For Barbados to maintain its credit rating, or get a higher one that benefits ordinary Barbadians more, Government will have to keep reducing its debt while sustaining public investment to spur higher economic growth.
That is economist Dr Ankie Scott-Joseph’s reading of the situation following international credit rating agency’s Fitch’s affirmation of its B+ with a positive outlook rating for Barbados.
Scott-Joseph, who lectures in economics at The University of the West Indies, Cave Hill Campus, told Barbados Business Authority that “one factor Fitch says could lead to an upgrade is a deeper domestic debt market, in which Government borrows more at home”.
She also noted that “high primary surpluses and higher trend growth are the two other factors Fitch says could lead to an upgrade”.
“Fitch’s upgrade factors – high surpluses, more domestic borrowing and higher growth – are the same results households need from Government,” the public debt management specialist said.
“Hence ordinary Barbadians will gain from this rating when Government keeps reducing its debt as a share of the economy and keeps its capital projects on schedule, so that more Barbadians find work at higher incomes.”
She mentioned the National Insurance and Social Security Scheme’s (NISSS) investments in Government paper, its increased utilisation of domestic debt, the overall debt situation, and the use of the public purse as key factors affecting how Barbados’ credit rating prospects were assessed.
This was based on the Fitch rating report on Barbados which was published on October 5. “Fitch lists limited, though improving, investor demand for Government’s domestic debt as a weakness in Barbados’ credit profile. The Ministry of Finance names the National Insurance Scheme as the largest single holder of Government’s domestic securities,” Scott-Joseph noted. “At the end of 2020, the NISSS held 69 per cent of its investments in Government and state enterprise securities. In a deeper domestic market, the NISSS and other Barbadian investors would therefore lend Government more.
“When Government borrows at home, it repays Barbadian lenders in Barbados dollars, while it repays its debt abroad with foreign exchange.”
The economist added: “However, Government expects to pay more on new medium- and long-term domestic bonds than on loans from multilateral lenders such as the Inter-American Development Bank and the Caribbean Development Bank.
“In its debt strategy for 2024-2025 to 2026-2027, the Ministry of Finance assumed 7.3 per cent on new fiveto ten-year Barbados dollar bonds, against 5.15 to 6.5 per cent on multilateral loans. “The Ministry projected the average rate on all Government debt rising from 5.1 to 5.3 per cent by March 2027, partly because of the higher rates on new domestic bonds. Hence, as Government deepens the domestic market, the average interest rate on its debt will rise.”
Scott-Joseph also pointed out that “high primary surpluses and higher trend growth are the two other factors Fitch says could lead to an upgrade”.
“Government earns a primary surplus when its total revenue exceeds all its spending except the interest on its debt, and Fitch wants those surpluses kept high so that the debt keeps falling as a share of the economy,” she said.
“Fitch also wants higher growth over the long term, driven by economic reform or stronger investment. Higher growth gives households more jobs and higher incomes, and it raises the value added tax and income tax that Government collects.”
She stated that economic growth “has slowed each year since 2024”.
“Real GDP grew four per cent in 2024 and 2.7 per cent in 2025, and Fitch forecasts about 1.7 per cent for 2026, still above the 2000-2019 average of around 0.6 per cent,” Scott-Joseph said.
“Fitch expects the overall fiscal deficit, which includes interest payments, to widen from 0.2 per cent of GDP in fiscal year 25/26 to 0.9 per cent in fiscal year 26/27, given economic weakness and higher spending.
“Between April and December 2025, Government raised its capital spending by 48.8 per cent to $393.8 million, and its grants to public institutions rose 6.5 per cent to $888.8 million.”
The economist explained that “if Government cuts its spending on capital projects such as roads and the planned airport modernisation to protect the surplus, it reduces the investment that Fitch names as a source of higher growth”.
“Therefore Government should keep its primary surplus at the level Fitch wants by limiting how fast its day-to-day spending rises, while it keeps its capital projects on schedule,” she said.
“Households would feel the slower rise in day-to-day spending through slower improvement in public services, and they would gain more jobs and higher incomes from the capital projects over time.”
Scott-Joseph said that at the end of the day a credit rating “is Fitch’s assessment of Government’s capacity to meet its debt payments”.
“Ordinary Barbadians lend to Government through their National Insurance contributions,” she said.
“According to the [last] NISSS actuarial review, benefit payments have exceeded contribution income in almost every year since 2014, so the NIS uses the interest and repayments on its Government bonds to help pay pensions. Government’s interest payments to the NIS therefore help fund NIS pensions.