The Barbados government is to continue discussions with the International Monetary Fund (IMF) “over the coming weeks.” Prime Minister Mia Mottley is seeking financial support from the Fund to assist her government in meeting its economic plans.
In a statement, announcing the departure of an IMF delegation following three days of discussions, the Ministry of Finance said “preliminary discussions were held on the key challenges faced by the Government, including the country’s very low level of international reserves, its unsustainable debt, and the need to develop an economic plan designed to address current imbalances and create the conditions for sustained broad-based growth.
“The Government and the IMF will continue to exchange views over the coming weeks and expect to be able to commence detailed discussions regarding Barbados’s economic reform program in the coming weeks—a program that the IMF will be asked to support with financial assistance,” the statement said.
Precarious economic situation
Prior to its departure, the head of the IMF delegation, Bert van Selm said Barbados is in a precarious economic situation with its international reserves having dwindled to US$220 million, while central government debt is unsustainable.
The IMF official said that the fiscal deficit has decreased over the last few years but remains large, at about four per cent of gross domestic product (GDP) in the fiscal year 2017/18.
The government also announced that it had retained the services of the London-based Cleary Gottlieb Steen & Hamilton LLP to serve as external legal advisor in the context of the planned debt restructuring that was announced earlier this month.
Potential problems getting low interesting funding
Meanwhile, the Barbados Economic Society (BES) is warning the new Barbados labor Party (BLP) government and private sector firms that they could face difficulties in accessing foreign commercial financing at reasonable interest rates, in light of the island’s latest downgrade by Standard and Poor’s (S&P).
S&P has lowered the island’s long-term foreign currency rating to selective default, following the June 1 announcement by Prime Minister Mottley that her administration was suspending foreign debt service payments and seeking to make interest payments on its domestic debt while negotiating a restructuring agreement with domestic creditors.