BRIDGETOWN, Barbados, Thursday December 13, 2018 – The seven-month-old Barbados Government has received top marks from the International Monetary Fund (IMF) for its efforts to restructure the economy under its Barbados Economic Recovery and Transformation (BERT) plan which was endorsed by the Washington-based lending agency.
Last week, two months after the IMF approved a US$290-million loan for the country under its Extended Fund Facility (EFF), an IMF team that visited the island said Barbados “has made an excellent start in implementing its ambitious and comprehensive economic reform programme”.
“Barbados has also made good progress towards meeting end-December 2018 structural benchmarks under the EFF…The country’s international reserves, which reached a low of US$220 million (5-6 weeks of import coverage) at end-May 2018, have more than doubled since then, amounting to more than US$500 million in early December. This has helped to rebuild confidence in the country’s macroeconomic framework,” said Head of Mission Bert Van Selm in a statement.
He added that the “rapid completion” of the domestic part of a debt restructuring which Prime Minister Mia Mottley announced on June 1, just a week after her Barbados Labour Party (BLP) won elections, has been “very helpful in reducing economic uncertainty, and the terms agreed with creditors will help put public debt on a clear downward trajectory”.
“A much-reduced government interest bill will help create much-needed fiscal space for increased social spending and investment in infrastructure,” he said.
The exchange offer for domestic debt was launched in early September. On October 15, the government announced reaching agreement with an overwhelming majority of domestic creditors, with support of all commercial banks, general and life insurers, the National Insurance Scheme, the Central Bank of Barbados, and smaller creditors. The domestic debt exchange operation was finalized on November 19.
Van Selm said progress being made by the authorities in furthering good-faith discussions with external creditors is welcome.
“Continuing open dialogue and sharing of information will remain important in concluding an orderly debt restructuring process; completion of the external debt restructuring would help further reduce uncertainty,” he said.
As for the government’s retrenchment programme which has seen about 1,000 people going home since October, Van Selm said it should help create a leaner, more efficient public sector, geared towards facilitating private sector-led growth.
“It should also help reduce central government transfers to state-owned enterprises, from a level that had become unsustainably high,” he added.
However, Van Selm expressed caution about the authorities’ announced plans to modify the corporate income tax framework, which seeks to unify rates that apply to the international business sector and local enterprises.
“There are some risks to this reform, including making corporate income tax revenues more dependent on maintaining international competitiveness,” the IMF official said.