Economic performance lauded

Barbados’ international reserves are in line for a further boost, following the completion of the island’s economic reform under the Barbados Economic Recovery and Transformation (BERT) programme by the executive board of the International Monetary Fund (IMF).

And Deputy Managing Director and Acting Chair Tao Zhang has lauded the Mia Mottley administration for its focus on social spending.

“Adequate social spending and an improved safety net to protect the most vulnerable members of society are key priorities of the programme. Social spending is being protected, preserving Barbados’ strong social safety net and limiting the impact of the stabilization programme on low-income households,” said Zhang.

The IMF official said Barbados continued to make good progress in implementing its comprehensive homegrown economic reform programme.

“The completion of the review allows the authorities to draw the equivalent of about US$48 million, bringing total disbursements to the equivalent of about US$145 million,” the IMF said at the end of its 2019 Article IV Consultation today.

“All quantitative performance criteria, indicative targets, and all structural benchmarks for end-September 2019 were met,” he announced.

On October 1, 2018 Barbados entered into a four-year arrangement with the IMF under an Extended Fund Facility (EFF) valued at US$288 million.

Under the BERT programme Barbados has committed to carrying out, among other things, a range of fiscal adjustment measures and restructuring of the public sector.

Zhang said: “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.”

“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,” he said.

The IMF official pointed out that state-owned enterprise (SOE) reforms were 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, cost reduction, revenue enhancement, and mergers and divestment,” Zhang added.

He also welcomed Government’s local and external debt restructuring, saying that it complemented the fiscal consolidation efforts.

He said: “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.

Acknowledging that climatic events posed a threat to the island’s continued economic progress, he said “Strengthening disaster resilience is key to boosting medium-term economic prospects.

“With the inclusion of natural disaster clauses into new domestic and external bonds, Barbados effectively used the debt restructuring to strengthen its protection against natural disasters,” said Zhang.

“Structural reforms are needed to unlock Barbados’ growth potential. While the process for providing construction permits has been streamlined, much room for improvement in the business climate remains. Deeper regional integration would also help increase Barbados’ growth prospects,” he added.

This news was welcomed by Professor Avinash Persaud, Special Envoy on Investment and Financial Services to the Prime Minister, who told Barbados TODAY the international reserves would now be boosted to over $1.3 billion, up from a low of $440 million in 2018.

Persaud was especially upbeat about investment prospects.

“With debt sharply down from 176 per cent of GDP towards 114 per cent by the end of this year, deficits eliminated, reserves jumping higher and ratings climbing back up, the investment climate is turning on cue. BERT remains on track for delivering new investment, growth and jobs in 2020,” said Persaud.

“Over the past eight weeks there has been a marked increase in the number of investors who themselves are saying to us that the investment climate has fundamentally changed. I think this confluence of the rating improvement, the surpassing of the BERT targets in the second review and the continuing climb in reserves, marks an important inflection point as we move from stabilisation to recovery and onto transformation,” said Persaud.

Government’s economic advisor on loan from the IMF Dr Kevin Greenidge was also upbeat about the development, saying “This passing of the second review reflects Barbados meeting all its targets under the BERT programme and in some instances, with a wide margin.”

Adding that there were lots of praise from the Directors of the IMF Board, Greenidge acknowledged there was significant work still to be done but said Government remained “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,” said Greenidge. (MM)