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Barbados awaiting green light from IMF

Barbados awaiting green light from IMF
31 Aug
2018

Barbados awaiting approval from the International Monetary Fund (IMF) of its Economic and Recovery Transformation (BERT) plan that is aimed at reversing the island’s economic situation.

“By endorsing the BERT programme the IMF then provides what you call a catalytic role because it has an international reputation by having 186 countries signed on.

“When investors see the fund sign on they then say, ‘well, this Barbados BERT programme is a doable programme and we believe the country is committed to it’, then immediately developmental partners like IDB and CDB would bring access to funds,” said Barbadian economist, Dr. Kevin Greenidge, who has been seconded from the IMF and is part of the Barbados’ joint economic team.

The programme is expected to be discussed with IMF officials next month and Greenidge told reporters Thursday that so far the Washington-based Inter-American Development Bank (IDB) has agreed to provide the island with US$100 million in funding, while the Barbados headquartered Caribbean Development Bank (CDB) has pledged $30 million.

“I can tell you right now we have commitment from IDB of two per cent of GDP [gross domestic product], which is BDS$200 million (One BDS dollar=US$0.50 cents) on [condition] that the IMF endorses the Barbados BERT programme and BDS$100 million from CDB,” Greenidge stressed.

The economist said that once the plan is endorsed by the Washington-based financial institution international investors would be encouraged to “bring in capital to do different projects.

“The other way the IMF provides assistance is that once they endorse the programme – and you see we have the problem on the reserves – they provide what we refer to as balance of payment support. So some funds come to help restore the reserves and that immediately goes to the Central Bank to shore it up. Again that offers a measure of confidence,” he added.

He said that once the island is on track to meet its targets under the plan, there would be disbursement of the agreed sum from the IMF and that the international lending agency would also provide technical support during the programme, which could last up to four years.

“During a programme the IMF will make available its technical expertise in reviewing whatever the country wants – its tax system . . . [and] expenditure system – and offer ideas of how you could be efficient in different areas,” he said.

Greenidge said that like many Caribbean countries in the past, the BERT is 100 per cent homegrown, and that the IMF would only “come in and ensure that it hangs together” even as it holds the Mia Mottley administration to the targets to be set under the recovery plan.

“So the broad underlying parameters of your recovery programme, the BERT programme, becomes the target to which you agree within the International Monetary Fund you are going to hit. So this gives seriousness to what the team is doing,” he said.

Prime Minister Mottley has already sought to re-assure Barbadians that her administration would do its best to ensure workers are not sent home as the efforts continue to revive the ailing economy.

Greenidge said that in the first phase over an 18-month period state owned enterprises (SOEs) would go under a transformation via retooling, retraining and enfranchisement, which may lead to at least 1 000 workers being sent home.

He said several mergers and consolidations were recommended including that of the Caribbean Broadcasting Corporation (CBC), the Government Information Services and Government Printery Services; the Garfield Sobers Gymnasium and the National Sports Council and the Cultural Industries Development Authority and the National Cultural Foundation.

Regarding the Transport Board, he stated that the target was to reduce its BDS$123 million bill by at least BDS$30 million, which could be done through an increase in bus fares, and moving to mobile payments to reduce accounting needs.

“The process involves having drivers and their teams to own buses and Sanitation to own their trucks and commit to some minimal standard of public service,” he added.

It was further recommended that the Barbados Conference Services Ltd and the Barbados Defence Force sports programme be removed from the Consolidated Fund, while the Cultural Industries Development Authority is absorbed into the National Cultural Foundation, and the National Initiative for Service Excellence and the National Productivity Council absorbed into a competitiveness unit in the Social Partnership.

Another key recommendation was that the Student Revolving Loan Fund be outsourced, while the Barbados Agricultural Management Company and the Barbados Agriculture Development and Marketing Corporation are rationalized, and the Caves of Barbados sold.

“The internal target is to reduce transfers and subsidies over the [18-month] period by about $115 million. But I must stress it is not about the number, it is about making the SOEs and the public sector fiscally fit for purpose,” Greenidge said, explaining that “when you go to efficiency you may lose some here, gain some there”.