By Keryn Nelson
The government of Barbados has reported an increase in the country’s financial reserves following what they say has been years of fiscal degradation.
“Our reserves rose from $400 million in May to, as of this morning, $1,060 million,” said Barbados’ Minister in the Ministry of Economic Affairs and Investment, Marsha Caddle on Friday, January 11, 2019. The increase, Caddle says, is the result of an agreement made with the International Monetary Fund (IMF) late last year.
Regarding the arrangement with the IMF, Bert van Selm, IMF Resident Representative in Jamaica, made this statement following talks with the Barbadian government in September 2018: “I am pleased to announce that, in support of the Barbadian authorities’ economic reform program, the IMF team and the government of Barbados have reached staff-level agreement on a 48-months Extended Fund Facility, with access of SDR 208 million (equivalent to 220 percent of quota, or about US$290 million). If approved by the IMF Executive Board, SDR 35 million (about US$49 million) would be immediately available.” By 1 October 2018, the IMF’s Executive Board publicly declared their approval of the agreement.
According to Caddle, the deal with the IMF allowed the ministry to make supplementary agreements with other multilateral development banks, which ultimately contributed to the growth of the country’s reserves.
Other developments, Caddle says, are as follows: “We settled one of the largest domestic debt restructurings as a percent of the national economy in history; our debt has already declined from near 170 percent of GDP in May last year to 124 percent this year. The IMF projects it will hit 60 percent by 2033. As a consequence of the change in the way we are managing our finances; our credit rating had its first uplift in over a decade. More is to come.”
In mid 2018, Barbados’ Prime Minister, Mia Mottley announced her administration’s plans to instate an Economic Recovery and Transformation Programme (BERT). “We needed literally to put the Barbados economy under an MRI,” Mottley said during a local press conference.
In an interview with veteran Journalist, David Ellis, Mottley explained that her government, once in office on 25 May 2018, made quick work of meeting with the Central Bank. “It became absolutely clear to us that we needed to take immediate action,” Mottley stated. She explained that as early as January of 2017, there had been calls from economic experts, like the then governor of the central bank DeLisle Worrell, for Barbados’ finances to “be protected.”
Mottley and crew claimed to follow up their meeting by preparing for immediate steps to be taken. Due to “unsustainable debt” and the need for balance of payment against the threat of quickly depleting the country’s fiscal reserves via increased oil payments and the risks of the incoming hurricane season, foreign debt payment was to be suspended. A week later, following a meeting with Christine Lagarde, Managing Director of the IMF, the government was set on its course of economic recovery.
The BERT programme features three phases as recorded, in part, by the Caribbean Council (caribbean-council.org):
Phase one aims to reduce the fiscal deficit over a period of one year. This would be done through the extractions of three statutory corporations under the country’s consolidated fund, greater tax compliance, a broadening of the tax base on overseas visitors, and the imposition of new domestic and international user fees.
Phase two, which began in late 2018 focuses on expenditure reduction on Central Government and State-owned enterprises. It includes the evaluation of Barbados’ international business sector framework so as to deliver a programme of measures intended to stimulate growth.
Phase three involves consultations with statutory bodies and government departments as well as e-poll surveys to gather the opinions of the wider public. This is so that the government can come to a conclusion on what expenditure is essential, what is highly desirable and what is optional.
In light of the fast moving pace to undergo economic reform and the proposed effects of structural changes, Minister Caddle declared last week, “We are not sprinting for show, we are running because we understand that many of our decisions will cause and are causing some pain and suffering.”