At the request of the Government of Barbados, an International Monetary
Fund (IMF) team led by Bert van Selm visited Bridgetown from December 4-7,
to discuss implementation of Barbados’ Economic Recovery and Transformation (BERT)
plan, supported by the IMF under the Extended Fund Facility (EFF). At the
end of the visit, Mr. van Selm made the following statement:
“Barbados has made an excellent start in implementing its ambitious and
comprehensive economic reform program. The country’s international
reserves, which reached a low of US$220 million (5-6 weeks of import
coverage) at end-May 2018, have more than doubled since then, amounting to
more than US$500 million in early December. This has helped to rebuild
confidence in the country’s macroeconomic framework.
“A comprehensive debt restructuring was announced on June 1, 2018. After
intensive discussions, an exchange offer for domestic debt (Barbados
dollar-denominated) was launched in early September. On October 15, the
government announced reaching agreement with an overwhelming majority of
domestic creditors, with support of all commercial banks, general and life
insurers, the National Insurance Scheme, the Central Bank of Barbados, and
smaller creditors. The domestic debt exchange operation was finalized on
November 19. The rapid completion of the domestic part of the debt
restructuring has been very helpful in reducing economic uncertainty, and
the terms agreed with creditors will help put public debt on a clear
downward trajectory. A much-reduced government interest bill will help
create much-needed fiscal space for increased social spending and
investment in infrastructure.
“Progress being made by the authorities in furthering good-faith
discussions with external creditors is welcome. Continuing open dialogue
and sharing of information will remain important in concluding an orderly
debt restructuring process; completion of the external debt restructuring
would help further reduce uncertainty.
“The government reported a primary surplus of 2½ percent of (annual) GDP in
the first six months of FY2018/19 (April-September 2018). In October, the
authorities launched a program to improve efficiency and reduce the public
wage bill by laying off and retraining workers in the central government
and public entities. This should help create a leaner, more efficient
public sector, geared towards facilitating private sector-led growth. It
should also help reduce central government transfers to state-owned
enterprises, from a level that had become unsustainably high. In November,
the authorities announced plans to modify the corporate income tax (CIT)
framework, seeking to unify rates that apply to the international business
sector and local enterprises. There are some risks to this reform,
including making corporate income tax revenues more dependent on
maintaining international competitiveness.
“Barbados has also made good progress towards meeting end-December 2018
structural benchmarks under the EFF. In October, a regulatory sandbox for
fintech start-ups was created to allow them to try out new technologies in
a well-defined and controlled space. Legislation to facilitate a more
efficient process for providing construction permits is underway, as is
legislation to support a more efficient budget process, and stronger
oversight of SOEs.
“Following IMF Executive Board approval of the EFF on October 1, 2018, both
the Caribbean Development Bank and the Inter-American Development Bank
approved policy-based loans. These operations, worth US$75 million and
U$100 million respectively (a combined 3½ percent of GDP), will help
finance the government, rebuild reserves, and support the reform process
with policy advice.
“The government has engaged in intensive consultations with the Social
Partnership to build public support for its economic reform program. In
October, a BERT Monitoring Committee was set up, and tasked to report to
the Social Partnership and the public. Strong ownership and broad societal
support bode well for successful program implementation and helping
Barbados to achieve better living standards for all its citizens.
“The team would like to take this opportunity to thank Barbados’
authorities and the technical team for their openness and candid
discussions.”
