Barbados has placed a US$500mn sovereign bond, marking its return to the international capital markets for the first time since its 2019 debt restructuring and two successive IMF programmes.
The Mia Mottley Administration said that it will use the funds to refinance existing debt, prepay portions of its IMF loan and “free up hundreds of millions for social programmes”. The bond, carried at an 8% coupon with a five-year principal grace period and final maturity in June 2035, will allow Barbados to repay roughly US$300mn of a 2029 bond and prepay US$142mn to the IMF.
During a debate under the External Loan Act, Leader of Government Business in the Senate Senator Lisa Cummins outlined the issue’s objectives. “The operation is meant to free up approximately US$186mn in net terms for the remainder of 2025 through calendar year 2026. Over the next two years, it gives Barbados a buffer, a cushion, a risk mitigator,” she said.
“This significant reduction in outflows from the country will also help the government and the Central Bank that is responsible for fiscal management, to ensure that we can maximise our reserve levels over the period, to boost our resilience to external shocks, and to support our work so that we can benefit from continued upgrades from the international agencies.”
Cummins stressed that the bond forms part of a broader debt management strategy “aimed not only at easing debt service obligations but also at ensuring adequate liquidity to sustain vital social programmes and investments in infrastructure and education.” She added that the higher 8% rate,versus 6.5% on the 2029 paper, reflects “the maturity, which is 5.5 years longer in weighted average terms, and the increase in underlying US dollar interest rates, which globally have increased by approximately 2.8 percentage points since the 2029 bond was issued in 2019.”
In parallel, Barbados plans to prepay part of its IMF loan. “By prepaying the IMF loan, we hope to eliminate the need to repay principal between July 2025 and June 2027,” Cummins said. “We also intend to reduce our IMF debt exposure from 505% of our quota to approximately 300%, giving us room to access emergency facilities if needed, especially in the case of a natural disaster.” She noted that this prepayment would cut interest costs and surcharges by about 50%.
Junior Finance Minister Ryan Straughn, speaking in the House of Assembly, confirmed that over 90 global investors subscribed to the issue. He noted that the bond’s built-in disaster and pandemic clauses—an innovation pioneered by Barbados—will allow the government to delay payments following a major hurricane or global health emergency.
“What is being debated today is not in [and] of itself the borrowing of new monies, but the opportunity to allow Barbados to engage in what we describe as liability management, which is effectively being able to smooth out the debt profile,” he explained. “Coming at the end of seven years of significant turnaround with the fortunes of the Barbadian economy, we have reached a point where the conditions were suitable for us to be able to engage the international capital markets again,” Straughn added.
Bloomberg highlighted Barbados as the first sovereign to include both natural-disaster and pandemic clauses in a primary bond issuance. These stipulations permit temporary suspension of coupon and principal payments if the economy is devastated by a hurricane or global health crisis, building on a 2019 restructuring that first introduced a ‘hurricane clause’.However, not everyone has welcomed the move. Opposition Senator Ryan Walters questioned the logic of swapping lower-cost debt for higher-cost bonds. “The government is borrowing money or seeks to borrow money to pay off its existing loans…. [Does it make] any sense today that the government should seek to borrow at 8% to clear debts that are at 6.5% and under 4%?” Walters warned that the higher coupon would tack on at least US$60mn to interest outlays by 2029 and accused the administration of “kicking the can down the road” on fiscal obligations.
He also challenged the necessity of borrowing to prepay recent IMF loans. “We have just heard weeks ago that Barbados will get its last loan from the IMF, and in less than a month, we are asked to borrow money to pay the IMF loans… Something is not adding up,” stressed Walters.
University of the West Indies economist Dr António Alleyne described the 8% coupon as “exorbitant.” “The last time that any sort of loan at this rate was accepted was when we had the financial crisis, and I don’t think we are in that position right now,” he said. Alleyne also noted the government’s prior criticism of similar high-rate borrowings under former administrations.
Despite criticisms, the government maintains that the bond will underpin fiscal stability, protect social spending, and enhance resilience against shocks. By combining liability management with innovative disaster clauses, Barbados aims to set a precedent for small nations seeking sustainable access to global capital markets.