Recovery programme critical to get economy back on track

The four-year Barbados Economic Recovery and Transformation (BERT) programme which is scheduled to wind up in about five months was necessary, says Central Bank Governor Cleviston Haynes as he reflected on the performance of the International Monetary Fund-backed (IMF) programme.

“The issue for me is not whether you go into a fund programme, the issue is, what are the policies you are going to implement whether you are in a fund programme or you are not in a fund programme? From my perspective, we cannot go back to a scenario of large fiscal balances that we are unable to support,” said Haynes.

He was responding to questions from the media on Wednesday, following a presentation of his first quarter economic review and outlook.

Stating that he was not in a position to say whether government should enter into a new IMF programme, Haynes said it was now critical that work continue to ensure that the adjustments made over the life of the current programme were not eroded.

“There is simply too much hard work done over the last four years to simply reverse that hard work,” said Haynes, who added that “looking at the programme itself, the programme is necessary”.

He recalled that prior to the introduction of BERT in 2018 there were low levels of international reserves, high expenditure, low revenues and spiraling debt. “We needed to put in place an adjustment initiative,” he said.

“The intention there really was to restore our reserves, restore the public finances to a level of sustainability, restore debt to a sustainable level and create a foundation for growth going forward,” said Haynes.

He said that between 2018 and early 2020 Government was “largely on track” to meeting its targets under the programme, having accumulated a primary surplus in 2019/2020 of six per cent, allowing for debt commitments to be honoured.

“It was done in a way that tried to balance revenue increases over the domestic economy and also on international transactions. I would say we were making progress in that regard,” said Haynes in his assessment of the performance of the BERT programme.

The island’s debt stock was also on the decline from the jaw-dropping 156 per cent, which had placed Barbados among the world’s most indebted nations at the time.

International reserves have also been increased to record levels.

However, the ongoing COVID-19 pandemic, which started to affect the country in March 2020, interrupted the programme, resulting in increased borrowing and spending by government over the past two years.

The Mia Mottley-led administration was also knocked off its planned trajectory when the island’s bread and butter tourism industry ground to a standstill in 2020, resulting in a dramatic decline in economic activity.

The Governor told business journalists that Government was now required to get back on track since the work was “somewhat incomplete”. However, he stressed that among the critical things to consider from a long-term perspective was being able to bring down the debt to GDP ratio to sustainable levels, making sure fiscal policy is sustainable and debt payments are able to be made on a timely basis.

He also pointed to Government’s acceleration of its capital expenditure programme, which he said coupled with the expected continued recovery in tourism would “point us towards the increased economic activity which we know”.

He agreed the decision on whether to enter into a new IMF programme to continue certain economic adjustments rests solely with Prime Minister Mia Mottley, who is also Minister of Finance.

In her Budget presentation last month, Mottley indicated that she would be carrying out her assessment and would be making a decision in coming months.

“I believe she will consider all of the advice in relation to that and make a determination as to whether or not we need to go [back to the IMF],” he said.

Haynes also highlighted the need for ongoing public sector reform in order to improve productivity, transparency and efficiency across Government agencies and departments.
(MM)