IMF Board Approves Revisions to Barbados’ Fiscal Adjustment Programme

The Executive Board of the International Monetary Fund has approved revisions to the terms of Barbados’ Enhanced Fund Facility programme. The adjustments, which were first announced in October after the Government and the IMF reached a staff level agreement, are a recognition of the impact of the COVID-19 pandemic on the island’s economy.

Under the new terms, the targeted primary balance – the difference between Government’s revenue and its non-interest expenditure – has been further reduced to -1 percent of GDP from a previously revised 1 percent. A primary balance of 6 percent for the fiscal year was initially targeted.

Barbados will also receive additional funding from the IMF, bringing the total disbursement to approximately US $390 million.

In a statement after the decision, IMF Deputy Managing Director and Acting Chair, Tao Zhang, commented on Barbados’ handling of the pandemic thus far and on the potential for further challenges:

“The Barbadian authorities continue to make excellent progress in implementing their Fund-supported Economic Recovery and Transformation plan and have swiftly responded to address the impact of the pandemic. Prospects for continued strong programme performance are good, but downside risks will continue to pose challenges in the period ahead.”

The statement went on to highlight the structural changes Barbados will need to make going forward:

“Medium-term fiscal adjustment will be supported by continued reform of state-owned enterprises (SOE) to secure space for investment in physical and human capital. Transfers to SOEs need to decline through a combination of stronger oversight, cost reduction, revenue enhancement, and mergers and divestment. Pension reform and introduction of a fiscal rule will also support medium-term fiscal sustainability.

“Progress in restoring fiscal sustainability will further be safeguarded by a new central bank law aimed at limiting financing of the government and strengthening the central bank’s mandate, autonomy, and decision-making structures.

“A strong recovery from the global pandemic will hinge on accelerating structural reform, including improving the business climate and promoting economic diversification. Strengthening resilience to natural disasters and climate change will be key to long-term sustained economic growth.”

Read the full statement here.