Having completed the second review of Barbados’ economic reform programme, the executive board of the International Monetary Fund (IMF) is commending the Caribbean island’s Government for the implementation of the Barbados Economic Recovery and Transformation plan.
“The Barbadian authorities continue to make good progress in implementing the comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, rebuilding reserves, and increasing growth. Since May 2018, international reserves have increased from a low of US$220 million (or 5-6 weeks of import coverage) to more than US$600 million at end-October 2019,” a statement from the IMF said.
The BERT programme focuses on mitigating falling reserves and boosting economic growth, while attempting to protect vulnerable groups through strengthened social safety nets.
“Directors also underscored that social spending and an improved safety net to protect low‑income households are key priorities for the programme.”– The International Monetary Fund
According to the IMF board, the restructuring of the country’s domestic debt, completed in November 2018, contributed to waning economic uncertainty, and that renegotiating with domestic creditors has placed debt on a clear downward trajectory.
And despite several domestic and external risks threatening the Barbados economic outlook — including weaker global growth, tighter global financial conditions, and vulnerability to natural disasters — the prospect of growth seems favourable as private sector confidence is on the rise.
However, the fund warned that due to the island’s heavy dependence on the tourism sector, “the impact of the fiscal adjustment on growth has been limited”.
Still, the IMF commends the Barbados Government for crafting a budget that provides a framework for achieving a targeted primary surplus of six per cent of GDP (gross domestic product), and which indicates its commitment to fiscal discipline.
“Directors welcomed tax reforms aimed at enhancing revenue and considered that improvements in tax and customs administration are essential to support medium‑term revenue. They supported the planned adoption of a fiscal rule to sustain the adjustment effort over the medium and long run,” the fund explained further.
“Directors also underscored that social spending and an improved safety net to protect low‑income households are key priorities for the programme.”
“Deeper regional integration would also help increase Barbados’ growth prospects.”– The International Monetary Fund
The IMF board stressed the need for reforms to State‑owned enterprises in order to achieve the primary surplus target and maintaining it over the medium term.
On the matter of the debt-restructuring agreement reached with commercial external creditors, the fund said it will not only help reduce uncertainty, but also improve prospects for investment.
While calling on the Barbados Government to improve the governance of the Central Bank of Barbados, the IMF emphasised the need to limit monetary financing to the Government and improving the AML/CFT framework.
Among other things, the IMF board encourages the Barbados authorities to strengthen the country’s disaster-resilience capabilities in order to withstand weather‑related shocks to the economy. Addressing climate and disaster resilience will be critical to improving medium‑term economic prospects.
In addition, the directors of the IMF highlighted the inclusion of natural disaster clauses into new debt instruments, explaining it will help strengthen Barbados’ protection against natural disasters.
Importantly, the IMF urges the Government to continue pursuing the improvement of the business environment by streamlining regulations, addressing key obstacles to growth, and implementing structural reforms to strengthen competitiveness and unlock Barbados’ growth potential.
“Deeper regional integration would also help increase Barbados’ growth prospects,” the IMF also noted.