Foreign reserves ‘could come under threat’ – PM

There is a possibility that Barbados will not meet its targets under the International Monetary Fund (IMF) programme should the COVID-19 reach the island.

In that regard, Prime Minister Mia Mottley has announced that she would be negotiating with the IMF in an effort to get some “relaxation” to the targets set out under the four-year programme, which began in October 2018.

Stating that there was expected to be some loss of jobs, from the impact of the virus on travel especially, Mottley said Government would be putting some fiscal measures in place aimed at helping those who would be impacted.

The Prime Minister said as the island beefed up its preparedness for the arrival of COVID-19, she was aware of some of the capital expenditure that would be required, including the approximately $8.8 million to strengthen the Ministry of Health and ensure isolation and quarantine facilities were readied.

She also disclosed that a number of government buildings that are in need of funding were not included in the Estimates for the upcoming fiscal year due to limited fiscal space.

Mottley said she expected negotiation with the IMF would be concluded in about two weeks and the island would be granted a loosening of fiscal targets as well as the opportunity for “precautionary stand-by financing”.

“In the absence of tourism revenues and foreign exchange coming in, we will see a decline on our reserves, but we will have, hopefully, the capacity to draw down if we need beyond that which was agreed before,” she explained.

“That is what we are seeking to negotiate with the IMF – augmentation of resources and additional fiscal space through the relaxation of fiscal targets and debt targets in order for us to keep Barbadians above the water,” said Mottley.

Pointing out that the economy had been stabilized under the IMF-backed Barbados Economic Recovery and Transformation (BERT) programme, Mottley said the foreign reserves were now at $1.544 billion.

However, she said that could now come under “some stress” with the threat of the COVID-19.

In fact, the Prime Minister said after discussions with representatives of the Caribbean Development Bank (CDB) and the Central Bank of Barbados, three different scenarios were developed showing the impact of a 25 per cent decline in tourism revenue over a three-month period, a decline of 50 per cent revenue over a three-month period and a severe case of a decline of 80 per cent in tourism revenue over six months.

Mottley said this meant a number of job losses or reduction in the work week especially among workers and suppliers associated with the island’s bread and butter tourism industry.

“Therefore, the Government has taken a firm decision that we will undertake counter-cyclical policies . . . we need to spend money in order to make sure that if a man or woman can’t work fully within the tourism sector that there will be other areas of economic activities in the country that we will now trigger or expedite in order to keep as many people working as possible,” said Mottley.

Besides aiming for a six per cent primary surplus at the end of this month, officials are hoping to bring down the high debt to gross domestic product (GDP) to about 60 per cent by 2030.

The debt to GDP is currently around 119 per cent.

“We are meeting a hiccup and this hiccup is one that we have to face because what is at stake is human life. We can continue, however, to keep paying down our debt.” Mottley noted.

“Whether we run six per cent primary surplus, or four per cent primary surplus or three per cent primary surplus we are still paying down our debt, but what we need now is a little room to ensure that households do not fall through the cracks, to ensure that businesses are not pushed into bankruptcy en masse, to ensure that we can sustain life, sustain and protect our people and allow them to live while the world finds the solution for the vaccination that would hopefully bring this madness to an end.”
marlonmadden@barbadostoday.bb