IMF gives Barbados access to another $24M

Barbados’ continued strong implementation of its Economic Recovery and Transformation (BERT) plan has allowed it to access another $US24 million ( BDS$48 million)  from the International Monetary Fund (IMF), the Washington-based financial institution has announced.

The disclosure came after the IMF concluded an Article IV consultation with Barbados as well as its sixth review of the economic reform programme that is supported by an arrangement under the Fund’s Extended Fund Facility (EFF).

“The completion of the review allows the authorities to draw the equivalent of Special Drawing Rights (SDR) 17 million, about US$24 million), bringing total disbursements to the equivalent of SDR 305 million (about US$425 million),” it said, recalling that the four-year extended arrangement under the EFF is for an amount equivalent of SDR 322 million or about US$465 million.

The IMF cautioned that the prolonged COVID-19 pandemic, along with the twin natural disaster shocks of volcanic ashfalls from neighbouring St Vincent in April and the Category 1 hurricane Elsa in July, pose a major challenge for Barbados’ tourism-dependent economy.

And the IMF’s deputy managing director, Bo Li, said given that the outlook remains uncertain, the authorities in Barbados need to maintain sound policies and their strong reform momentum to safeguard macroeconomic stability and boost potential growth.

He said a temporary relaxation of the primary balance target for fiscal year 2021/22 is appropriate given the lingering impact of the pandemic and unexpected spending needs to address the impact of Hurricane Elsa and the ashfalls.

“The authorities will have to compensate this short-term fiscal accommodation with higher primary surpluses in the medium term to safeguard debt sustainability,” he said.

The IMF official said medium-term fiscal adjustment will be supported by reforms to state-owned enterprises (SOEs) and to create fiscal space for investment in physical and human capital, transfers to SOEs need to decline by strengthening oversight of these entities, revenue enhancement, cost reduction, as well as mergers and divestment.

He said the authorities’ plans to reform the pension system and introduce a fiscal rule will also support fiscal sustainability.

Li said the Barbadian authorities had taken an appropriate monetary and financial policy response to the pandemic.

“Carefully unwinding pandemic-related credit support measures, as conditions allow, will be critical to containing financial sector risks,” he said.

The Central Bank of Barbados plans to join the Network for Greening the Financial System and intends to gradually integrate climate change risks into its financial stability assessments.

“Going forward, the authorities should also work in close cooperation with the Financial Action Task Force to further strengthen the AML/CFT framework,” the senior Fund official said.

Li added that medium-term growth prospects depend on accelerating structural reforms to improve the business climate, diversify the economy, and facilitate green and digital transformations.

He said strengthening resilience to natural disasters and climate change, combined with an accelerated transition to renewable energy, is key to achieving more sustainable economic growth and reducing vulnerability to international oil price volatility.

“In this regard, the authorities’ ambitious target of reaching 100 per cent renewable energy by 2030 is commendable,” Li said. (BT/CMC)