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Govt to borrow $48m more from IMF

Barbados is preparing to borrow another $48 million from the International Monetary Fund (IMF).

But amid concerns about escalating debt, the IMF and Government have agreed to a two-year extension of the main debt target under the Barbados Economic Recovery and Transformation (BERT) programme.

IMF Barbados team leader Bert van Selm announced this yesterday at the end of a six-day virtual mission.

He also said that while “in this very challenging environment, Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform programme”, Government missed some performance targets.

This was after the authorities increased financing to cash-strapped, state-owned enterprises affected by the COVID-19 pandemic.

The IMF mission was the fifth review of Barbados’ economic reform programme under the international financial institution’s Extended Fund Facility (EFF).

“Following productive discussions, the IMF team and the Barbadian authorities reached staff level agreement on the completion of the fifth review under the EFF arrangement,” said van Selm.

“The agreement is subject to approval by the IMF Executive Board, which is expected to consider the review in June. Upon completion of the review . . . about US$24 million will be made available to Barbados.”

He said Government was targeting a zero per cent of GDP primary balance for financial 2021/2022 compared to a deficit of one per cent of GDP in financial year 2020/2021.

This fiscal stance, van Selm explained, reflected “a projected modest recovery in tourism and facilitates COVID-related emergency outlays on health facilities, medical supplies and income support to the most vulnerable”.

Government and the IMF also agreed to change the main debt target after Barbados’ public debt surged to $12.9 billion at the end of March.

“The authorities’ long-term debt target of 60 per cent of GDP will be pushed out by two years (from financial year 2033/2034 to financial year 2035/2036) to reflect the impact of the pandemic on the economy. The authorities remain firmly committed to reducing public debt over time,” van Selm stated.

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

“A new Central Bank law was adopted by Parliament in December 2020 – a critical safeguard for continued prudent macroeconomic policy. International reserves, which reached a low of US$220 million (five to six weeks of import coverage) in May 2018, are now at a comfortable level of US$1.3 billion.

“Quantitative targets for end-March under the EFF were met, except for the performance criterion on central Government transfers and grants to public institutions, which was exceeded owing to measures to address the COVID-19 health crisis (including the vaccination programme executed by the national hospital).”

While reporting reform progress, van Selm said Barbados’ economy “remains severely depressed by the ongoing global pandemic”.

“Tourism came to a virtual standstill from April 2020 onwards and remains at a fraction of normal levels. Economic growth for 2021 is premised on a modest recovery of tourism in the second half of 2021. Risks remain elevated, including in light of the impact of recent volcanic activity in neighbouring St Vincent,” he noted. (SC)