreign financing of $518.4 million and $678.5 million from domestic sources.
“Foreign borrowing offers lower interest rates and longer repayment terms, helping ease short-term fiscal pressure. However, this increases exposure to exchange rate fluctuations and external lending conditions,” Robinson said.
“Domestic borrowing, while reducing currency risks, may increase competition for credit in local markets, raising interest rates and impacting private sector growth.”
QEH subvention
The 2025-2026 Estimates includes a $120.9 million subvention for the Queen Elizabeth Hospital; $94.6 million for the amalgamated Social Empowerment Agency; a $98.4 million subvention and $20.7 million for economic costs and tuition fees for UWI; $8.5 million for the Change Management Unit in the Ministry of Education; $11 million for the female dormitories at the Regional Police Training Centre; and $16.4 million for the Hope Agriculture Training Institute and the UWI Centre for Food Security and Entrepreneurship (China Aid Project).
With Barbados holding We Gatherin’ celebrations all year, the Estimates show that Government has budgeted $3.9 million on the initiative. Based on the 813-page document, the bulk of the expenses – $2.5 million – are with the Prime Minister’s Office (Culture).
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