Barbados’ foreign reserves are to get a boost with the approval of a unique Inter-American Development Bank’s loan that may have come at just the right time for an already ailing economy likely to get another hard knock.
The injection of $160 million dollars from a policy-based loan for the IDB’s Barbados Sustainable Development Policy programme has come at an opportune time, Minister of Economic Affairs and Investment Marsha Caddle has announced.
The loan is the first-ever granted by the IDB for a country’s “commitments to climate action, responsible land use and other sustainable development practices”.
But with officials predicting that the international reserves could come under threat should the COVID-19 crisis continue to affect the tourism industry and disrupt international trade, Government is looking to ensure an adequate buffer against the expected economic shock.
Prime Minister Mia Mottley is expected to negotiate a deal with the International Monetary Fund (IMF) to get an ease in fiscal targets under the four-year Barbados Economic Recovery and Transformation (BERT) programme, which is in its second year.
Caddle said: “The US$80 million loan further builds our war chest of foreign exchange reserves against COVID-19, as we turn our response first to safeguarding lives and then to addressing economic impact.
“As a result of this long-term, low-interest loan, gross reserves will rise to over $1.7 billion, the highest level of foreign exchange reserves held at the Central Bank ever in Barbados’ history. But we continue to build our reserves to match the scale of the global challenges we face.”
Policy-based loans provide countries with flexible, liquid funding based on evidence that the country has met certain policy reform targets. While many policy-based loans are normally tied to fiscal or major sector reforms, the IDB lending is specifically geared to carrying out sustainable development policies.
Government’s Roofs to Reefs programme, an integrated public sector and private investment programme for the resilient development of the island, forms the basis of the loan’s policy actions, with reforms across sectors including town planning, environment, energy, water and the blue economy, said Caddle.
She added: “This policy-based loan has been extended to the Government of Barbados for keeping its promises to implement policies that balance the management of natural resources on the one hand, and growth and the delivery of basic services on the other. The policies include, for example, to promote the delivery of regular access to water and improve solid waste management to limit the dependence on landfills.”