Central Bank outlines financing safety net for shocks, hurricanes

Barbados is set to open talks within weeks with the International Monetary Fund (IMF) on a standby arrangement designed to provide rapid access to financing in the event of economic shocks, Central Bank Governor Dr Kevin Greenidge has revealed.

After exiting the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) in June last year, the Mottley administration will within weeks be opening talks on that standby arrangement after declaring it would keep the IMF on “speed dial”.  

The talks should begin between next week and the week after to discuss what the standby arrangement would look like, he told Barbados TODAY. 

Reference to the plan was made as Dr Greenidge reported continued economic growth for the first quarter of this year – the 20th quarterly rise in a row.

But he told Barbados TODAY: “A speed dial means that when you call up, you don’t have to wait and go through all the regular processes, and wait three and four months because a shock is now. So, for that, you will need to have some sort of programme so to speak, but not in the traditional sense like the EFF. So, what we are looking at, will be something where we continue to work with them in terms of policy dialogue and we explain to them what we are doing and get onboard. 

“We may even set some little targets for ourselves, like what we plan to do. And every time we achieve a target, some money may be put aside for us in reserve somewhere, like an insurance policy. And then, if we are ready, if anything happens, we can borrow. The IMF calls that a standby arrangement. We call that a speed dial. Within a couple days, if anything happens, you can get it.

He continued: “I have been run around making presentations to other countries about, you have to have a financial package ready, in case a hurricane hits. If a hurricane happens, the first thing we are going to call from in Barbados… once we have space on the debt, space on the fiscal to help you to be able to quickly attend to certain things once there is some money in the kitty. 

“Then, there is the Regional Catastrophe Fund, who will pay out some money in a few days; then we got some bonds in the World Bank as an emergency funding in case we need…because, funding is what we need; then there are the clauses built into the debt to climate fund that you can postpone if needed debt payments…instead of money going out and put them in a year or two. 

“Then, if you have some sort of standby arrangement, you got some money there waiting for you. So, that is part of a whole package. Remember, in an emergency, what you want to do is get money quick, and minimize money going out, so you can do what you want to do. So, that is the context in which we are proposing.”

In June last year, Barbados received its final tranche of loans totalling about $116m from the IMF, following the successful completion of the country’s economic reform programme, BERT 2.0. 

In May, Mottley announced Barbados may keep the International Monetary Fund “on speed dial” beyond June, when the second version of the national economic recovery programme concluded.

She told journalists at Ilaro Court that the structural reforms must continue, and the IMF, which formally ended its arrangement with Barbados under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) last June, will be on call in case emergency support is needed beyond June.

“We have to continue to make Barbados fit for the third decade of the 21st century and beyond, we have to become more nimble; we have to become less ponderous, we have to become more cooperative, we have to build skills,” the prime minister told a news conference.

The need for more Barbadians to be skilled was expressed during the discussions on national insurance and pension reform, she added. 

“We feel it when we have to import persons to help us out. We have had to have a number of persons working from outside, inside of Barbados, not because we wanted it — a first option is always a Bajan — but the reality is if you can’t get a person for the job, then what do you have to do? You have to go where the skills can be had. So skills development is a huge part of it.”

A BERT 3.0 must entail continued modernisation of the country’s governance structure, Mottley also said.

 

(KH)