The Caribbean Development Bank (CDB) said this afternoon that the Mia Mottley-led Government was heading in the right direction by bringing the International Monetary Fund (IMF) on board to finance its homegrown Barbados Economic Restructuring and Transformation (BERT) programme.
The CDB’s Director of Economics Dr Justin Ram told Barbados TODAY his institution had been saying for a number of years that the debt was on an unsustainable path and the Government needed to reduce spending and improve revenue.
“This is a step in the right direction. It is going to have some challenges initially because it is not going to be easy whenever there is fiscal consolidation . . . and also some level of debt restructuring. There is going to be some challenges,” Dr Ram said, adding that from the bank’s observation and the Government’s pronouncements, the current path was the right one.
The CDB Director of Economics was speaking after the board approved a grant of US$400,000 to help the Government further develop its economic reform programme.
He said the money was a technical assistance project grant which aimed to enhance the capacity of staff in the Ministry of Finance, Economic Affairs and Investment to adequately design, negotiate and support the implementation of critical macroeconomic and structural reforms.
“We think it is particularly necessary at this point in time because of the urgency of the [situation],” he added.
Dr Ram told Barbados TODAY he expected to see improvement in the economic performance of Barbados in the near future, coming out of the IMF-financed BERT programme.
However, he anticipated some drag on the economy in the short term as a result of cuts in expenditure whereby people’s spending would be restricted.
But he said where Government was cutting back on spending, provided the private sector the opportunity to intervene and spark growth.
“The package that is being proposed here is one of real, I would say, structural transformation for the economy…and so over the medium to long-term, Barbados is expected to be in a better position than it is currently,” Dr Ram assured.
Barbados and the IMF last week reached a “staff-level” agreement for US$290 million to help shore up the foreign reserves and protect the country’s precious dollar.
The CDB and Inter-American Development Bank (IDB) are standing ready to pump millions of dollars in loan development money once the IMF starts disbursing the money to Barbados.
But the CDB said that today’s US$400,000 technical assistance grant is a response to the urgent challenges Barbados faces, including a fragile fiscal and external liquidity situation and unsustainable levels of public indebtedness.
“Such issues are adversely affecting investor confidence and consequently domestic economic activity,” the Barbados-based development financing agency noted. firstname.lastname@example.org