IMF gives BERT progress top marks

Barbados has come in for high praise from the International Monetary Fund (IMF) for its continued “good progress” in implementing the Barbados Economic Recovery and Transformation (BERT) programme.

At the same time, the IMF has agreed to a further ease in the primary balance – the difference between revenue and expenditure not including debt payment – target under the four-year programme that began in October 2018.

On Friday, the Washington-based institution announced that it had reached another staff level agreement with authorities in Bridgetown, following its fourth review of the BERT plan.

This means that under the programme, which is supported by the IMF’s Extended Fund Facility (EFF), Barbados will be able to draw down about US$90 million upon approval, which is expected by December.

At the same time, the IMF has agreed to review a proposal for an augmentation of the EFF in the amount of US$66 million, to help finance the emerging fiscal deficit and balance of payments needs.

The IMF team, led by Bert van Selm, conducted a virtual mission between October 26 to 30 to discuss implementation of the BERT plan.

He said on Friday that the agreement reached with Barbados authorities was subject to approval by the IMF Executive Board by December.

“In this very challenging environment, Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform programme,” van Selm said.

He pointed to higher reserves, which is now in excess of $1 billion, and the fact that all quantitative targets under the programme were met by the end of September.

“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 (NDA),” said van Selm.

He pointed out that while the pandemic has had a major negative impact on the economy, with double-digit decline in economic activity projected for 2020, and the tourism industry now only a fraction of normal levels, Government remained on course to meet agreed targets under the four-year EFF arrangement, which began in October 2018.

In response to the pandemic, the Government of Barbados is now targeting a primary balance of -one per cent of GDP for financial year 2020/2021, compared to a surplus of six per cent of GDP envisaged prior to the pandemic, and a surplus of one per cent of GDP at the time of the third EFF review.

It was in May that the Mia Mottley administration first sought and received approval from the IMF to shift its primary balance target from a six per cent surplus to one per cent for the fiscal year. The new target is now -1 per cent. Government’s fiscal year ends on March 31 each year.

“The lowered primary balance target accommodates the loss of Government revenues stemming from the pandemic and facilitates emergency outlays on health facilities, medical supplies, and income support to the most vulnerable. Staff supports this easing of the fiscal stance and, subject to approval by the IMF Executive Board, proposes an augmentation of the Extended Fund Facility in the amount of SDR 48 million (51 per cent of quota, about US$66 million) to help finance the emerging fiscal deficit, bringing total access under the program to SDR 322 million or 341 percent of quota,” van Selm explained.

He again noted that a tabling of a revised Central Bank law in Parliament was expected “shortly”, pointing out that this was “a critical safeguard for continued macroeconomic stability and will be a prior action for the completion of this EFF review”.

“The team would like to thank the authorities and the technical team for their openness and candid discussions,” he added.
(marlonmadden@barbadostoday.bb)