Government is going back to the International Monetary Fund (IMF) to get financing for a Barbados Economic Recovery and Transformation (BERT) plan 2.0.
Prime Minister Mia Mottley announced on Friday that this time around, the arrangement would be for three years and once approved by the IMF, would unlock approximately US$130 million (BDS$260 million) in financing.
She said entering another programme with the IMF – with the current four-year agreement concluding at month end – would also allow the country to access another US$210 million (BDS$420 million) under the Resilience and Sustainability Trust (RST) set up by the IMF in May, to help countries access financing to invest in resilience building.
“So, from the IMF in total we are looking at US$340 million to be able to assist us over the course of the next three years,” Mottley said at a wide-ranging media conference at Ilaro Court.
The Prime Minister said the decision to approach the IMF about a new Extended Fund Facility (EFF) arrangement followed consultations with the Social Partnership teams and “other larger and smaller groups” in June and July.
“The Cabinet yesterday [Thursday] agreed that we will formally approach the International Monetary Fund again with a letter I propose to sign this afternoon [Friday] to the Managing Director asking for discussions and negotiations to resume,” she said.
Explaining the rationale for the move, the Prime Minister pointed to the “difficult and uncertain times” facing economies and the monetary policies employed by central banks around the world that have increased the cost of borrowing.
She said this was not the time for Barbados to go to the international market to seek funding.
“We have been of the view that the cheapest money in town is still at the International Monetary Fund. In addition to that, it also unlocks other development funds that may be made available to us as a nation,” said Mottley.
“We also believe that what is being asked of us does not vary far, thus far, from our own Barbados Economic Recovery and Transformation programme, adjustments to which we will make willingly because we recognise how we need to hone what we are doing in the ability to recover from a COVID environment, but at the same time also to lay that platform for growth,” she explained.
Mottley noted that BERT 2.0 will be similar to the first programme in terms of the structural, fiscal, and monetary targets and benchmarks.
“We were hobbled by COVID but we are not down and out, and any slippage that we had we intend to make up. People must be able to work. We are looking for jobs. Government took up some of the slack during the pandemic; we need now some of that slack to shift back to the private economy so that Government doesn’t end back up in a spiral, increasing its debt beyond that which it can take,” she said.
The Prime Minister said while the reforms undertaken in the last IMF-backed programme helped the country to get closer “to where we need to be, we recognise that because of COVID there is still work that remains unfinished”.
“The work with respect to completing the restructuring and repurposing of state-owned enterprises is a work in progress that we had to put a pause on largely because of COVID. We also believe there is tremendous opportunity for growth,” added Mottley, who said she expected double-digit growth for Barbados for the rest of this year.
She also pointed to the need for continued training and digitalisation, while noting that Barbados should soon benefit from a labour market information specialist.
Mottley added that her administration was likely to create a fiscal council – a group to examine the Government’s tax policies and expenditure – early next year.
The Prime Minister indicated that while pension reform was a part of the last programme, it would not be included in the new one being pursued, as she insisted that the $4 billion National Insurance Scheme (NIS), which experts predict could be depleted in as little as 12 years if not reformed, was not in crisis.
Indicating that there have been extensive consultations over the past several weeks on the issue, Mottley said between the end of this month and early October, the Board of the NIS should be in a position to make its recommendations to Cabinet. She said that will be followed by a public announcement.
Mottley also used the opportunity to announce that negotiations on wages, salaries, and allowances would begin before the end of September, but said she would refrain from commenting to avoid prejudicing the discussions.
“I am hoping, therefore, that we can see that process put properly on the table so that persons on behalf of the labour unions and those on behalf of the Government can sit down and appropriately assess where we are and what the future is,” the Prime Minister said.
