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IMF pays out US$48M to Barbados, recommends more reforms

The International Monetary Fund (IMF) will pay out an additional US$48 million to the Government of Barbados as part of the Extended Fund Facility agreement signed by both parties on October 1, 2018.

The disbursement of funds comes after the IMF executive board completed a consultation and second review of the EFF for the period June – September 2019.

Following the review, Deputy Managing Director and Acting Chair Tao Zhang noted: “Barbados continues to make good progress in implementing its comprehensive homegrown economic reform program. All quantitative performance criteria, indicative targets, and all structural benchmarks for end-September 2019 were met.”

So far Barbados has increased international reserves from a May 2018 low of US$220 million to more than US$600 million at end-October 2019. Should the Government meet all targets under the four-year extended arrangement, the country stands to benefit from approximately US$288 million — or 220 percent of its quota in the IMF.

“Structural reforms are needed to unlock Barbados’ growth potential.”

— International Monetary Fund Deputy Managing Director Tao Zhang

Reforms and targets

According to Zhang, “The fiscal adjustment continues as programmed with the primary surplus targeted at 6 percent of GDP for FY2019/20 and subsequent years. This target for end-September 2019 was met by a significant margin, and the FY2019/20 budget provides a solid basis for reaching the target for the next fiscal year.”

He said that the implementation of tax reforms will support the Government’s push to improve tax collection, that improving tax and customs administration will enhance the country’s revenue.

Shoppers traverse a street in Bridgetown, the capital of Barbados.

“The planned adoption of a fiscal rule in 2020 will help sustain the adjustment effort over the medium and long term,” Zhang added.

He further explained that reforms to State-owned enterprises (SOEs) will contribute to achieving and maintaining the primary surplus target over the medium term.  In addition, Zhang recommended significantly reducing the financing of SOEs in order to secure the fiscal space for investment in physical and human capital; instead, combining stronger oversight of SOEs, cost reduction, revenue enhancement, and mergers and divestment.

The Lord Nelson statue in Bridgetown, Barbados, welcomes citizens and visitors alike to the island’s capital and its premier business district.

To cushion “the impact of the stabilisation programme on low-income households”, the IMF deputy managing director stressed the need to integrate adequate social spending and an improved safety net into the reform programme. This, he said, will ensure the protection of the most vulnerable members of society.

“Structural reforms are needed to unlock Barbados’ growth potential. While the process for providing construction permits has been streamlined, much room for improvement in the business climate remains. Deeper regional integration would also help increase Barbados’ growth prospects,” Zhang also advised.