The first two months of the COVID-19 pandemic did not prevent Government’s near-perfect performance on its BERT austerity scorecard, the programme’s watchdog said Friday but warned of an uphill battle as the year continues.
The Barbados Economic Recovery and Transformation (BERT) Monitoring Committee said the Government met its targets for the period February to March.
But the committee said Government could struggle to meet future targets under the four-year IMF-funded programme and would therefore be forced to seek further ease from the funding agency.
“Government has made excellent progress under the programme in achieving all of its performance targets, and in particular the primary balance surplus of six per cent of gross domestic product (GDP) and the growth in net international reserves to levels well above the programme target,” the monitoring committee said in its latest report.
But, it said: “With the onset of the COVID-19 pandemic the Government of Barbados has held discussions with the IMF regarding supplemental funding and amendments to the future programme targets in order to have the fiscal space required to cope with the challenges that the pandemic is posing to the Barbados economy.”
On April 30, Government reached a staff-level agreement with the IMF and was able to draw down $180 million (US$90 million) under the Extended Fund Facility (EFF). After discussions with the Washington-based institution, Barbados was granted a lowering of its primary fiscal surplus target to one per cent of GDP for financial year 2020/21 from the initial six per cent.
But the monitoring committee said it was concerned about what impact the severity of the COVID-19 pandemic could have on the overall programme, which still had several benchmarks to be met.
“The severity of the impact of COVID-19 is the principal risk to the programme, and the Committee is concerned that even with the lowering of the fiscal surplus target and the supplemental funding expected it will be a significant challenge to meet the targets established for the coming fiscal year and close monitoring and further collaboration and negotiation with the IMF may be necessary as the full impact of the pandemic on the economy emerges in the months ahead.
“The staggering level of unemployment reported to date due to the pandemic raises concerns regarding social implications that the country may face should the impact persist for an extended period. It is critical that the counter-cyclical measures announced so far to mitigate the situation are executed in a timely, efficient, and transparent manner.
“However, it is comforting to know that the healthy international reserves position together with the successes achieved in the domestic and external debt restructurings to date stand the country in a much stronger position to meet these challenges than it was 18 months ago.”
This month, Government is expected to meet several structural targets.
The committee’s report, which examines the month of February and March, is the sixth of such public reports.
It pointed out that while revenue collection fell short of the targets under the BERT plan, expenditure was “contained, which allowed the adjusted primary balance minimum target of $631 million to be achieved”.
“This is a significant achievement that has required a concerted effort on the part of the Government,” the monitoring team said.
Total revenue for the fiscal year ending March 31, was $2.98 billion, representing a shortfall of $275 million or 8.4 per cent when compared to the original target under the BERT plan.
This also represents a decrease of $10 million on a total of $2.99 billion collected in the same period in the previous year.
The shortfall was the result of lower tax revenues from the slashing of corporation and other taxes.
“The foregoing shortfalls were partly offset by property tax collections and non-tax revenue that exceeded targets by $13 million and $16 million respectively,” said the monitoring team.
Government spending reached $2.6 billion, which was $376 million or 12 per cent below the target, and $424 million less than the prior year.
Transfers and grants to public institutions reached $396 million at the end of the review period, which was below the $418 million limit.
As of March 31, Government was able to contain its stock of total debt at $12.317 billion, just shy of the cap of $12.390 billion.
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