A senior official of the International Monetary Fund (IMF) says Barbados is on track to receiving a passing grade for the second review of its Economic Recovery and Transformation (BERT) programme.
The IMF Deputy Division Chief for the Caribbean, Bert Van Selm, said he is pleased with measures recently put in place to help the government meet its ambitious target of six per cent of gross domestic product (GDP) at the end of the current fiscal year.
“So far it looks good…for some targets it is too early to tell because we do not have complete data yet, but what we can see so far is that the performance as at March has been quite strong,” Van Selm told the online publication, Barbados TODAY, singling out structural and legislative changes, as well as reform of Government processes, as “moving in the right direction”.
Barbados has entered into a US$290 million Extended Fund Facility programme 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 next review is scheduled for the middle of May, when IMF officials will consider the period up to March 31, and assess government’s outlook.
The IMF official said that while it is imperative for the Mia Mottley administration to maintain the strong economic policies in order to reduce the national debt and spending, he is also suggesting there would be no escaping the onerous measures for the life of the programme.
He said meeting the targets was also critical if the confidence of international partners and local and international investors was to be regained.
Van Selm said for over a decade there had been significant external and fiscal imbalances which have led to an unsustainably high debt and low international reserves.
“Now the new government coming in has been very active in trying to address this situation from the middle of last year, but this is not something you can turn around in like a day or two or a year or two. So adhering to this programme for four years is going to be very important,” he added.
There have been concerns that government could be in danger of not meeting some of its targets, which it also hopes to maintain, due to the outstanding external debt restructuring and forthcoming debt payments.
But Van Selm told Barbados TODAY the IMF remained confident the Mottley government would meet its targets “because otherwise we would not have given our support to this programme”.
“We believe the Government is on track. The budget has now been approved by Parliament for the coming fiscal year to meet that six per cent primary surplus target, it is just a matter of adhering to it.
“So after this fiscal year 2019/2020, there will be no further tightening of fiscal policies, it will just be a matter of staying the course and what we expect to see then is a gradual recovery of confidence of markets and international participants, which would lead to inflows of capital into Barbados. So as long as the programme is adhered to we think the prospects are good,” he said.
But he acknowledged that it would not be until the IMF visits Barbados next month and “crunches the numbers” that they would know for sure if the measures implemented so far are enough or if a “new course” was needed.
“So that is something we will be looking at as well and you do that by looking at the budget that was just adopted by Parliament for next year and also looking at the underlying fiscal trends…like do certain types of taxes indeed deliver the type of revenue that you expected? If yes, everything is fine, if not, maybe you need to take some measures to address that,” he said.
He noted that best-case scenario, Barbados achieves its targets, resulting in a return of confidence, improved sovereign ratings, and increased support from lending agencies and investors or worse case scenario, Government buckles under pressure and does not stick to its targets, and the programme fails.