Barbados has reached a staff-level agreement with the International Monetary Fund (IMF) to borrow almost $600 million to prop up balance of payments, subject to approval by the global lender’s top brass in early October.
A staff-level agreement means that the staff members from the IMF and the Government’s negotiators in Barbados have been able to reach a deal to finance Barbados’ economic recovery programme, likely to be approved by the IMF Executive Board.
At the same time, Barbadians are being given the assurance that they have nothing to fear as Barbados enters into the agreement, since the IMF was not in the business of telling countries what to do.
Announcement of the deal came on Friday at a media conference at Government Headquarters, as IMF Head of mission to Barbados Dr Bert van Selm revealed that under the arrangement Barbados would receive about US$290 million over a four-year period.
Once the Extended Fund Facility (EFF) was approved, the struggling Barbados economy would receive an immediate injection of approximately US$49 million, which would be followed by three additional disbursements of similar amounts, he said.
“The last four will be [in tranches of] US$25 million roughly. So we believe with this programme it gives a lot of economic opportunity to support ongoing structural reforms and we think it is the right tool. But it will also play a very important role in rebuilding international reserves,” said van Selm, who noted that the amount under the agreement was about 220 per cent of the country’s quota under the IMF.
He said this balance of payment support was appropriate for Barbados given that the island required “a bit more” to address structural problems and the need to rebuild reserves quickly to re-establish confidence.
The IMF official, who is also the Fund’s representative in Jamaica – which is also in an IMF programme – said Barbados’ economy had been caught in a cycle of low growth, widening fiscal deficits increasing debt and falling reserves in the last decade.
But while making reference to the home-grown Barbados Economic Recovery and Transformation (BERT) programme, he expressed satisfaction that the current administration was rapidly developing plans to put the economy on a sustainable growth path.
While acknowledging the measures and expected targets outlined under the economic programme, van Selm said “continuing dialogue and sharing information will remain important in concluding an orderly debt restructuring process”.
“The success of Barbados’ programme will require an extraordinary effort and resolve on the part of the authorities and other segments of society, and also broad international support, while the international implementation period will be challenging Barbados will emerge stronger and more dynamic from this programme and it will be in a better position to generate growth and job creation for the people of Barbados,” said van Selm.
Officials are hoping that the IMF agreement would trigger other key international funding agencies to give assistance, allowing Barbados to borrow at concessionary rates in coming years.
The Barbados economic recovery team has already indicated that the Inter-American Development Bank and the Caribbean Development Bank have already pledged their support.
Giving an assurance that Barbadians had nothing to worry about as the country entered into the agreement with the IMF, van Selm said “the IMF has changed a lot over time”.
He explained that the lending agency was more open and was listening a lot more to a broader section of people in countries than it did in the past.
“In the past we would essentially talk only to governments but now we go out when we visit countries to talk to labour unions, the private sector, political parties, academics. We hear many different views from the society and we take all of these into account,” he said, adding that the main ingredient to a success of a programme was the “ownership” of that programme by the people.
Prime Minister Mia Mottley said the IMF team had already indicated that Barbados was “on the right path”, with its adjustment programme, adding that the agreement reached today, was “a signal to the rest of the world that Barbados is on the right path to growth again, that we are taking serious responsibility to restructure, retrain, retool and empower and enfranchise”.
She expressed disappointment that the Freundel Stuart administration did not take the necessary steps that her administration had taken in only three months of being in office, arguing that because of the indecisiveness over the past five years the country was cut off from favourable financing.
“With this route, people now have confidence in the judgment of the International Monetary Fund to come in,” said Mottley.
Ahead of its October approval, the IMF is expected to make an assessment as to whether the economic recovery programme designed by Barbados is credible and capable of being implemented.
Saying that Barbados intended to stay the course, the Prime Minister predicted economic growth to return in two to three years, although she did not say by how much.
Recalling the measures taken by her administration from the time of her swearing-in following the May 24 general election to today’s agreement, Mottley said Government recognized that the most important thing was to “protect the integrity and value of the Barbados dollar” and that was the main reason behind entering into an IMF agreement.
“I say all of this to allow Barbadians to appreciate that first and foremost that we stand here today appreciating this staff level agreement because we recognized that in achieving it we have not put the stability or the value of the Barbados dollar at risk,” said Mottley, who also insisted out that during the restructuring job cuts would not be in the order of 4,000.
“We have, however, adjustments to make and we will make them and we have started to make them,” said Mottley, adding that the IMF would only monitor the country’s progress and give its review, but would not tell the country what to do.