BRIDGETOWN, Barbados, Tuesday December 17, 2019 – Barbados has passed its latest International Monetary Fund (IMF) test with flying colours, opening up access to almost BDS$100 million (US$48 million) from the Washington-based institution.
The country also impressed the IMF directors who reviewed the progress on the island’s Barbados Economic Recovery and Transformation (BERT) programme.
Government’s economic advisor on loan from the IMF, Dr Kevin Greenidge, disclosed yesterday that the Executive Board of the IMF had completed the second review of the BERT programme which is supported by an IMF Extended Fund Facility (EFF), allowing the government to draw the equivalent of SDR 35 million (about US$48 million).
“This passing of the second review reflects Barbados meeting all its targets under the BERT programme and, in some instances, with a wide margin. There were lots of praise from the Directors at the Board,” he said.
According to the directors, in spite of its limited technical capacity, Barbados has made impressive progress towards achieving fiscal and debt sustainability, rebuilding reserves, reducing uncertainty towards generating growth.
Dr Greenidge added, however that, “there is significant work to be done, and we remain resolved to stay the course and continue meeting our commitments under the EFF”.
“Passing yet another IMF review, completing the debt restructuring and having our credit ratings upgraded are all sending an important message to the world – that Barbados is back; we are serious about our reforms and about transforming the economy,” he said.
Barbados entered into a four-year arrangement with the IMF under an EFF valued at US$288 million, on October 1, 2018, underpinned by the BERT programme under which the country has committed to executing a range of fiscal adjustment measures and restructuring of the public sector.
The latest disbursement brings the total so far to US$145 million.
Following the IMF Board discussion of the review, Tao Zhang, Deputy Managing Director, and Acting Chair issued a statement in which he said that Barbados continues to make good progress in implementing its comprehensive homegrown economic reform programme.
“The fiscal adjustment continues as programmed with the primary surplus targeted at six per cent of gross domestic product for financial year 2019/2020 and subsequent years,” he said.
“This target for end-September 2019 was met by a significant margin, and the financial year 2019/2020 budget provides a solid basis for reaching the target for the next fiscal year. Tax policy reforms aim to enhance revenue, while improvements in tax and customs administration are essential to support medium-term revenue. The planned adoption of a fiscal rule in 2020 will help sustain the adjustment effort over the medium and long term.”
The IMF official also welcomed Government’s local and external debt restructuring, saying that it complemented the fiscal consolidation efforts.
“The recent agreement reached with commercial external creditors will help reduce uncertainty and improve prospects for investment. Under the programme’s macroeconomic framework, the restructuring agreement will facilitate reaching the 80 per cent of GDP medium-term debt target in financial year 2027/2028, and the 60 per cent of GDP long-term anchor in financial year 2033/2034.
“An improved governance framework of the Central Bank of Barbados would facilitate limiting monetary financing to the government and strengthening the central bank’s mandate, autonomy, and decision-making structure. Measures to strengthen the Anti-Money Laundering/Countering Financing of Terrorism regime would also be helpful,” he added.
Zhang also noted that State-Owned Enterprise (SOE) reforms are essential for achieving the primary surplus target and maintaining it over the medium term.
“To secure fiscal space for investment in physical and human capital, transfers to SOEs are envisaged to significantly decline by a combination of stronger oversight of SOEs,” he said.
He also noted that strengthening disaster resilience is key to boosting medium-term economic prospects.