Barbadians are being warned to prepare for some “tough times” ahead as commodity prices continue to soar, even as measures are implemented to stave off any further major fallout.
Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva issued the sober reminder on Thursday, saying that Barbadians must experience this tough period to get to better days.
She advised that to help get through the current challenges, Barbados and the rest of the region should move with urgency to ramp up food and energy security.
“We are in for some tough times this year [and] next year,” Georgieva cautioned.
Her comments came during a conversation with President of the Barbados Economic Society (BES) Dr Simon Naitram and students of the University of the West Indies at the Lloyd Erskine Sandiford Centre.
Responding to a question regarding the dramatic slowdown in foreign direct investment to developing countries due to the COVID-19 pandemic, Georgieva declared that although the flow of private capital was now somewhat steady, “where we are today [globally] is a very dangerous zone because of multiple factors like supply chain interruptions [and] the war in Ukraine, [which] are putting pressure on prices and therefore inflation is becoming the most pressing concern in many countries”.
“We need inflation under control because price stability is critical for growth, but to bring inflation under control that means tightening of financial conditions, and when this happens typically we see withdrawal of capital.
“So, at the IMF now we are working hard to anticipate which of our members may face balance of payment constraints, and I can tell you we are ready to step up. We have US$700 billion lending capacity and we will deploy as much as necessary,” the IMF boss said.
She said she has been notifying countries with high debt not to wait until things deteriorate further before moving towards programmes that would help protect their economies.
“When capital leaves and nothing comes to guarantee stability, then countries may find themselves in a very tough spot,” Georgieva cautioned.
“I want to be honest with all of you – we are in for some tough times this year [and] next year because of this tightening of financial conditions and the consequences of it.”
However, the economist, who is in Barbados for what is her first trip to the Eastern Caribbean, told residents not to “take it as bad”, explaining that the fiscal tightening measures on which some countries were embarking were to ensure financial and price stability, which would, in turn, lead to more confidence among investors.
“Investors would be comfortable to invest, there would be jobs, there would be growth. So we have to go through these tougher times,” she said.
Georgieva said residents will also need to play their part by changing their consumption patterns and doing what they can to protect the environment.
“We all need to adjust to this tougher time,” she said.
The top IMF official declared that the time was ripe for Barbados and other countries in the region to ramp up investment in the agriculture and renewable energy sectors and “rethink supply chains and rethink security of supply, especially for food”.
She also agreed that while governments should seek to protect the most vulnerable, those just above the poverty line may also require some assistance.
“In this environment, we also see the middle-class quite affected. So, measures do need to target the most vulnerable. There has to be also some appreciation for those that are above the poverty line but are not by much,” Georgieva explained.
“What we recommend and what we see being in place is a recognition that inequalities have grown during the pandemic . . . . That cannot continue because it undermines the social foundation and, in that sense, measures that are directed to more progressivity in taxation [are required], so those who can afford to help more they do.”
At the same time, she said the IMF was “working hard” to identify ways in which it can better help member countries to achieve their sustainable development goals.
The Managing Director pointed out that the Washington-based international financial institution has “stepped up significantly from the very outset of the COVID crisis” to provide financing to nearly 100 of its 190 member states.
Responding to a question from one of the students on the IMF’s plans to assist member countries to recover from the setback caused by the COVID-19 pandemic and how it planned to assist them going forward, she reminded that in addition to emergency funding which was also extended to Barbados, the IMF also allowed countries to access loans through the Special Drawing Rights (SDR) facility.
Georgieva is on a four-day official visit here. marlonmadden@barbadostoday.bb
