One of the island’s most respected economists says he would not be surprised if Government entered another programme with the International Monetary Fund (IMF).
Dr Justin Robinson, a Professor of Finance and Dean of the Faculty of Social Sciences at the University of the West Indies Cave Hill Campus, believes the Mia Mottley administration could go that route if it anticipates trouble accessing financing on the international market at decent terms.
His comments have come with the IMF’s Managing Director, Kristalina Georgieva set to arrive in the island on Tuesday night, to meet with Prime Minister Mottley.
Barbados is set to receive approval from the IMF for a final drawdown from the Extended Fund Facility (EFF) under the Barbados Economic Recovery and Transformation (BERT) Programme that began in October 2018.
With the BERT set to expire at the end of September, the Prime Minister said discussions on whether Government would re-enter an IMF programme would commence at the end of June.
Speaking to Barbados TODAY, Dr Robinson described the BERT as a success, noting that Barbados met all of its targets during the four-year programme.
However, he said there was one area where Government might foresee some challenges and this could prompt it into another IMF programme.
“If the Government perceives it will have challenges accessing the financing it needs to execute Government’s expenditure plans at reasonable terms on the open capital market, and they can renegotiate an acceptable agreement with the IMF, I would not be surprised if they went that route,” Dr Robinson told Barbados TODAY.
He explained that with government bonds not performing as well as anticipated, there might be a need for the country to ensure it can assess international funding.
“Many would have noted in the Estimates passed earlier this year there was at least $200 million of planned expenditure that the Government had not yet identified the financing for as yet, and from the public statements of the Central Bank Governor, the bonds issued from the Barbados Government have not exactly been successful with investors.
“So, it does appear that four years into the BERT programme and almost at the end, that the confidence in the capital markets in Barbados Government paper has not yet been restored and the Government may face a challenge in terms of accessing financing.
“So, that may be a case for continuing to seek funding with the IMF where you are accessing that funding in lieu of being able to access it normally on the capital markets. It may be an indicator that there is some more fallout or it is taking longer to get back that confidence in light of the debt restructuring and also in terms of the impact of the COVID-19 pandemic,” Dr Robinson noted.
He pointed out that there was also the possibility a number of the structural reforms of state-owned enterprises (SOEs) and others that were part of the BERT had not yet been completed.
The economist contended, however, that those were actions Government could undertake on its own, without the assistance of an IMF programme.
He added that with Barbados’ foreign reserves healthy, with more than three times the normal buffer of 12 weeks’ cover, he did not believe there was a need to go to the IMF to bolster foreign reserves.
randybennett@barbadostoday.bb
