A noted local economist has given Government’s US$290 million deal with the International Monetary Fund (IMF) two thumbs up.
Following this morning’s revelation that Barbados had officially entered an IMF programme, former president of the Barbados Economic Society (BES) Jeremy Stephen said he was “pleasantly surprised” by the amount of financing that the Mia Mottley-led administration was able to secure with its homegrown austerity programme.
“The US$290 million was way more than a lot of persons expected, that a lot of people thought that the IMF would be willing to give Barbados with its own homegrown plan, which some people laughingly referred as a farce,” said Stephen, who said he was among those initially skeptical of Government’s ambitions as it related to negotiations with the IMF.
Stephen contended that the deal was a good step in shoring up foreign reserves, which had fallen to a two decade low of US$241 million in February this year.
“It does provide some level of comfort towards the balance of support that is mainly propping the reserves. That payment is essentially divided up into the eight tranches, which supports our energy needs, and to a lesser extent our imports,” he explained.
The former BAS head told Barbados TODAY he was heartened by indications that Barbados would resume its debt payments to local and international creditors soon.
In the first few days after her Barbados Labour Party’s (BLP) scored a clean sweep in the May 24 polls, Prime Minister Mia Mottley announced she would seek to restructure the island’s public debt and suspend payments due on debts owed to external commercial creditors, as her administration prepared to meet an IMF team.
Mottley explained at the time that her Government had inherited more than $15 billion in public debt. The decision resulted in Barbados’s credit rating falling to default status by international credit rating Moody’s and Standard & Poor’s.
However, this afternoon Stephen contended that those who were worried about Barbados’ ability to access favourable financing from the international capital markets could breathe a little easier.
“This afternoon in the press conference the Prime Minister said that they would be instituting a debt swap, which means that they are gearing up to sooner rather than later resume those debt payments at a heavily discounted price. A debt swap means that you are issuing new instruments for old instruments that had different terms of length and interest rates,” he said while reserving further analysis of the arrangement until all requirements of the IMF funding have been revealed.
This morning the IMF delegation announced it reached a staff-level agreement with Barbados on a US$290 million 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 went into some of the details of the arrangement during a press briefing with Mottley at Government Headquarters.
“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,” he said.