The Barbados Economic Recovery and Transformation (BERT) programme should have been implemented at least a decade ago, said the Barbados-born IMF economist attached to the Government economic recovery council.
The Government’s economic advisor Dr Kevin Greenidge, said a homegrown austerity programme should have been implemented at the height of the recession in 2008.
“The honest truth, and I am a technician so to speak and not a politician, but we should have entered this programme after the recession of the global financial crisis happened in 2008, we responded not necessarily appropriate on the fiscal,” Dr Greenidge said during an interview with broadcaster Carol Roberts this morning.
The economist, attached to the Central Bank of Barbados, further explained that Bridgetown’s failure to cut spending during the 2008 crisis led to the current position.
“When there is a global recession, the fiscal should have contracted a bit because it has a shock to the income. We didn’t ease off of the luxury spending, we kept continuing spending the luxuries so to speak, and that was an inappropriate policy to have and then we kept widening that inappropriateness of the policy.
“The result of all this rising debt and an unsustainable fiscal position meant we started to run out of reserves. Our reserves went from close to $2 billion (17 weeks of imports) in 2007, to $400 million (five weeks of imports) at the end of 2017,” Dr Greenidge revealed.
But he maintained that the BERT programme was designed to help the country out of its economic slump.
The IMF’s approval of the programme, leading to over half a billion dollars in funding, means that other international agencies will also follow suit, he said.
The first tranche of $100 million from the near $600 million which the IMF pledged to Barbados is to be transferred to the Treasury tomorrow, the IMF economist revealed.
“There is support coming in a number of ways, but perhaps the most important one is that the support came with external financing, and some funds which will go to shore up our reserves [of] US $291 million. That is the support over the four years, as it is a four-year programme because our Barbados Recovery Programme is a four-year programme.
“You get the external support which came with yesterday’s approval, which we will have access to tomorrow in the amount of US $49 million into the Government’s account and then over the course of the four years, seven different disbursements about $50 million each,” Dr Greenidge disclosed.
He also revealed that together with the IMF funds, both the Inter-American Development Bank and the Caribbean had pledged close to $1 billion to Barbados.
“In the BERT programme we set own conditions and targets. We are going to improve fiscal position where we are improving from a primary balance of two per cent to the end of March to 3.5 per cent to six per cent the following fiscal year, as that is the size of the deficit we can comfortably afford,” he said.
Dr Greenidge also said that putting a cap on the amount of Central Bank financing was also one of the proposed targets.