No IMF approval needed, says Sinckler
”We are not looking for approbation from the IMF”.
This was the reaction today from Minister of Finance Chris Sinckler to the latest International Monetary Fund (IMF) report, which warned that the island still faced “daunting” challenges and suggested that more bitter medicine could be in store, following over 3,000 layoffs in the public sector.
In a detailed assessment following its recent Article 1V Consultation, the Fund’s executive directors said while they welcomed the improvement in the island’s macroeconomic conditions and the authorities’ commitment to tackle urgently needed reforms, they remained concerned about its external risks, its high fiscal deficit and debt levels, as well as its competitiveness challenges.
“Against this backdrop, they urged the authorities to implement a comprehensive reform programme that includes strong fiscal adjustment and structural reforms to foster growth and external and debt sustainability,” the IMF statement said.
Though commending the Government’s progress with fiscal consolidation over the past year, and welcoming the direction of policies outlined in the recent Budget statement, they also stressed the need for “continued ambitious adjustment efforts”, and underlined the importance of “reducing current spending and addressing the stock of Government arrears, while securing room to increase public investment”.
However, in defence of the pace at which the Government is moving to increase its revenue and drive down the country’s debt, Sinckler said the IMF’s position was nothing new.
He told reporters he was very aware of the country’s fiscal position, adding that the necessary work was being done to further reduce the country’s deficit, which stood at 6.6 per cent of GDP at the end of fiscal year 2014/15, to around four per cent in the next fiscal year, and then even lower.
In keeping with his June 15 Budget presentation, he said reform measures were being taken as it relates to education, public health, sanitation, tourism, renewable energy and the sugar industry, as well as in relation to productivity and the cost of doing business.
“In fact, in the same release the IMF said they [welcomed the direction of the policies outlined in the recent Budget statement], but we are not looking for approbation from the IMF,” said Sinckler.
“We are doing the programme that we believe best suits the circumstances in Barbados,” he added.
While acknowledging that “some people feel we should go a lot deeper and a lot faster”, he said “we believe that the pace that we are going at right now is reasonable enough given the circumstances of the society, and then we will build from there to ensure we get to the target objective that we have set. So that is where we are at”.
In relation to the IMF’s call for Government to consider divesting some state assets in order to lower its debt, which rose to 101 per cent of GDP at the end of March 2015, up from 76 per cent of GDP in March 2011, Sinckler said “we have addressed those issues”.
The Minister of Finance cautioned however that any privatization programme “has to make sense and bring value to the Government”, even while revealing that the sale of the Barbados National Terminal Company Limited was “very close to closure”.
The IMF has also called for the removal of tax waivers. However, Sinckler said those which remained were aimed at “building economic capacity, maintaining social cohesion in the society and contributing to overall stability in the country”.
Also commenting on the latest IMF report, President of the Barbados Economic Society (BES) Jeremy Stephen acknowledged that the IMF advice was not necessarily new, since it was a sentiment echoed by many in the economic community over the last year or so.
However, Stephen told Barbados TODAY the call by the IMF for “continued ambitious adjustment efforts” could have been avoided had the Government moved earlier to implement necessary economic remedies.
“These remedies are neither new and they were treated as not being high priority or pressing for many reasons, including political and social,” said Stephen.
On the topic of privatization, the BES head noted the issue was “highly politicized” in the past, but said it was “just a matter of Government deciding which policies do serve our social good and which policies we need to enact now to reduce further pain in the future”.
He explained that should the Government take the IMF advice of undertaking “ambitious adjustment”, Barbadians could expect “further pain going forward”.
“. . . if somehow we can do it little by little, the pain wouldn’t be too huge to bare,” said Stephen.