BARBADOS has successfully navigated its economic reform and transformation programme with support from the International Monetary Fund (IMF), but a former Opposition leader in that country said the economic measures that were implemented during the programme are hurting Barbadians and has therefore “missed the mark”.
The IMF on Friday, May 13, 2022 said it reached a staff-level agreement with Barbadian authorities after the seventh and final review of progress made under the fund supported programme, praising the country for continuing “to make good progress in implementing its ambitious and comprehensive economic reform programme” despite difficult conditions. Barbados entered a US$290-million Extended Fund Facility (EFF) with the IMF in May 2018 to help it out of “a precarious economic situation.” At the time, the country’s public debt was 157.3 per cent of gross domestic product (GDP), while international reserves dropped to five-six weeks of import coverage. The IMF then mapped out a programme to help the country restore debt sustainability, strengthen the external position, and improve growth prospects.
However, Bishop Joseph Atherley, who served as Opposition leader up to January this year, has expressed concern about the impact of the reform measures on ordinary Barbadians even as the country is assessed to have passed its final IMF test with flying colours.
“The outcome of the visit is not surprising,” Atherly was quoted as saying in Barbados Today, a Barbados-based newspaper, on May 18, 2022. “The IMF is basically reporting what it has said before after each of these assessments and that is that the Barbados Government is doing a good job in terms of keeping in tune with the conditions set within the arrangements which the country has with the IMF,” Atherley continued according to the publication.
At the end of the seventh review which is to be approved by the IMF’s Executive Board in June, the IMF staff noted that “all quantitative targets for end-December 2021 and end-March 2022 under the EFF were met. International reserves, which reached a low of US$220 million (five-six weeks of import coverage) in May 2018, are now at a comfortable level of US$1.5 billion.” The IMF added that for the 2022/23 fiscal year, the Barbadian authorities are targeting a primary surplus of one per cent of GDP, with revenue projections premised on a continued recovery in tourism. They were also recognised for “remaining firmly committed to reducing public debt over time.”
On that progress, Atherley is quoted further as saying: “When the IMF speaks like that the Government is, in fact, honouring its commitment to those conditions, including the build-up of foreign reserves, control of expenditure, and efforts to earn revenue, so Government will be able to address in a macro way some of the problems facing the economy in time. But, unless they address those conditions in the economy which cause pain to people in their pockets and on the ground also takes place, then I think that we are still missing the mark.”
His comment comes days after Barbadian Prime Minister Mia Mottley told her country that she will decide in the next few months whether to engage the IMF on a new programme.
“From July, we will start discussing, will we have a successor programme? If so, what type of successor programme? Will we go into it on our own? Is it time or is it right to go on your own when interest rates are rising globally, or do you stay with the comfort of concessional interest rates by having a programme and working closely with the other regional development banks or international financial institutions, especially given our vulnerability to climate and especially given the fact that COVID, even though reduced, is still very much with us,” Mottley said.
Barbados is set to exit the current IMF programme on September 30. Bert van Selm who led the IMF Mission to the country last week, lauded the government on the progress made so far in the recovery.
“Economic activity in Barbados is starting to recover from the COVID-19 shock,” he wrote in the staff-level agreement.”Tourism came to a virtual standstill in April 2020, and the economy contracted by 14 per cent in 2020. A gradual economic recovery started in 2021 and gained momentum in recent months, with tourism now just over 50 per cent of pre-pandemic levels. Risks to the outlook remain elevated, with higher global food and fuel prices starting to push up inflation in Barbados.” Its debt has also down. At the end of 2021, Barbados’ public debt was equivalent to 135.78 per cent of GDP and it is projected to fall further to 121.05 per cent of GDP at the end of this year.
However, Atherley insisted that Government must address, in a more meaningful and strategic way, the economic structure under which Barbados operates.
“We have a growth platform which is premised on a very limited structure, essentially tourism. We need to see that diversified so that we pursue a tourism product that is more than sun, sea and sand and that is a bit more than a coastal tourism economy. We need to diversify the product and diversify the profile,” he told the Barbados Today.