Let us help, says IMF

IMF willing to come to Barbados’ rescue

The International Monetary Fund (IMF) said today it was ready and willing to come to Barbados’ rescue, while warning that slower growth and a doubling of the domestic cost of living were on the immediate horizon as a result of the austerity measures announced by Minister of Finance Chris Sinckler in his May 30 Budget.

Without passing judgment on the Budget itself or getting into the recent national discussion over whether the island should enter into a formal IMF arrangement or not, the lending institution made it clear the island’s economic problems were not over by any measure.

In this context, it said it “stands ready to assist the Government of Barbados, including through continued policy dialogue and technical assistance”.

The offer comes on the heels of a suggestion made by former Prime Minister Owen Arthur, backed by several other respected economists, that Sinckler’s half-billion dollar adjustment programme effectively amounted to a devaluation of the Barbados currency, and that an IMF adjustment would have been far easier for the entire country to swallow.

In fact, Arthur had explained that based on the IMF’s Article 1V Consultation last year, Government could have been afforded the equivalent of $310 million annually over a three-year period.

However, with Government currently sticking to its homegrown strategy, a team from the Washington-based financial institution, led by Judith Gold, visited the island from June 20–29 to review recent economic developments and to discuss the 2017 Budget.

Judith Gold

And after meeting with Sinckler and other key officials, including Minister of Industry, International Business, Commerce, and Small Business Development Donville Inniss and Acting Central Bank Governor Cleviston Haynes, they issued a warning today that the economy, which registered 1.6 per cent growth in 2016 and a further two per cent acceleration in the first quarter of 2017, was likely to falter as a direct result of Sinckler’s $542 million austerity package, which also stands to significantly affect the overall cost of living.

“Growth in 2017 is projected to slow to less than one per cent, reflecting the fiscal consolidation efforts introduced in the FY2017/18 Budget,” the IMF team warned in its statement, in which it also cautioned that domestic inflation, which stood at 3.2 per at the end of last year, was likely to accelerate to 6.7 per cent by the end of 2017.

In this regard, the IMF team, which also met with Opposition Leader Mia Mottley and members of the private sector, pointed the accusatory finger directly at Government over its proposed increase in the National Social Responsibility Levy (NSRL) and other taxes and fees, while suggesting that the situation should “revert to more historical norm in 2018 and subsequent years.

“There are important downside risks related to the increase in domestic and global uncertainty, including the impact of the Brexit on the British pound,” the IMF added, while stressing that “continued fiscal discipline, with economic growth, are essential to securing Barbados’ future.

“They will be critical to bolster international reserves and support the currency peg. Only a substantial and a sustained reduction in the fiscal deficit, which will put the debt-to-GDP ratio on a solid downward path, will restore the country’s credit rating and attractiveness to investors,” the statement added.

The latest report comes against the backdrop of concerns expressed by a wide cross section of Barbadians that notwithstanding some improvements seen in the vital tourism sector, this country’s international reserves fell to $682 million by the end of 2016, which the IMF estimates to be “about two months of imports”.

Delayed official loan disbursements and privatization, as well as lower private-sector inflows, have also been key drivers of this decline.  And while there was some progress in reducing the fiscal deficit in fiscal year 2016/17 to 5.5 per cent of GDP from 6.8 per cent in fiscal 2015/16, the IMF has pointed out that most of the adjustment was generated by lower Government spending, while fiscal revenues held steady.

“Despite this progress, the large Government financing requirements were a challenge, as banks reduced their sovereign exposure. As a result, the Government had to increasingly resort to funding from the Central Bank of Barbados (CBB),” the IMF said.

With this in mind, Sinckler’s Budget was premised on raising revenues while shoring up international reserves, including through an increase in the NSRL — which mostly impacts imported goods — from two per cent to ten per cent.

Government also plans cuts in current expenditure, to complete ongoing privatization efforts, and to undertake new divestments, as well as to initiate a voluntary exchange of debt instruments with the National Insurance Scheme and the Central Bank to reduce the interest bill.

“If implemented as envisaged, the 2017 Budget would lead to substantial gains toward improving public finances,” the IMF said.

However, it warned that over the medium-term, further fiscal adjustment would be needed on the expenditure side to decisively reduce its debt and debt service costs.

“Transfers to public enterprises of close to eight per cent on an annual basis represent the second largest expenditure item, after the wage bill, and about the same magnitude as the interest bill on the public debt.

“Both expenditure categories weigh heavily on public finances and critical reforms are needed over the to restore sustainability and confidence,” the IMF said, adding that a reduction in transfers to public enterprises must be supported by structural reforms to reduce state agencies’ operating costs, rationalize their programmes, and raise their revenues.

Consideration should also be given to divesting commercial SOEs that can be run more efficiently and profitably by the private sector. Other structural reform, especially those focused on improving the investment climate and fostering growth are also critical.

kaymarjordan@barbadostoday.bb

16 Responses to Let us help, says IMF

  1. Sundiata WorldTraveller Browne
    Sundiata WorldTraveller Browne June 29, 2017 at 10:04 pm

    Oh boy

    Reply
  2. Martine Boyer
    Martine Boyer June 29, 2017 at 10:20 pm

    Doubling the cost of living? What?

