IMF Executive Board concludes the fifth review under the IMF’s Extended Arrangement under the Extended Fund Facility for Barbados
IMF News, June 16, 2021
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- Published: June 16, 2021
Fifth review completion and disbursement
- The Executive Board concluded the fifth review of the IMF’s extended arrangement under the Extended Fund Facility (EFF) for Barbados on June 16, 2021.
- Completion of the review allows the authorities to draw SDR 17 million (about US$24 million).
- The draw brings total disbursements to the equivalent of SDR 288 million (about US$415 million).
- The four-year extended arrangement under the EFF was approved on October 1, 2018 and is for an amount equivalent of SDR 322 million (about US$464 million).
Program status and objectives (BERT)
- Barbados continues implementation of the comprehensive Economic Recovery and Transformation (BERT) plan aimed at:
- restoring fiscal and debt sustainability,
- increasing reserves, and
- increasing growth.
- The prolonged global coronavirus pandemic poses a major challenge for the economy, which is heavily dependent on tourism.
Executive Board (Acting Chair) assessment and guidance (Tao Zhang)
- Direct quotations from Mr. Tao Zhang, Deputy Managing Director and Acting Chair:
- “Barbados continues to make strong progress in implementing its homegrown Economic Recovery and Transformation plan, despite major challenges from the ongoing global pandemic . The authorities remain strongly committed to program implementation."
- “The lower primary balance target, financed by additional support from international financial institutions, is appropriate to accommodate worse-than-anticipated revenue losses and support spending on public health and social protection. The delay in achieving the 60 percent of GDP debt anchor by two years would avoid jeopardizing economic growth and social cohesion. To help safeguard debt sustainability, sustaining ambitious primary surpluses over the medium and long term would be required."
- “The authorities are committed to medium-term fiscal consolidation, supported by reform of state-owned enterprises (SOEs). Lower transfers to state-owned enterprises (SOEs) will create fiscal space for investment in physical and human capital, complemented by stronger SOE oversight, revenue enhancement, cost reduction, and mergers and divestments. Pension reform and the introduction of a fiscal rule will also support medium-term fiscal sustainability."
- “The approved amended central bank law will limit its financing of the government and strengthen the central bank’s mandate, autonomy, and decision-making. The removal of Barbados from the EU list of non-corporative jurisdictions for tax purposes is welcome. Full implementation of the FATF action plan would allow Barbados to exit its grey list."
- “A strong recovery after the global pandemic will depend on accelerating structural reforms to improve the business climate and facilitate green and digital transformation. Strengthening resilience to natural disasters and climate change is key to achieving long-term sustainable economic growth.”
Policy measures emphasized
- Fiscal policy and debt sustainability:
- Lower primary balance target temporarily adopted to accommodate revenue losses and support public health and social protection.
- Delay in achieving the 60 percent of GDP debt anchor by two years (as noted by the Acting Chair) to avoid jeopardizing growth and social cohesion.
- Sustaining ambitious primary surpluses over the medium and long term recommended to safeguard debt sustainability.
- Introduction of a fiscal rule recommended to support medium-term fiscal sustainability.
- State-owned enterprises (SOEs):
- Reform of SOEs to support fiscal consolidation.
- Measures include lower transfers to SOEs, stronger SOE oversight, revenue enhancement, cost reduction, and mergers and divestments.
- Central bank governance:
- Approved amended central bank law will limit central bank financing of the government and strengthen the central bank’s mandate, autonomy, and decision-making.
- Tax and AML/CFT:
- Removal of Barbados from the EU list of non-cooperative jurisdictions for tax purposes is noted as welcome.
- Full implementation of the FATF action plan would allow Barbados to exit its grey list.
- Structural reforms and resilience:
- Accelerate structural reforms to improve the business climate and facilitate green and digital transformation.
- Strengthen resilience to natural disasters and climate change to achieve long-term sustainable economic growth.
Key statistics and dates (verbatim)
- SDR 17 million (about US$24 million) — draw allowed by completion of the fifth review.
- Total disbursements: SDR 288 million (about US$415 million).
- Extended arrangement approved on October 1, 2018.
- Extended arrangement amount: SDR 322 million (about US$464 million).
- Press Release No. 21/182
- Date: June 16, 2021
International Monetary Fund — Press Release No. 21/182 (June 16, 2021).