Barbados Today – Barbados is in line to receive $48 million (US$24 million) from the International Monetary Fund (IMF) in another month or so, the Washington based financial institution said on Saturday.
But the injection comes as the IMF warns that risks to the economy remained elevated, economic growth depended heavily on a “modest” recovery in tourism and that Government’s target to decrease the debt to 60 per cent of gross domestic product (GDP) has been extended by two years.
The IMF said in a statement that it had reached a staff-level agreement with authorities in Bridgetown, following the fifth review under the Extended Fund Facility (EFF), and the country could benefit from a drawdown under the facility once approval was given.
The IMF said in its statement that at the request of Government, a team led by Bert van Selm conducted a virtual mission on May 3-7 to discuss the implementation of the IMF-supported Barbados Economic Recovery and Transformation (BERT) plan.
Bert van Selm said: “Following productive discussions, the IMF team and the Barbadian authorities reached staff-level agreement on the completion of the fifth review under the EFF arrangement. 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, [Special Drawing Rights] SDR 17 million (or about US$24 million) will be made available to Barbados.
“Barbados’ economy remains severely depressed by the ongoing global pandemic. Tourism came to a virtual standstill from April 2020 onwards and remains at a fraction of normal levels. Economic growth for 2021 is premised on a modest recovery of tourism in the second half of 2021. Risks remain elevated, including in light of the impact of recent volcanic activity in neighbouring St Vincent.”
He said despite the challenging environment, Barbados continued to make good progress in implementing its ambitious and comprehensive economic reform programme.
He explained: “A new central bank law was adopted by parliament in December 2020—a critical safeguard for continued prudent macroeconomic policy. International reserves, which reached a low of US$220 million (5-6 weeks of import coverage) in May 2018, are now at a comfortable level of US$1.3 billion [$2.6 billion].
“Quantitative targets for end of March under the EFF were met except for the performance criterion on central government transfers and grants to public institutions, which was exceeded owing to measures to address the COVID-19 health crisis (including the vaccination program executed by the national hospital).
“The Government of Barbados is targeting a zero per cent of GDP primary balance for financial year 2021/2022, compared to a deficit of 1 per cent of GDP in financial year 2020/2021).
He highlighted that this fiscal stance reflected a projected modest recovery in tourism and facilitated COVID-related emergency outlays on health facilities, medical supplies, and income support to the most vulnerable.
“The authorities’ long-term debt target of 60 per cent of GDP will be pushed out by two years – from financial year 2033/2034 to financial year 2035/2036 – to reflect the impact of the pandemic on the economy. The authorities remain firmly committed to reducing public debt over time,” said van Selm, while thanking authorities for their “openness and candid discussions.”
