BRIDGETOWN, Barbados, CMC – The International Monetary Fund (IMF) Friday announced that it had reached a staff-level agreement with Barbados following the review of the island’s Economic Recovery and Transformation program (BERT) under the External fund Facility (EFF).
Subject to approval by IMF Executive Board
“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$49 million will be made available to Barbados, bringing the total disbursement to SDR 70 million (nearly US$98 million), the head of the IMF mission Bert van Selm said.
US$290 million package
Barbados has entered into a US$290-million EFF program with the Washington-based financial institution and, following the first review which was completed in December last year, the island received an estimated US$49 million to shore up the once-dangerously low international reserves.
The mission Thursday ended a 10-day visit to Bridgetown noting that the island continues to make good progress in implementing its ambitious and comprehensive economic reform program.
The Mia Mottley government had requested the visit of the team from the Washington-based financial institution to discuss implementation of the BERT.
Strong economic progress
“Barbados continues to make strong progress in implementing its ambitious and comprehensive economic reform program. International reserves, which reached a low of US$220 million (5-6 weeks of import coverage) at end-May 2018, have more than doubled since then,” said van Selm.
He said the rapid completion of the domestic part of a debt restructuring has been very helpful in reducing economic uncertainty, and the new terms agreed with creditors have put debt on a clear downward trajectory.
“The authorities have started the reform of State-Owned Enterprises (SOEs) by tightening reporting requirements and shedding excess staff,” he said, adding that “all program targets for end-March under the EFF have been met.
The IMF official said that the program target for Net International Reserves was met by a wide margin, as was the target for the Central Bank of Barbados’ Net Domestic Assets (NDA). The targets for the primary surplus, central government grants to SOEs, central government domestic arrears, and social spending were also met.
“In March, Parliament adopted the 2019/2020 budget targeting a primary surplus of six per cent of gross domestic product (GDP) and van Selm said that full year effects of reforms set in motion during the last financial year, including the introduction of several new taxes – an airline travel fee, room levies, a new fuel tax, and a new health service contribution – should help achieve this target.
He said a broadening of the base of the value added tax (VAT) and the land tax, adopted in March this year in the context of the 2019/20 budget, will help support revenue.
“The budget approved for financial year 2019/20 provides a solid basis for the targeted fiscal consolidation; the authorities stand ready to take additional measures if necessary to reach the targeted 6 percent primary surplus,” he said.
The IMF official said that the Barbadian authorities continue to make good progress in implementing structural benchmarks under the EFF, including those that contribute to an improved business climate such as a new Planning and Development Act passed in January 2019 and a Sandbox regime to regulate fintech start-ups set up in October 2018.
He said a new Public Financial Management Act passed in January 2019 introduced wide-ranging measures to strengthen fiscal transparency and accountability. The government has also introduced a system for monitoring state-owned enterprises (SOE) arrears on an ongoing basis and has submitted a consolidated report on the performance of SOEs to parliament.
““Progress being made by the authorities in furthering good-faith discussions with external creditors is welcome. Continuing open dialogue and sharing of information will remain important in concluding an orderly debt restructuring process,” van Selm added.