BRIDGETOWN, Barbados, March 11, 2020 (CMC) – Barbados is seeking to negotiate some form of relief with the International Monetary Fund (IMF), as it hinted at the possibility of not meeting its US$290 million target, under the Extended Fund Facility (EFF), should the island record cases of the coronavirus (COVID-19).
Prime Minister, Mia Mottley, said the administration would be putting some fiscal measures in place, aimed at helping those, who would be impacted.
Yesterday, St. Lucia’s Prime Minister, Allen Chastanet, said the IMF will hold a conference call with regional countries, next Monday, to discuss the economic impact of the virus that has killed more than 4,000 people, globally, and posed economic problems for small island developing states (SIDS).
“Hence, we are in dialogue with the Central Bank, the World Bank, the Caribbean Development Bank (CDB) and the IMF, on what measures and mechanisms we can put in place, in order to maintain the confidence of the business community. A conference call with the IMF is scheduled with the region, for Monday next week,” he told legislators.
Last week, the Washington-based financial institution said it would make available US$50 billion, to help countries address the COVID-19.
Mottley said that the island strengthens its preparedness for the arrival of COVID-19; she was aware of some of the capital expenditure that would be required, including the approximately BDS$8.8 million to strengthen the Ministry of Health; and ensure isolation and quarantine facilities were readied.
Mottley said she expected the negotiation with the IMF would be concluded, in about two weeks, and the island would be granted a loosening of fiscal targets, as well as the opportunity for “precautionary stand-by financing”.
“In the absence of tourism revenues and foreign exchange coming in, we will see a decline on our reserves, but we will have, hopefully, the capacity to draw down, if we need, beyond that which was agreed before.
“That is what we are seeking to negotiate with the IMF – augmentation of resources and additional fiscal space, through the relaxation of fiscal targets and debt targets, in order for us to keep Barbadians above the water,” said Mottley.
Mottey said that the island’s economy had been stabilized under the IMF-backed Barbados Economic Recovery and Transformation (BERT) program, and that the foreign reserves were now at $1.544 billion.
However, she said that could now come under “some stress”, with the threat of the COVID-19, and that she recently held discussions with representatives of the CDB and the Central Bank of Barbados, where three different scenarios were developed, showing the impact of a 25 percent decline in tourism revenue, over a three-month period; a decline of 50 percent revenue, over a three-month period; and a severe case of a decline of 80 percent in tourism revenue, over six months.
Mottley said this meant a number of job losses or reduction in the work week, especially among workers and suppliers, associated with the island’s bread and butter tourism industry.
“Therefore, the government has taken a firm decision that we will undertake counter-cyclical policies . . . we need to spend money in order to make sure that, if a man or woman can’t work, fully, within the tourism sector, that there will be other areas of economic activities in the country that we will now trigger or expedite, in order to keep as many people working as possible,” said Mottley.
“We are meeting a hiccup, and this hiccup is one that we have to face, because what is at stake is human life. We can continue, however, to keep paying down our debt,” Mottley noted.
“Whether we run six percent primary surplus, or four percent primary surplus, or three percent primary surplus, we are still paying down our debt, but what we need now, is a little room to ensure that households do not fall through the cracks; to ensure that businesses are not pushed into bankruptcy en masse; to ensure that we can sustain life, sustain and protect our people and allow them to live, while the world finds the solution for the vaccination that would, hopefully, bring this madness to an end.”