The largest source of development financing for the Caribbean and the region’s development bank have pledged to pour up to $300 million into the Barbados economy on condition that the International Monetary Fund (IMF) endorses the Barbados Economic and Recovery Transformation (BERT) plan.
Economist Dr Kevin Greenidge, a member of Barbados’ joint economic team, today announced that the Washington-based Inter American Development Bank (IDB) has agreed to provide Government with $200 million in funding, while the Barbados headquartered Caribbean Development Bank (CDB) has pledged $100 million.
Greenidge did not reveal if there were any other conditions, except for the IMF’s approval next month of Prime Minister and Minister of Finance Mia Mottley’s economic recovery plan.
“By endorsing the BERT programme the IMF then provides what you call a catalytic role because it has an international reputation by having 186 countries signed on. When investors see the fund sign on they then say, ‘well, this Barbados BERT programme is a doable programme and we believe the country is committed to it’, then immediately developmental partners like IDB and CDB would bring access to funds,” he said.
“I can tell you right now we have commitment from IDB of two per cent of GDP [gross domestic product], which is $200 million on [condition] that the IMF endorses the Barbados BERT programme and $100 million from CDB,” Greenidge stressed.
He said once the IMF endorses the programme international investors would be encouraged to “bring in capital to do different projects”.
“The other way the IMF provides assistance is that once they endorse the programme – and you see we have the problem on the reserves – they provide what we refer to as balance of payment support. So some funds come to help restore the reserves and that immediately goes to the Central Bank to shore it up. Again that offers a measure of confidence,” he added.
Once the country is on track to meet its targets under the plan, there would be disbursement of the agreed sum from the IMF to the Barbados Government, he said.
The IMF economist, who will be assisting the island with its economic recovery plan for the next two years, said the international lending agency would also provide technical support during the programme, which could last up to four years.
“During a programme the IMF will make available its technical expertise in reviewing whatever the country wants – its tax system . . . [and] expenditure system – and offer ideas of how you could be efficient in different areas,” he explained.
Greenidge insisted that the economic recovery programme was 100 per cent homegrown, adding that the IMF would only “come in and ensure that it hangs together”.
Still, he explained, the IMF would hold Government to the targets to be set under the recovery plan.
“So the broad underlying parameters of your recovery programme, the BERT programme, becomes the target to which you agree within the International Monetary
Fund you are going to hit. So this gives seriousness to what the team is doing,”
Besides meeting a primary balance of six per cent of GDP, if the IMF endorses the recovery plan Government must also ensure the reserves are restored over a period of time, it does not incur further arrears, and it meets outstanding arrears – all of which would have to be done over the life of the IMF programme.
The monitoring of the economic recovery plan will have the oversight of the Social Partners, while the IMF will monitor its programme on a semi-annual basis.
Confident that the IMF will give its stamp of approval next month, Government is currently engaging a team from the Washington-based institution as it continues its negotiations.
The IMF team, led by Bert van Selm, concluded its last visit to Barbados on June 8. (MM)