The International Monetary Fund (IMF) is so assured of Barbados’ economic plan that it is set to pump an extra $280 million (US$140 million) in financial support, it said Thursday evening.
And the international financial institution has already given its support for Prime Minister Mottley’s $2 billion plan to revive the economy from the COVID-19 crisis.
The announcement followed a virtual mission headed by lead economist Bert van Selm to discuss the implementation of Barbados’ Economic Recovery and Transformation (BERT) programme, the homegrown austerity drive that is supported by the IMF under its Extended Fund Facility (EFF).
The development is welcome news for the Mia Mottley administration, as the Central Bank today reported that the economy had shrunk by three per cent in the first quarter, and the impact of COVID-19 could derail much of the progress made over the last 18 months.
But the IMF and Barbados have reached an agreement that is subject to approval by the IMF’s Executive Board during its review in June to pave the way for more funding, Van Selm said.
On completion of the review, the IMF said about $280 million (US$140 million) will be made available to Barbados, bringing total disbursement to the country under the programme to just over $570 million (US$285 million).
While the IMF said Barbados had met all the targets so far, it noted that due to the negative effects associated with COVID-19, the IMF had reduced one of the key targets. The condition of reaching a primary surplus target of six per cent of GDP for the financial year 2020/2021, has been reduced to just one per cent.
In a further development, the IMF official has signalled the multilateral lenders’ full backing of the Government’s announced $2 billion economic recovery plan which will be carried out over the next two years.
Van Selm said in the statement: “The ongoing global coronavirus pandemic poses a major challenge for the economy, which is heavily dependent on tourism. An economic contraction of more than ten per cent is projected for 2020. The shock will have a large impact on the fiscal accounts and the balance of payments.
“The Government aims to accommodate the loss of government revenues and additional emergency outlays on health facilities and medical supplies, as well as provide income support to the most vulnerable groups in society.”
With the planned adjustment to the primary surplus target, van Selm explained that subject to approval by the IMF’s Executive Board, it proposed augmentation of the extended facility in the amount of about $180 million (US$90 million).
Van Selm also praised the Mottley administration’s efforts to bolster the foreign reserves.
The IMF team leader said: “Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform programme. International reserves, which reached a low of US$220 million [$440 million] (five-six weeks of import coverage) at the end of May 2018, have sharply increased since then to more than US$850 million [$1.7 billion].
“The completion of the debt restructuring in December 2019 and meeting the primary surplus target of six per cent of GDP for 2019/20 have been very helpful in reducing economic uncertainty and reducing public debt.
“All programme criteria for end-March 2020 under the EFF have been met. The programme target for Net International Reserves was met by a wide margin, as was the target for the Central Bank of Barbados’ Net Domestic Assets.”