The International Monetary Fund (IMF) is again warning that Government needed to urgently implement a “sizeable and credible” fiscal adjustment programme in order to get a grip on the stalled economy.
This latest recommendation came on the heels of mounting calls for the Freundel Stuart administration to enter into an official programme with the Washington-based lending institution to avoid possible devaluation of the Barbados currency.
Although the now fired Central Bank Governor Dr DeLisle Worrell warned last month that the dollar was at risk due to the dwindling reserves – which had fallen to a 14-year low of 10.3 weeks of import cover – Minister of Finance Chris Sinckler has repeatedly assured that there will be no devaluation.
The latest assurance came today at a news conference during which Sinckler admitted the fiscal deficit was still “too high”, but said the island was not facing a “doomsday” scenario.
However, sticking to the position issued in its staff report of May last year, an IMF spokesperson told Barbados TODAY while the economy appeared to have turned the corner last year, fiscal adjustment and public sector reforms were necessary to drive down public debt, preserve external sustainability and improve investor sentiment.
“In our view, the recommendations in the staff report, the need to implement a sizeable and creditable fiscal adjustment effort to reverse the increase in public debt and put it on a decisive downward trajectory have become even more urgent,” the IMF spokesperson said.
In its report last year the global financial institution said the fiscal situation here remained challenging despite ongoing Government adjustment efforts.
It added that the financial year 2015/2016 budget deficit was broadly unchanged at about seven per cent of gross domestic product (GDP).
“Revenue measures, though raising revenue by one per cent of GDP, fell short of the target due to implementation delays. On the expenditure side progress on reducing transfers to state owned enterprises was also slower than anticipated, partially attributed to the unbudgeted debt service of one enterprise and transfers to support infrastructure investment financed by external sources,” it said then.
The IMF is scheduled to visit Barbados in May ahead of a board meeting in July.