IMF Reaches Staff Level Agreement on the Fourth Review of Barbados’ Economic Program Under the Extended Fund Facility

IMF News, October 30, 2020

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Canonical URL: IMF Reaches Staff Level Agreement on the Fourth Review of Barbados’ Economic Program Under the Extended Fund Facility

IMF team led by Bert van Selm conducted a virtual mission between October 26-30, 2020 to discuss implementation of Barbados’ Economic Recovery and Transformation (BERT) plan under the Extended Fund Facility (EFF).
IMF team and Barbadian authorities reached a staff-level agreement on the completion of the fourth review under the EFF arrangement.
Agreement is subject to approval by the IMF Executive Board, which is expected to consider the review in December.
Upon completion of the review, SDR 65 million (69 percent of quota, or about US$90 million) will be made available to Barbados.
A revised central bank law is expected to be tabled to parliament shortly; this is a critical safeguard and will be a prior action for completion of this EFF review.

The COVID-19 pandemic has had a major impact on Barbados’ economy, with a double-digit decline in economic activity projected for 2020.
Tourism specifics:
- Tourism came to a virtual standstill between March and June 2020: airlift declined precipitously, most hotels closed, and occupancy plummeted at facilities that remained open.
- In early July, the island cautiously started reopening the economy for international tourists after effectively halting local transmission.
- Tourism arrivals remain at a fraction of normal levels.
Fiscal policy adjustments:
- The Government has lowered its primary balance target to minus 1 percent of GDP for FY2020/21.
- This compares to a surplus of 6 percent of GDP envisaged prior to the pandemic, and a surplus of 1 percent of GDP at the time of the third EFF review.
- The lowered primary balance target accommodates the loss of government revenues and facilitates emergency outlays on health facilities, medical supplies, and income support to the most vulnerable.
Financing proposal:
- To help finance the emerging fiscal deficit and related balance of payments need, an augmentation of the EFF in the amount of SDR 48 million (51 percent of quota, about US$66 million) is proposed.
- This augmentation would bring total access under the program to SDR 322 million or 341 percent of quota.

International reserves and program targets:
- International reserves, which reached a low of US$220 million (5-6 weeks of import coverage) at end-May 2018, are now in excess of US$1 billion.
- All quantitative targets for end-September under the EFF were met.
- The program target for Net International Reserves was met by a wide margin, as was the target for the Central Bank of Barbados’ Net Domestic Assets (NDA).

Staff supports the easing of the fiscal stance in response to the pandemic.
Subject to IMF Executive Board approval, staff proposes the SDR 48 million augmentation to help finance the emerging fiscal deficit.
The IMF team thanked the authorities and technical team for their openness and candid discussions.

IMF press release, October 30, 2020.