An aerial view of Bridgetown, the capital of Barbados (Photo: businessinsider.com)

IMF reaches staff level agreement with Barbados

An aerial view of Bridgetown, the capital of Barbados (Photo: businessinsider.com)

The International Monetary Fund (IMF) on Friday said Barbados could receive US$90 million in December under its Extended Fund Facility (EFF) if the island successfully completes another round of review of its economic performances.

The IMF on Friday said Barbados could receive US$90 million in December under its Extended Fund Facility.

The Washington-based financial institution said at the request of the Mia Mottley Administration, an IMF team, led by Bert van Selm conducted a virtual mission between October 26-30 to discuss implementation of Barbados’ Economic Recovery and Transformation (BERT) plan, which is supported by the Fund under the EFF.

“Following productive discussions, the IMF team and the Barbadian authorities reached staff-level agreement on the completion of the fourth review under the EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to consider the review in December,” van Selm said in a statement.

The IMF’s team lead to Barbados Bert van Selm

He said upon completion of the review, about US$90 million will be made available to Barbados.

The IMF official said that the coronavirus (COVID-19) pandemic has had a major impact on Barbados’ economy, with a double-digit decline in economic activity projected for 2020.

“Tourism came to a virtual standstill between March and June 2020: airlift declined precipitously, most hotels closed, and occupancy plummeted at facilities that remained open. In early July, the island cautiously started reopening the economy for international tourists, after the authorities effectively halted local transmission of the disease. However, tourism arrivals remain at a fraction of normal levels,” he said.

“In this very challenging environment, Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform programme.

He said international reserves, which reached a low of US$220 million or five to six weeks of import coverage at end-May 2018, are now in excess of US$1 billion.

“All quantitative targets for end-September under the EFF were met. The programme target for Net International Reserves was met by a wide margin, as was the target for the Central Bank of Barbados’ Net Domestic Assets (NDA).”

van Selm said in response to the pandemic, the Barbados government is now targeting a primary balance of minus one per cent of gross domestic product (GDP) for the financial year 2020-21 compared to a surplus of six per cent of GDP envisaged prior to the pandemic, and a surplus of one per cent of GDP at the time of the third EFF review.

He said the lowered primary balance target accommodates the loss of government revenues stemming from the pandemic and facilitates emergency outlays on health facilities, medical supplies, and income support to the most vulnerable.

“Staff supports this easing of the fiscal stance and, subject to approval by the IMF Executive Board, proposes an augmentation of the Extended Fund Facility in the amount of about US$66 million to help finance the emerging fiscal deficit, bringing total access under the programme to 341 per cent of quota.”

He said tabling of a revised central bank law to parliament is expected shortly, adding “this is a critical safeguard for continued macroeconomic stability and will be a prior action for the completion of this EFF review”.

In 2018, the IMF approved US$290 million agreement with Barbados under the EFF in a bid to revitalise the island’s ailing economy.