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 targets under the US$290 million under the Extended Fund Facility (EFF) should the island record cases of the coronavirus (COVID-19).
Prime Minister Mia Mottley said her administration would be putting some fiscal measures in place aimed at helping those who would be impacted.
On Tuesday, St. Lucia’s Prime Minister Allen Chastanet said the IMF will hold a conference call with regional countries on Monday next week to discuss the economic impact of the virus that has killed more than 4,000 people globally and posing economic problems for small island developing states.
“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 as 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) programme 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 per cent decline in tourism revenue over a three-month period, a decline of 50 per cent revenue over a three-month period and a severe case of a decline of 80 per cent 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 per cent primary surplus, or four per cent primary surplus or three per cent 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.”