The International Monetary Fund (IMF) today warned Barbadians to prepare for a second round of austerity as the Mia Mottley administration seeks assistance from the lending agency to drag the economy back from the brink.
At the end of a ten-day visit here during which the IMF team held discussions with various stakeholders, the Washington-based institution said the $1.2 billion package of austere measures announced by Mottley in her June 11 Budget were not enough.
In a release today, it said the next phase of adjustment would focus on reducing expenditures “by improving the efficiency and effectiveness of public services, reducing Government transfers to state-owned enterprises, by reviewing user fees, exploring options for mergers, and providing stronger oversight”.
These words echoed those by the Prime Minister and Minister of Finance when she introduced her three-phase economic recovery and transformation plan, the first of which continues through to October.
“It focuses on the imposition of user fees on domestic and international players to take three statutory corporations completely off, and one partially off, of the Consolidated Fund which will account for a reduction in expenditure of almost $215 million in a full fiscal year,” Mottley said at the time.
“Phase 1 also focuses on a review of our tax revenue to impose more effective taxes, increase compliance, broaden our base between domestic and those visiting our shores. This will better allow us to reduce the fiscal deficit in this the first year of our plan,” she said.
The second phase of Mottley’s plan, clearly endorsed by the IMF, will focus on the reduction of expenditure “through a review and analysis of central Government and state-owned enterprises focusing on the merger of potentially affiliated entities such as corporate affairs and the financial services commission, both of which currently receive subventions from central Government,” the Prime Minister said during the June 11 presentation.
The IMF team, led by Bert van Selm, praised the adjustment programme, describing it as a good first step.
The team also said progress was being made on Government’s debt restructuring efforts with domestic and external creditors.
However, the Washington-based lending agency advised that “continuing open dialogue and sharing information, will remain important in concluding an orderly debt restructuring process”.
“Fiscal consolidation alongside a comprehensive debt restructuring exercise is critical for restoring debt sustainability and policy credibility. In this context, the authorities’ revised Budget for 2018/19, approved by Parliament on June 11, is a decisive step in the right direction,” the IMF said, adding that the Budget targets a primary surplus of six per cent of gross domestic product.
At the conclusion of the July 2- 12 visit, which came at the request of the Mottley administration, the IMF team reaffirmed its commitment to partnering with Government on the road to economic recovery.
“The Barbadian authorities, in close consultation with their social partners, are taking effective steps to address current economic vulnerabilities. The IMF stands ready to partner with Barbados to restore macroeconomic stability in order to secure strong, durable and inclusive growth in the years ahead.
“Significant progress has been made during this IMF staff visit on the plan that could underpin financial support from the IMF. On its return to Washington the team will continue to analyze the Government’s comprehensive reform programme. We will remain closely engaged with the authorities in the coming weeks,” the release stated.
The third phase of Government’s austerity programme “will see a continuation of the review of all remaining state-owned enterprises and departments of Government,” Mottley had said in her June 11 Budget presentation.
“We will determine what expenditure is essential, what is highly desirable and what is optional,” she said then.