NOT SO FAST
Chartered accountant cautions against jumping the gun on the IMF
A formal International Monetary Fund (IMF) programme could have benefits for Barbados and may have to be considered down the road, but it is not needed just yet.
That is the view of former head of the Institute of Chartered Accountants of Barbados (ICAB) David Simpson, following a suggestion by prominent businessman and financial analyst Peter Boos that Government should quickly move towards an IMF-backed structural adjustment programme.
He said a little more time should be given to see what progress Government’s 19-month fiscal consolidation programme, which was announced in December 2013,
Boos had warned that the Freundel Stuart administration’s plan would cause the economy to shrink further and lead to even more layoffs in the public and private sectors.
“I think we need to probably wait until the end of September/October to look at the progress of the programme, hear the Central Bank Governor’s third quarter report and so on,” Simpson told Barbados TODAY.
“There are aspects of Government’s austerity programme that could work . . . . But I think Mr Boos is really getting to the point of if that is not functioning to the level that you want at the end of 19 months.”
Asked whether he saw the IMF as an option at that stage, the accountant responded: “You have to do something . . . . You could also extend the programme beyond 19 months but at that point you would have to see what you have achieved – whether government came close to achieving the targets or whether there is a big gap between what were the stated targets and what is there at the end of the 19 months.”
He did question, though, whether Government would see increased taxation as the option at that stage.
“My concern is what further taxation would do,” Simpson said, as he argued that the most onerous component of Government’s adjustment programme is the level of increased taxation.
He did agree with Boos that there were benefits to being under an IMF programme.
“What I support Mr Boos in is that the IMF is not a bad entity. We need to recognise that IMF does not equal devaluation. The IMF has a lot of different programmes of assistance that they can offer and therefore I am not totally against the suggestion that we may seriously need to consider going into a formal programme under the IMF,” the accountant said.
Simpson, like Boos, believes IMF involvement would also boost investor confidence.
Using the current experience in Jamaica as an example, he pointed out that the country has reportedly been able to attract a significant amount of foreign direct investment in the first six months of its arrangement with the Washington-based institution.
“Whether or not the Government changes you have that stability in the minds of investors that this programme will continue until it meets the targets that it has set and they will take all steps to make sure that the timeline they have set the targets are achieved within, so I want to say that is the most important point that comes out of Mr Boos’ position – the extra confidence that you will give,” he said.
“It’s not even about looking at the possibility of it working but that in the mind of an investor, a government could tomorrow say, ‘we will do something slightly different’ as opposed to where the IMF is controlling the programme and the parameters of it and the success and failure.”