S&P Global Ratings has upgraded Barbados’s long-term local and foreign currency sovereign credit ratings to ‘B+’ from ‘B’, citing improved economic governance, fiscal consolidation and a steady reduction in public debt since the island’s 2018-19 restructuring. The outlook is stable.

The move reflects confidence that the Government of Mia Mottley, the Prime Minister of Barbados, will maintain “policy continuity and ongoing reforms”, S&P said after the successful completion of the International Monetary Fund’s Extended Fund Facility and Resilience and Sustainability Facility this year.

Barbados plans to launch the Barbados Economic Recovery and Transformation 2025 programme to further strengthen fiscal governance, deepen the financial sector and expand climate-related investments.

S&P noted that Barbados has reduced its fiscal deficit to 0.9 per cent of gross domestic product in fiscal 2025, down from 1.7 per cent the year before, and forecasts it will fall to 0.8 per cent in 2026. The country’s debt-to-GDP ratio is projected to decline to 95 per cent by 2026, on track towards the Government’s long-term goal of 60 per cent by 2035-36.

Economic growth is expected to average 2 per cent annually over the next two years, driven by a strong tourism rebound and major hotel and infrastructure projects. S&P projects GDP per capita to reach $25,800 in 2025, up from $23,200 in 2023. Tourism now directly contributes nearly 10 per cent of GDP and indirectly about 40 per cent.

International reserves remain robust at about $1.9 billion as of mid-2025, while the current account deficit has narrowed to 6 per cent of GDP, compared with more than 10 per cent in 2021. The unemployment rate has fallen to 7 per cent, and inflation is forecast at about 2.3 per cent.

Barbados successfully issued a $500 million bond in June this year to refinance IMF obligations, restoring capacity for future borrowing if needed. S&P expects the country will maintain a “productive relationship” with multilateral lenders and continue using local Barbados Optional Savings Scheme Plus bond issues for domestic financing.

The rating agency credited Barbados’s “stable, predictable and mature political system” and sustained reform agenda for enhancing resilience to external shocks. Risks include continued dependence on tourism and exposure to climate events, although recent approval of a disaster-risk financing policy and strong relationships with lenders are expected to mitigate those vulnerabilities.