IMF Executive Board Completes First Review Under the IMF’s Extended Fund Facility for Barbados and Approves US$48.7 Million Disbursement
IMF News, June 24, 2019
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- Published: June 24, 2019
Review completion and immediate financing
- The Executive Board completed the first review of Barbados’ economic reform program under the Extended Fund Facility (EFF) on June 24, 2019.
- Completion of the review enables an immediate disbursement of SDR 35 million (about US$48.70 million).
- Total disbursements to date amount to SDR 70 million (about US$97.40 million).
EFF arrangement and program scope
- The four-year EFF arrangement was approved on October 1, 2018.
- The EFF arrangement amount is equivalent to SDR 208 million (about US$289.41 million, or 220 percent of Barbados’s quota in the IMF).
- The program is the Barbados Economic Recovery and Transformation (BERT) plan, aimed at:
- restoring fiscal and debt sustainability,
- addressing falling reserves,
- increasing growth,
- protecting vulnerable groups through strengthened social safety nets.
Fiscal consolidation and public debt restructuring
- Authorities are targeting a primary surplus of 6 percent of GDP in FY2019/20 and several years thereafter.
- Fiscal adjustment measures highlighted:
- new taxes,
- ongoing reforms in public financial management,
- reduction of transfers to State‑Owned Enterprises (SOEs),
- adequate provisions for social safety nets and capital expenditure.
- The planned adoption of a fiscal rule in 2020 is intended to help sustain the adjustment effort over the medium and long term.
- A comprehensive public debt restructuring complements the fiscal consolidation:
- Domestic public debt restructuring completed in November 2018 has helped substantially reduce the public debt burden.
- Authorities are engaging in good faith negotiations with external commercial creditors to further restore debt sustainability.
State‑Owned Enterprises (SOEs)
- Reform of SOEs is described as critical for achieving and maintaining the primary surplus target.
- Measures envisaged to significantly decline transfers to SOEs include:
- stronger oversight of SOEs,
- cost reduction,
- revenue enhancement,
- mergers and divestment.
Monetary framework and reserves
- The fixed exchange rate has served as a key anchor for macroeconomic stability.
- International reserves have increased.
- Planned reforms to strengthen the central bank’s mandate, autonomy, and decision‑making structures are expected to further bolster the exchange rate peg and monetary regime.
Structural reforms and growth
- Structural reforms target improvements in the business environment to increase growth over the medium term.
- Specific reform milestone: adoption of a new Town and Country Planning Law in January 2019, which streamlined the process for providing construction permits.
- Authorities intend to carefully review and address the different obstacles to growth.
Social protection and labor measures
- Adequate social spending and an improved safety net are key program priorities.
- The authorities have launched a training and outplacement program to mitigate the impact on unemployment from layoffs at the central government and SOEs.
Executive Board statement (Tao Zhang, Deputy Managing Director and Acting Chair)
- “Barbados has made a strong start in implementing its ambitious and homegrown economic reform program. All performance criteria for March 2019 were met, and all structural benchmarks have been implemented, although a few with minor delays.
- “The FY2019/20 budget provides a solid basis for the targeted fiscal consolidation of 6 percent of GDP. The adjustment effort is supported by several new taxes, ongoing reforms in public financial management, a reduction of transfers to State‑Owned Enterprises (SOEs), and adequate provisions for social safety nets and capital expenditure. If necessary, the authorities stand ready to take additional measures to reach the targeted primary surplus. The planned adoption of a fiscal rule in 2020 will help sustain the adjustment effort over the medium and long term.
- “Reform of SOEs is critical for achieving the primary surplus target and maintaining it over the medium term. To secure fiscal space for investment in physical and human capital, transfers to SOEs are envisaged to significantly decline by a combination of stronger oversight of SOEs, cost reduction, revenue enhancement, and mergers and divestment.
- “A comprehensive public debt restructuring complements the fiscal consolidation. The domestic debt restructuring completed in November 2018 has significantly reduced Barbados’s public debt burden without jeopardizing financial stability. The authorities are continuing good faith negotiations with external commercial creditors, which together with the domestic debt restructuring, should help restore debt sustainability.
- “The fixed exchange rate has served as a key anchor for macroeconomic stability and international reserves have increased. The exchange rate peg and monetary regime would be further bolstered by the planned reforms to strengthen the central bank’s mandate, autonomy, and decision‑making structures.
- “Structural reforms target improvements in the business environment to increase growth over the medium term. With the adoption of a new Town and Country Planning Law in January 2019, the process for providing construction permits has been streamlined. Going forward, the authorities intend to carefully review and address the different obstacles to growth.
- “Adequate social spending and an improved safety net are key priorities for the program. The authorities have launched a training and outplacement program to mitigate the impact on unemployment from layoffs at the central government and SOEs.”
IMF Communications Department press release, June 24, 2019.