||Central Bank Of Barbados
Following a visit by its staff in May, the International Monetary Fund’s (IMF) Executive Board has completed its first review of Barbados’ progress in implementing the Barbados Economic Recovery and Transformation (BERT) programme, and has approved the disbursement of an additional US $48.7 million.
This drawdown, the second under Barbados’ arrangement under the IMF’s Extended Fund Facility (EFF), brings the total money received so far to US $97.40 million. Under the four-year EFF, the island is expected to receive approximately US $290 million.
After the completion of the review, Deputy Managing Director of the IMF Tao Zhang issued a statement saying:
“Barbados has made a strong start in implementing its ambitious and home-grown economic reform program. All performance criteria for March 2019 were met, and all structural benchmarks have been implemented, although a few with minor delays.
“The FY2019/20 budget provides a solid basis for the targeted fiscal consolidation of 6 percent of GDP. The adjustment effort is supported by several new taxes, ongoing reforms in public financial management, a reduction of transfers to State‑Owned Enterprises (SOEs), and adequate provisions for social safety nets and capital expenditure. If necessary, the authorities stand ready to take additional measures to reach the targeted primary surplus. The planned adoption of a fiscal rule in 2020 will help sustain the adjustment effort over the medium and long term.”
The IMF Deputy Managing Director also commented on several of the Barbados’ planned structural reforms, the ongoing debt restructuring, and the island’s fixed exchange rate.
“Reform of SOEs is critical 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, cost reduction, revenue enhancement, and mergers and divestment.
“A comprehensive public debt restructuring complements the fiscal consolidation. The domestic debt restructuring completed in November 2018 has significantly reduced Barbados’s public debt burden without jeopardizing financial stability. The authorities are continuing good faith negotiations with external commercial creditors, which together with the domestic debt restructuring, should help restore debt sustainability.
“The fixed exchange rate has served as a key anchor for macroeconomic stability and international reserves have increased. The exchange rate peg and monetary regime would be further bolstered by the planned reforms to strengthen the central bank’s mandate, autonomy, and decision‑making structures.
“Structural reforms target improvements in the business environment to increase growth over the medium term. With the adoption of a new Town and Country Planning Law in January 2019, the process for providing construction permits has been streamlined. Going forward, the authorities intend to carefully review and address the different obstacles to growth.
“Adequate social spending and an improved safety net are key priorities for the program. The authorities have launched a training and outplacement program to mitigate the impact on unemployment from layoffs at the central government and SOEs.”