    Reply
  3. don June 29, 2017 at 10:31 pm

    The IMF will only make things worst because you abide by they rules and their track record ain’t to pretty, We as a nation need to control our own destiny, thanks but no thanks

    Reply
  4. Jennifer June 29, 2017 at 10:42 pm

    Here it comes.

    Reply
    • Jennifer June 30, 2017 at 7:05 am

      I don’t know which is worst our little small criminals or these big ones. Talk about that recessive heel on the neck. And how will their austerity measures be easier to swallow, it is because it will be in liquid form mixed with milk rather than a large pill. All of this financial talk will all boil back to these politicians/financial controller not understanding the basic rudiments of how, when and on whom to spend on and the importance of clearing debts and deficits etc. I will be forever saying that this people have some much needed areas of their education removed. The only people here that will suffer is the placid elephant who is IGNORANT OF IT’S power. The mice will be well taken care off running around and eating everything in site. These masses are doomed. And you know why>>>>? this people LEARNED ABSOLUTELY NOTHING FROM THAT OLD PLANTATION GOING INTO THIS NEW ONE.

      Reply
  5. John Everatt June 29, 2017 at 10:59 pm

    So we see what the situation is. Some will say, in a patriotic way, that the IMF should not be considered. The nation needs to control its own destiny. On the other hand one can certainly see what kind of a destiny has been achieved in the last 10 years. Is this really the kind of destiny you want? Is this the kind of destiny that you want to leave for your children? We are already at the tipping point.

    Reply
  6. Mr. Crowley June 29, 2017 at 11:58 pm

    Feels like dé·jà vu….so we introduce a series of austerity measures (taxes + fees) to help correct the fiscal imbalance (deficit) within our economy…what happens next? Sooner rather than later we borrow some enormous sum of money for some “must have” projects (probably spend millions constructing a new building to help boost staff morale….BWA) and more importantly, we allow government entities to continue receiving subsidies…..CBC, Transport Board, BWA, et al and then what? What’s the point of all this sacrificing and austerity? We’ve gone through this song and dance before. It’s only a matter of time before government rack up all this debt again. If political terrorist continue to hijack our tax dollars, if government lacks transparency and accountability, the Auditor General reporting all these financial irregularities and discrepancies with nothing being done to hold those responsible accountable… then what’s the point of all this? It’s an exercise in futility. Most reasonable people will accept austerity and sacrifice so long as there’s something to show for it…..it’s becoming increasingly hard to accept with very little or nothing to show. Feels like the Merry-Go-Round Playhouse with voters being the horses and our politicians doing the riding.

    Reply
  7. Alex Alleyne June 30, 2017 at 7:48 am

    IMF the “Economic Hitman”.

    Reply
  8. Bevan Green June 30, 2017 at 8:56 am

    Why does the IMF want to get their tentacles into the soul of Bim? Barbados is doing a good job implementing its own harsh measures upon our own people. I hate to admit it but we have our own IMF personality in the form of Sinkler implementing fiscal measures that are already draconian but necessary. Let us govern ourselves. Is the IMF assisting the USA in their financial crisis? They continue to live on borrowed money.

    Reply
  9. Bevan Green June 30, 2017 at 8:58 am

    No THANK YOU Judith!! Why does the IMF want to get their tentacles into the soul of Bim? Barbados is doing a good job implementing its own harsh measures upon our own people. I hate to admit it but we have our own IMF personality in the form of Sinkler implementing fiscal measures that are already draconian but necessary. Let us govern ourselves. Is the IMF assisting the USA in their financial crisis? They continue to live on borrowed money.

    Reply
    • Jennifer June 30, 2017 at 9:34 am

      @Bevan – well said. Just continuing their typical repetitive parasitic behavior.

      Reply
  10. Breadfruit. June 30, 2017 at 11:10 am

    @ Bevan

    Fiscal measures that are already draconian but necessary we introduced about eight years ago. More and more each year.

    Evuhbody sehin to cut expenditure. We still gine end up in d IMF hans afta all de home grown draconian measures if we don’t also cut expenditure. so wha would be d use? just delay of de inevitable?

    comparing de USA situation to Barbados is comparing apples and oranges. US has to many resources and will never need the IMF.

    We bajans too like attaking de messenger while ignoring de message.

    Hard ears wont hear…….

    Reply
  11. Kevin June 30, 2017 at 12:10 pm

    No, no, no. Jamaica still in the IMF hands for 40 plus years and counting…..

    Reply
  12. Milli Watt June 30, 2017 at 2:24 pm

    when sinky done wid wunnuh he goin work fuh de IMF

    Reply
  13. Sheron Inniss June 30, 2017 at 2:29 pm

    Actions speak louder than words. We don’t want your help – the one thing I agree with this administration about. I believe the average Bajan collective can get through these rough times minus the good for everything but really and truly the good for nothing politicians and the yard fowls in high positions.

    Reply
  14. Jennifer June 30, 2017 at 4:52 pm

    No thank you, you guys have done enough damage to this people as a whole. Try starting to REPAIR what you did first via reparations.

    Reply

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