Prime Minister Mia Amor Mottley told a press conference following the wrap-up meeting with the IMF team, that it was an extraordinary achievement by Barbados to reach this point with the IMF in three months, stating that some countries had taken nine and 15 months. She continued: “We appreciate the Staff Level Agreement, because we recognise that in achieving it we have not put the stability or the value of the Barbados dollar at risk…
“We have, however, adjustments to make and…we have started to make them. Phase one was the mini-budget on June 11 and phase two and three will start concomitantly.”
The Prime Minister disclosed that the Government of Barbados would be launching its Debt Exchange Programme today and affected persons would have until September 28 to accept its terms.
She noted that the IMF was a “cheap source of funding” but more than anything else, it would assist in unlocking access to funding for the country.
“Immediately upon [the IMF’s] Board approval, which we hope to have in a few weeks’ time, it will also unlock funding from the Inter-American Development Bank, we believe, and the Caribbean Development Bank and other institutions.
“It allows us to move forward with a level of certainty and to send the message that Barbados has a good prognosis and that we anticipate that growth will return, in our view, within two to three years….”
Ms. Mottley stressed that Barbados must use this period to retool, empower, retrain and enfranchise its people. She said a country could not spend 68 cents in every dollar of revenue that it earned in debt servicing and explained that the restructuring of the debt was a key component of the Barbados Economic Recovery and Transformation Programme.
“Our Government must be fit for purpose at the end of this Programme. Our debt to GDP must drop to 60 per cent…. We must be able to provide services and goods to our people such that our country is not only stable and safe, but the place of choice for Barbadians and non-Barbadians to want to live and do business,” she stated.
The Prime Minister admitted that the road ahead would not be easy, but emphasised that the country could make it. “Not every day is sunny, but equally, every day is worth living. And to that extent, if this country can make the adjustments that we…have started to make, then I have every confidence that within two to three years, growth will return and opportunities will abound,” she surmised.
Head of the IMF mission to Barbados Mr. Bert Van Selm in a statement said “I am pleased to announce that, in support of the Barbadian authorities’ economic reform program, the IMF team and the government of Barbados have reached staff-level agreement on a 48-months Extended Fund Facility, with access of SDR 208 million (equivalent to 220 percent of quota, or about US$290 million). If approved by the IMF Executive Board, SDR 35 million (about US$49 million) would be immediately available. Staff envisages that the IMF’s Executive Board would consider the proposed arrangement under the EFF by early October.
“In the last decade, the Barbadian economy has been caught in a cycle of low growth, widening fiscal deficits and increasing debt. International reserves have dwindled to US$240 million, well below reserve adequacy levels, while central government debt has become unsustainable.
“The new government that took office in May 2018 is rapidly developing plans to address the current vulnerabilities, in close consultation with its social partners. The Barbados’s Economic Recovery and Transformation Plan aims to restore macroeconomic stability and put the economy on a path of strong, sustainable and inclusive growth, while safeguarding the resilience of the financial sector. The authorities’ fiscal consolidation program, in conjunction with the announced debt restructuring, would place debt on a clear downward trajectory. The strategy of accelerating growth focuses on attracting new investment in areas such as renewable energy, creative and artistic industries, education and health services, agro-industries, research, the international business sector, and tourism.
“The authorities’ reform program, and the important commitment of IMF resources that it entails, is a vote of confidence in Barbados’ Economic Recovery and Transformation Plan. The cornerstone of the program is a strong front-loaded fiscal adjustment focused on curbing current expenditure, while maintaining space for bolstering social safety nets and infrastructure spending. In this context, the measures to reduce government expenditures announced in late August are a critical and important first step. These measures aim to improve the efficiency and effectiveness of public services and reduce government transfers to state-owned enterprises by reviewing user fees; exploring options for mergers; and strengthening oversight. The measures should help reach a primary surplus target of 6 percent of GDP in 2019/20.
“The fiscal adjustment will be complemented by a comprehensive debt restructuring, aimed at securing meaningful debt reduction, reducing financing needs, and restoring debt sustainability. Barbados’ central government debt will be put on a clear downward path towards a target of 60 percent of GDP by 2033, from an estimated 157 percent of GDP at present. Progress being made by the authorities in furthering good-faith discussions with domestic and external creditors is welcome. Continuing open dialogue and sharing information will remain important in concluding an orderly debt restructuring process.
“The success of Barbados’ program will require an extraordinary effort and resolve on the part of the authorities and other segments of society, as well as broad international support. While the initial implementation period will be challenging, Barbados will emerge stronger and more dynamic from the program, and it will be better poised to generate growth and job creation for the people of Barbados.
- Countries: Barbados