The Government’s new fiscal policies and its US$290 loan from the International Monetary Fund (IMF) appear to be paying dividends thus far.
The Central Bank of Barbados reported on Wednesday some successes in the debt restructuring and public sector reform initiative, as part of the Barbados Economic Recovery and Transformation (BERT) programme.
Delivering his third-quarter economic review, bank governor, Cleviston Haynes, said there has been a recovery in the island’s international reserves which had been falling for the past six years.
Haynes said the first disbursement of $49 million from the IMF pushed the import cover from 7.4 weeks to 8.6 weeks.
He said the new fuel tax, which replaced the road tax on July 1 this year, has raised over $8 million since its inception due to the late transfer of earned revenue to the Treasury.
“However, the fall in import demand together with the repeal of the NSRL [National Social Responsibility Levy] led to reduced indirect taxes, including those for excises and import duties,” Haynes said.
He noted that the suspension of external and domestic commercial debt service by the Mia Mottley administration soon after coming to office in May, resulted in interest payments being lowered by $105 million and substantially cutting the share of revenue absorbed by interest payments.
Government has also been able to slash its capital spending and transfers and subsidies, a key requirement under the IMF-funded BERT programme.
Haynes reported that the pressure on the Central Bank to finance Government eased considerably.
“The suspension of debt service payments and the subsequent debt restructuring have curtailed Government’s ability to access financing other than from the Central Bank. However, the improved fiscal performance and reduced borrowing requirement contained financing to only $14 million by the Central Bank during the July to September quarter after rising by $105 million the previous quarter,” he said.
The bank governor also informed the country that the rise in the debt stock tapered off during the last quarter, a precursor to stabilizing and ultimately reducing the debt ratio.
He said the debt stock now includes obligations that have been deferred in recent years because of Government’s cash flow difficulties, but which now have to be repaid on a phased basis. “At the end of September, the debt ratio remained largely unchanged.” Haynes added.
Government’s decision to abolish the National Social Responsibility Levy (NSRL) is also paying off.