The International Monetary Fund (IMF) has reached a staff-level agreement with Barbados on a US$290 million dollar economic programme under the Extended Fund Facility.
The IMF’s Executive Board is expected to consider the proposed arrangement by October and once approved Barbados will have immediate access to US$49 million.
IMF Chief of Mission Bert van Selm made the announcement today at a press briefing with Prime Minister Mia Mottley at Government Headquarters.
Below is the full statement
At the request of the Government of Barbados, an International Monetary Fund (IMF) team led by Bert van Selm visited Bridgetown from August 30 to September 7, for discussions on possible IMF financial support for the Government of Barbados’s Economic Recovery and Transformation plan. At the end of the visit, Mr. van Selm made the following statement:
“I am pleased to announce that, in support of the Barbadian authorities’ economic reform program, the IMF team and the government of Barbados have reached staff-level agreement on a 48-months Extended Fund Facility, with access of SDR 208 million (equivalent to 220 percent of quota, or about US$290 million). If approved by the IMF Executive Board, SDR 35 million (about US$49 million) would be immediately available. Staff envisages that the IMF’s Executive Board would consider the proposed arrangement under the EFF by early October.
“In the last decade, the Barbadian economy has been caught in a cycle of low growth, widening fiscal deficits and increasing debt. International reserves have dwindled to US$240 million, well below reserve adequacy levels, while central government debt has become unsustainable.
“The new government that took office in May 2018 is rapidly developing plans to address the current vulnerabilities, in close consultation with its social partners. The Barbados’s Economic Recovery and Transformation Plan aims to restore macroeconomic stability and put the economy on a path of strong, sustainable and inclusive growth, while safeguarding the resilience of the financial sector. The authorities’ fiscal consolidation program, in conjunction with the announced debt restructuring, would place debt on a clear downward trajectory. The strategy of accelerating growth focuses on attracting new investment in areas such as renewable energy, creative and artistic industries, education and health services, agro-industries, research, the international business sector, and tourism.
“The authorities’ reform program, and the important commitment of IMF resources that it entails, is a vote of confidence in Barbados’ Economic Recovery and Transformation Plan. The cornerstone of the program is a strong front-loaded fiscal adjustment focused on curbing current expenditure, while maintaining space for bolstering social safety nets and infrastructure spending. In this context, the measures to reduce government expenditures announced in late August are a critical and important first step. These measures aim to improve the efficiency and effectiveness of public services and reduce government transfers to state-owned enterprises by reviewing user fees; exploring options for mergers; and strengthening oversight. The measures should help reach a primary surplus target of 6 percent of GDP in 2019/20.
“The fiscal adjustment will be complemented by a comprehensive debt restructuring, aimed at securing meaningful debt reduction, reducing financing needs, and restoring debt sustainability. Barbados’ central government debt will be put on a clear downward path towards a target of 60 percent of GDP by 2033, from an estimated 157 percent of GDP at present. Progress being made by the authorities in furthering good-faith discussions with domestic and external creditors is welcome. Continuing open dialogue and sharing information will remain important in concluding an orderly debt restructuring process.
“The success of Barbados’ program will require an extraordinary effort and resolve on the part of the authorities and other segments of society, as well as broad international support. While the initial implementation period will be challenging, Barbados will emerge stronger and more dynamic from the program, and it will be better poised to generate growth and job creation for the people of Barbados.
“The team would like to take this opportunity to thank Barbados’ authorities and the technical team for their openness and candid discussions.”