Barbados could be in the clutches of the International Monetary Fund (IMF) for up to four years, if the country reaches an agreement with the lending agency.
Governor of the Central Bank of Barbados Cleviston Haynes today suggested that the fiscal situation here is so bad that the Mia Mottley administration may have to negotiate an Extended Fund Facility (EFF) with the IMF, as opposed to a stand-by arrangement which is geared toward shorter-term engagement of no more than three years.
“When a country faces inherent structural deficiencies and is able and willing to implement deep and sustained structural reforms, consideration can be given to a programme under an EFF which typically lasts between 36 and 48 months,” Haynes told journalists at a news conference this morning at which he reviewed the island’s economic performance for the first half of this year.
The bank’s governor said while this country’s access to IMF funds was determined by its quota, which now stands at US$135 million, normal access under the EFF would allow the country to borrow up to 145 per cent of its quota annually, or 435 per cent over the life of a programme.
He said the actual size of the facility would be influenced by the country’s balance of payments need, the strength of its adjustment programme and its capacity to repay.
The Washington-based lending agency said it can assist with the adjustment process under and EFF, when a country faces “serious medium-term balance of payment problems because of structural weaknesses that require time to address”.
Compared to assistance provided under the stand-by arrangement, an extended arrangement features longer programme engagement and a longer repayment period, the IMF explains on its website.
Whatever arrangement it reaches to stabilize the economy, Haynes today gave the assurance Government would not engage in massive public sector layoffs, even as he warned that some state enterprises would be under scrutiny.
“It is too early to say what the nature of the reform as it relates to the enterprises will be. One has to look at how do you improve the delivery of the services which we currently deliver. Is it that we have to look at the fee structure at some of these enterprises? There are a whole range of things that we have to look at before one can come to the conclusion that it leads to the sending home of persons,” he said.
However, the bank boss said it was critical that services delivered within the public sector is improved, “and that may or may not involve any job losses, but certainly, there is no intention as I understand it, to have wholesale job losses”.
In any case, he said, the IMF would be seeking to ensure that the reforms agreed were sustainable, and not “something that we are putting it in place today and tomorrow we are back in the situation from whence we came”.
Haynes also said Government would have to explore ways to reduce the size of transfers to the statutory corporations and to reduce their debt.
“Some of the transfers which they are currently receiving is for them to be able to service debt. So the issue of restructuring of the debt will also address some of the issues for some of them, not all. But there are a number of approaches which will have to be taken, but everybody recognizes that we have to address the size of the transfers which we provide at this point in time,” the Central Bank head said.
Haynes’ predecessor, Dr DeLisle Worrell, has repeatedly said Government needed to reduce its wages bill by cutting 4,500 public service jobs over a three-year period.