A BIG SURGE in global oil prices triggered by the war in the Middle East has thrown the Ministry of Finance and Government into crisis mode to protect Barbadians.
Minister of Finance Ryan Straughn yesterday announced sweeping fiscal measures to secure the country’s fuel supply and protect household electricity bills, cap prices at the fuel pump and address fallout from spiralling freight costs, especially for food and other consumer goods.
In a near three-hourlong presentation of the Budgetary Proposals And Financial Statement in the House of Assembly, he also revealed a decision to revise the 2026-2027 Estimates of Revenue and Expenditure by about $500 million. Government now expects $200 million less revenue from corporation tax and is cutting previously budgeted spending by about $300 million.
Oil prices
Straughn warned Barbadians that if the oil prices, which were US$106 a barrel yesterday, reached between US$150 and US$200 a barrel as predicted by some pundits, Barbados’ economy, like the rest of the world, would likely fall into recession.
A substantial part of his speech, his first since being appointed last month, dealt with the ongoing and possible future fallout caused by the conflict involving the United States, Israel and Iran. However, the Budget also included measures to stimulate investment, economic growth and exports, while protecting the vulnerable.
Addressing the Chamber, including a well-populated Public Gallery, the Minister said that from a fiscal perspective, Barbados had turned the corner, with money flowing in the right direction towards households and businesses, but cautioned that ongoing external events meant that it could not be business as usual.
“When we prepared the Estimates . . . , the assumption was that we were going to be in a stable world, [but] since we laid those Estimates, the world has changed fundamentally,” he said.
“The sharp increase – 66 per cent – in global oil prices is a direct result of geopolitical conflict and war, and because Barbados imports its fuel, we inevitably feel that impact. Energy prices affect almost everything in our economy – from electricity to transportation to shipping – which is why fuel costs have such a direct impact on the cost of living.”
Straughn then announced a suite of additional measures he said was intended to give consumers an ease from the price pressures.
“First, we have already acted in the oil futures market. On Government’s instructions last week, our national fuel importer, Barbados National Energy Company Limited (BNECL), has locked in the price of heavy fuel oil, which powers our electricity generation, at US$92 per barrel for the next three months,” he announced, adding that this was a saving of about US$1 million.
“Essentially, what the Government did was lock in the price of heavy fuel oil ahead of time to protect Barbadians from further price spikes in the international market over the next three months. We will review again in three months when this hedge expires.”
Electricity
Government will also allocate $7.9 million to subsidise electricity prices from April 1, by absorbing half of the expected increase in the Fuel Clause Adjustment, which Barbadians pay via their electricity bills, for a three-month period.
Value added tax (VAT) on the first 250 kilowatt hours for residential homes will remain at 7.5 per cent from April 1, until March 31, 2027, which will spare households from a $32 per month increase in their electricity bills above what it is this month.
Barbadians are also getting relief at gas stations. From April 1, until March 31, 2027, VAT will be capped at 47 cents per litre on gasoline and 37 per litre on diesel.
Straughn also said that from next month “the excise tax charged on gasoline will be reduced for three months from 99.39 cents to 89.39 cents and diesel from 44.03 cents to 34.03 cents”.
With BNECL now reducing the rate of its recovery of 2022 financial losses from nine cents per litre to four cents per litre, Barbadians will get a cumulative reduction of 15 cents per litre at the fuel pump.
Other measures will come at ports of entry “to further ease the squeeze”.
“Government is adjusting how duties are calculated so that unusually high shipping costs do not unfairly inflate the taxes paid on imported goods. It is like ensuring the tax is calculated on the item itself, not the inflated shipping cost,” Straughn told the House.
“With effect from April 1, 2026, until March 31, 2027, items landed in Barbados on or after April 1, 2026, Customs & Excise Department will use the free-on-board value for the purpose of calculating customs duty and VAT on food, personal care items and construction materials.”
The Budget also included policies to put more money in the pockets of low-income Bajans, the middle class, pensioners and people on welfare.
Government will spend $12.9 million to expand access to the Reverse Tax Credit from income year 2025, and $31.7 million per year to raise the income limit for the Compensatory Income Credit from $35 000 to $50 000.
Further, at a combined cost of $26.1 million to Government, the income tax rate for people earning between $25 000 and $75 000 will be reduced from 12.5 per cent to 11.5 per cent, and from 28.5 per cent to 27.5 per cent for those earning over $75 000 effective April 1.
Pensioners
For pensioners with annual income below $50 000, from April 1, the cost of living cash credit will be $100 per month, paid for 12 months, and “from income year 2025, the taxable allowance for pensioners will be increased from $50 000 to $75 000”, at a cost of $11.7 million per year.
People on welfare will also be paid the cost of living cash credit of $100 per month for one year.
The Budget also focused on measures to stimulate investment and grow the economy, while boosting skills, competitiveness and productivity.
Government is establishing the Green Industrialisation Gateway Advantage as it targets expanding Barbados’ annual export earnings from today’s US$700 million to US$4 billion to $6 billion annually within a decade.
For small businesses, there is an increase in the loan limit for the Trust Loans to $20 000 effective April 1, the VAT registration threshold will be increased from $200 000 to $350 000 from October 1, 2026, and the Ministry of Finance will establish a factoring facility, capitalised at $3 million, to provide small businesses with greater access to working capital financing.
Also, from April 1, all tourism properties with concessions issued under the Tourism Development Act
on or after January 1, 2005, will be granted an automatic threeyear extension to their concession agreement.
There will be a big effort to revitalise Bridgetown, via a public-private partnership involving Government, the Barbados Chamber of Commerce and Industry and other stakeholders.
Straughn said the Budget, which included support to fight crime, fix traffic congestion and improve the health care sector, “eases the squeeze where families feel it most, it protects our economy from global shocks, and it prepares Barbados for the opportunities ahead”.