In the matter of a month, Barbados’ economic recovery effort has received yet another shot in arm, this time from the Inter-American Development Bank (IDB) who have approved a US $100 million loan to the island.
The structure and content of the IDB loan program, which was approved Tuesday morning, are aligned to the US $290 million International Monetary Fund (IMF) Extended Fund Facility (EFF) approved for Barbados last month.
In a statement released on the IDB’s website, it was revealed the loan is funded from the international lending agency’s Ordinary Capital. Furthermore, the loan will disburse in a single tranche within one year, with a grace period of 3 years, and an interest rate based on LIBOR (London Interbank Offered Rate a benchmark rate that some of the world’s leading banks.). The executing agency will be Barbados’ Ministry of Finance, Economic Affairs and Investment, which is headed by Prime Minister Mia Mottley.
“This support is part of a broader effort to stabilize the Barbadian economy in coordination with the IMF and the Caribbean Development Bank (CDB) during the four-year program,” the IDB release explained.
Among the key parameters for use of the funds are fiscal reforms to address structural weaknesses in the nation’s fiscal framework. Monies are also earmarked for the restructuring and privatization of state-owned enterprises while at the same time protecting vulnerable groups by strengthening the nation’s safety nets.
In addition, funding would go to the reform of the Central Bank of Barbados, granting it more autonomy and thereby limit its financing to the government. Some of the loan would is also expected to go towards tackling the controversial issue of debt restructuring. The liberalization of labour, product and service markets to promote growth, are also supposed to be addressed under the programme.
The release said the financing comes with a component of technical assistance.
“The Government of Barbados sought financial and technical assistance from the IDB and the IMF to help formulate a comprehensive economic reform program to stabilize public finances after years of increasing debt and to address the country’s macroeconomic and fiscal crisis,” the release said.
The IDB further noted “this financing, in conjunction with corrective economic and fiscal measures introduced by the government, aims to give short-term relief and allow the government to advance on important and difficult reforms to place the public finances on sustainable footing.”
Last month the Board of Directors of the CDB approved a policy-based loan of USD75 million to the Government of Barbados. The loan is part of wider coordinated assistance provided by international financial institutions to the Government, to support the implementation of the Barbados Economic Recovery and Transformation (BERT) Plan.
The funding will support the Government of Barbados’ programme, which includes revenue administration and collection, expenditure and debt management, public financial management, and broad-based growth and social development.