WASHINGTON, DC June 4, 2020 (CMC) – The International Monetary Fund (IMF) announced, yesterday, it was making U$$139 million available to Barbados, as the island continues its “strong implementation” of the comprehensive Economic Recovery and Transformation (BERT) plan, to turn around the economy.
The Washington-based financial institution said that the funds followed the successful third review of the IMF’s extended arrangement, under the Extended Fund Facility (EFF) for Barbados, bringing total disbursements to US$283 million.
Barbados had entered into a four-year US$377 million extended arrangement, under the EFF, in October last year.
The IMF noted that Barbados continues its strong implementation of the BERT plan that is aimed at restoring fiscal and debt sustainability and increasing reserves and growth.
It said that the ongoing, global coronavirus pandemic poses a major challenge for the economy, which is heavily dependent on tourism, and is expected to have a large impact on the balance of payments and the fiscal accounts.
“Barbados continues to make good progress in implementing its comprehensive Economic Recovery and Transformation plan, with all performance criteria, for end-March 2020, met. Prospects for continued strong program performance are good,” said IMF Managing Director, Tao Zhang.
Zhang said that the policy response to the global coronavirus pandemic is adequate, with a reduced primary surplus target of one percent of Gross Domestic Product (GDP), for fiscal year 2020/21, to accommodate significant revenue losses and support spending on public health and social protection.
He explained that the reduction of the primary surplus is financed by additional resources from international financial institutions, including an augmentation of the IMF’s extended facility.
“The accommodation in fiscal year 2020/21 will be compensated by higher primary surpluses, in the medium term, to ensure that the debt target, of 60 percent of GDP, in fiscal year 2033/34, is reached,” he added.
The IMF official said that state-owned enterprise (SOE) reform remains an essential element of Barbados’ economic program.
“To secure fiscal space for investment in physical and human capital, transfers to SOEs need to decline, after the global coronavirus pandemic, with a combination of stronger oversight of SOEs, cost reduction, revenue enhancement, and mergers and divestment.
“Progress in restoring fiscal sustainability must be safeguarded, by adopting a new central bank law that limits its financing of the government, to short-term advances and strengthens the central bank’s mandate, autonomy, and decision-making structures. Addressing the identified deficiencies in the AML/CFT framework is important going forward.”
Zhang said a strong recovery, after the global pandemic, will depend on accelerating structural reforms.
“There is much room for improvement in the business climate. Establishing a credit registry and credit collateral registry, in addition to broadening the types of eligible collateral, would facilitate access to credit. In addition, priority should also give to improving resilience to natural disasters and climate change,” he concluded.