Statement by the IMF Mission on the 2007 Article IV Consultation Discussions with BarbadosPress Release No. 07/165
July 20, 2007
An International Monetary Fund (IMF) mission headed by Christina Daseking, Deputy Division Chief in the IMF's Western Hemisphere Department, issued the following statement on July 19, 2007 at the end of its discussions in Bridgetown:
"An IMF team visited Bridgetown during the past two weeks to review recent economic and financial developments and to discuss economic prospects and policies, as part of its routine annual consultation with Barbados. To this end, the team met with officials in the Ministries of Finance and Economic Affairs, the Central Bank of Barbados, other supervisory and regulatory agencies, as well as representatives of the private sector and the opposition.
"Following solid economic growth in 2006, with a drop in the unemployment rate to historical lows, prospects for 2007 are favorable. The economy is projected to grow at some 4 percent in 2007, and inflation is expected to slow to 5½ percent. The external current account deficit, which narrowed considerably since 2004-05, is projected to remain stable at about 8½ percent of GDP.
"The discussions centered on the Prime Minister's recent announcement to liberalize the country's capital account, initially vis-à-vis other CARICOM countries. This move marks an important milestone in Barbados' process of increased regional and global integration, but also requires the support of strong economic and financial policies. The discussions covered three policy areas that both sides agreed would be critical for a successful liberalization:
• Fiscal consolidation—to reduce external current account imbalances and high public debt, in order to maintain the scope for an effective policy response to shocks and uphold the credibility of the dollar peg.
• Market-based monetary policy instruments—to effectively manage domestic liquidity in a more volatile environment.
• Effective financial sector regulation and supervision—to guard against excessive exposures to exchange rate risks and cross-border spillovers.
"On its return to Washington D.C., the team will prepare a staff report that is tentatively scheduled to be discussed by the IMF's Executive Board in early September. It is expected that the staff report will soon thereafter be made available to the general public, including by its posting on the IMF's external website."