BRIDGETOWN, Barbados, Monday September 10, 2018 – The Barbados government and the International Monetary Fund (IMF) have reached a Staff Level Agreement that would see the country getting access to a total US$290 million.
Prime Minister Mia Mottley and Deputy Division Chief of the Caribbean II Division of the IMF, Bert van Selm made the announcement during a press conference last Friday, the end of an August 30 to September 7 visit by a team from the Washington-based institution.
“I am pleased to announce that, in support of the Barbadian authorities’ economic reform program, the IMF team and the government of Barbados have reached staff-level agreement on a 48-months Extended Fund Facility (EFF), with access of SDR 208 million (equivalent to 220 percent of quota, or about US$290 million),” Van Selm said. “If approved by the IMF Executive Board, SDR 35 million (about US$49 million) would be immediately available. Staff envisages that the IMF’s Executive Board would consider the proposed arrangement under the EFF by early October.”
The IMF official suggested that the Barbados Economic Recovery and Transformation (BERT) Programme, on the basis of which assistance is being granted, had the Fund’s thumbs up.
“The authorities’ reform programme, and the important commitment of IMF resources that it entails, is a vote of confidence in Barbados’ Economic Recovery and Transformation Plan,” he said.
“The cornerstone of the programme is a strong front loaded fiscal adjustment, focused on curbing current expenditure, while maintaining space for social safety nets and infrastructure spending. And in this context, measures to reduce Government expenditures that were announced…are critical and are a very important first step…
“The Barbados Economic Recovery and Transformation Programme aims to restore macroeconomic stability and put the economy on a path of strong, sustainable and inclusive growth. Fiscal consolidation together with the announced debt restructuring is needed to place that on a clear, downward trajectory. The strategy of accelerating growth focuses on attracting new investment in areas such as renewable energy, the creative and artistic industry, education and health services and of course tourism,” he said.
Van Selm said the measures in the programme should help reach a primary surplus target of six per cent of GDP in the fiscal year 2019/20. He added that the fiscal adjustment would be complemented by a comprehensive debt restructuring aimed at securing meaningful debt reduction, reducing financing needs and restoring debt sustainability.
And he noted that while the initial implementation period would be challenging, Barbados would emerge stronger and more dynamic from the programme and it would be better positioned to generate growth and job creation for citizens.
Prime Minister Mottley said it was an extraordinary achievement by Barbados to reach agreement with the IMF in three months.
“We appreciate the Staff Level Agreement, because we recognise that in achieving it we have not put the stability or the value of the Barbados dollar at risk…We have, however, adjustments to make and…we have started to make them. Phase one was the mini-budget on June 11 and phase two and three will start concomitantly,” she said.
Mottley noted that the IMF was a “cheap source of funding” but more than anything else, it would assist in unlocking access to funding for the country.
“Immediately upon [the IMF’s] Board approval, which we hope to have in a few weeks’ time, it will also unlock funding from the Inter-American Development Bank, we believe, and the Caribbean Development Bank and other institutions. It allows us to move forward with a level of certainty and to send the message that Barbados has a good prognosis and that we anticipate that growth will return, in our view, within two to three years,” she said.
“Our Government must be fit for purpose at the end of this Programme. Our debt to GDP must drop to 60 per cent…. We must be able to provide services and goods to our people such that our country is not only stable and safe, but the place of choice for Barbadians and non-Barbadians to want to live and do business,” Mottley added.
The Prime Minister admitted that the road ahead would not be easy, but emphasised that the country could make it.
“Not every day is sunny, but equally, every day is worth living. And to that extent, if this country can make the adjustments that we…have started to make, then I have every confidence that within two to three years, growth will return and opportunities will abound,” she said.