From all indications, Government is on track to receiving a passing grade for the second review of its rigid Barbados Economic Recovery and Transformation (BERT) programme.
This indication has come from the International Monetary Fund’s (IMF’s) Deputy Division Chief for the Caribbean Bert Van Selm, who told Barbados TODAY he was pleased with measures recently put in place to help Government meet its ambitious target of six per cent of gross domestic product (GDP) at the end of the current fiscal year.
“So far it looks good,” he said, recalling that at the end of December all targets were met.
“For some targets it is too early to tell because we do not have complete data yet, but what we can see so far is that the performance as at March has been quite strong,” said Van Selm as he singled out structural and legislative changes, as well as reform of Government processes, as “moving in the right direction”.
Under the four-year IMF-funded programme, which officially began on October 1, 2018, Barbados has to meet a number of quantitative and structural quarterly targets.
The first review of the US$290 million-funded programme was completed last December, at which time the country received its first payment of about US$49 million to shore up the once dangerously low international reserves.
The next review is scheduled for the middle of May, when IMF officials will consider the period up to March 31, and assess Government’s outlook.
While warning that sticking to the programme was extremely necessary in order to drive down the national debt and Government spending, Van Selm suggested there would be no escaping the onerous measures for the life of the programme.
The head of the IMF mission to Barbados said meeting the targets was also critical if the confidence of international partners and local and international investors was to be regained.
Pointing out that the problems facing the economy did not start overnight, Van Selm said for over a decade there had been significant external and fiscal imbalances which have led to an unsustainably high debt and low international reserves.
“Now the new Government coming in has been very active in trying to address this situation from the middle of last year, but this is not something you can turn around in like a day or two or a year or two. So adhering to this programme for four years is going to be very important,” he warned.
There have been concerns that Government could be in danger of not meeting some of its targets, which it also hopes to maintain, due to the outstanding external debt restructuring and forthcoming debt payments.
However, Van Selm told Barbados TODAY the IMF remained confident Government would meet its targets “because otherwise we would not have given our support to this programme”.
“We believe the Government is on track. The budget has now been approved by Parliament for the coming fiscal year to meet that six per cent primary surplus target, it is just a matter of adhering to it.
“So after this fiscal year 2019/2020, there will be no further tightening of fiscal policies, it will just be a matter of staying the course and what we expect to see then is a gradual recovery of confidence of markets and international participants, which would lead to inflows of capital into Barbados. So as long as the programme is adhered to we think the prospects are good,” he explained.
However it is not until IMF officials visit Barbados in another month and “crunches the numbers” that they would know for sure if the measures implemented so far are enough or if a “new course” was needed, he added.
The IMF officials are expected to examine key indicators such as the position of the international reserves, budget balance and debt levels, as well as social spending and new laws.
There will also be provisions for an outlook based on what Government is hoping to achieve over different time periods.
“So that is something we will be looking at as well and you do that by looking at the budget that was just adopted by Parliament for next year and also looking at the underlying fiscal trends…like do certain types of taxes indeed deliver the type of revenue that you expected? If yes, everything is fine, if not, maybe you need to take some measures to address that,” he said.
He noted that best-case scenario, Barbados achieves its targets, resulting in a return of confidence, improved sovereign ratings, and increased support from lending agencies and investors or worse case scenario, Government buckles under pressure and does not stick to its targets, and the programme fails.
If this should happen, said Van Selm, international reserves would start to fall again, public debt would rise and “later on you would end up in the same situation where Barbados found itself in by the middle of 2018”.
“That is what you need to try to avoid,” he said. email@example.com