The Barbados government has announced a BDS$20 million (One Barbados dollar=US$0.50 cents) “survival” stimulus package even as it braces for significant loss in revenue and increased expenditure.
Prime Minister Mia Mottley in a statement to Parliament on Friday night on the economic impact of the coronavirus (COVID-19), said the stimulus package will provide critical assistance to Barbadians and businesses in light of the expected fallout.
Under this stimulus package, the government ill provide up to BDS$600 per month to each family through the Welfare Department and there will also be a 40 per cent increase in all rates and fees paid by the Welfare Department to individuals.
“These funds must be the subject of urgent action,” said Mottley, adding that her administration has asked the private sector to match that stimulus package through an adopt-a-family programme, where those who earn more than BDS$100,000 annually, provides up to BDS$600 per month to the fund for families in need.
“Nobody is expecting breaststroke, backstroke, freestyle and not even a good dog paddle. We are expecting people just to tread and keep their head above water.”– Prime Minister of Barbados, Mia Mottley
The fund, to be implemented for an initial three to six months period, was launched Friday at CIBC FirstCaribbean Bank and Mottley said that the details of how to access it will be released in the coming days.
Mottley, who is also Finance Minister, said that the government expected at least a 1.5 per cent economic growth, but the COVID-19 pandemic and global economic downturn had changed that outlook
“We have gone back to the start line. This COVID-19 pandemic is expected to impact our economy through its impact on global travel. I have already seen it. We therefore believe that the effects of reduced tourism arrivals will in turn lead to a decline generally in economic activity.”
Mottley said foreign reserves of just over BDS$1.563 billion or about 5.5 months’ import cover have been boosted by BDS$360 million, or an extra month of import cover to help cushion the economic shocks and give government more flexibility.
“That reserve cover for the rainy day allows us to be able to plan out the phase one package… to help save the Barbadian people as we go into this woeful crisis,” she told Parliament.
She said the additional funds will constitute the BDS$160 million approved by the Inter-American Development Bank (IDB) last week and a reinforcement of BDS$200 million from the International Monetary Fund (IMF) under the Enhanced Structural Adjustment Facility, which is currently about BDS$440 million.
The IMF in October 2018, approved a US$290 million Extended Arrangement under the Extended Fund Facility (EFF) for Barbados, which the Washington-based financial institution said was to help the island restore debt sustainability, strengthen the external position, and improve growth prospects
She said she expects about 60 per cent of the island to “carry the weight” in the medium term as the island continues to feel the economic impact of COVID-19, and with the hurricane season around the corner, she has already informed the IMF that Barbados “can no longer run a six per cent primary surplus.
“Not with the level of suffering that is going to ensue or the implosion on our revenues that we are likely to see,” said Mottley.
She said the IMF and government had an “initial understanding” that it would move from a six per cent primary surplus target to a three per cent of GDP based on a scenario of the island witnessing a 50 per cent reduction in tourism.
Mottley said should it be a severe scenario of an 80 per cent reduction in tourism, which “it is looking more and more like”, then the target would move down to two per cent of GDP.
She told legislators that this would give the government additional fiscal space “so even if we lose BDS$240 million in tax revenue we are hoping to be able still to spend about BDS$150 million over the course of the next six to nine months or longer, to be able to stabilize and create opportunities for our people”.
She is forecasting a decline of 4.2 per cent in real growth under the moderate scenario of a 50 per cent reduction in tourism and 8.3 per cent under the second scenario of 80 per cent decline in tourism, the island’s main industry.
“I begin to wonder even if that may not be the full story,” said Mottley, who said the weakening in tourism and related sector would also result in decline in total imports of between one and two per cent of gross domestic product, or BDS$125 million to BDS$200 million.
She said the combine effect of lower travel credits and lower imports was expected to impact on the reserves accumulation.
“The job of this government is to help people keep their heads above water. Nobody is expecting breaststroke, backstroke, freestyle and not even a good dog paddle. We are expecting people just to tread and keep their head above water.