IMF says Barbados economy in precarious state
BRIDGETOWN, Barbados, CMC – The International Monetary Fund (IMF) says Barbados is in a precarious economic situation with its international reserves having dwindled to US$220 million, while central government debt is unsustainable.
Bert van Selm, who headed an IMF delegation to the island, said at the end of the three-day visit that the fiscal deficit has decreased over the last few years but remains large, at about four per cent of gross domestic product (GDP) in the fiscal year 2017/18.
He said the Central Bank of Barbados (CBB) is reporting a contraction of output of 0.7 per cent in the first quarter of 2018, over the same period last year.
“The Barbadian authorities, in close consultation with their social partners, are rapidly developing a plan to address current economic vulnerabilities. We welcome the government’s plans to urgently address infrastructure problems, and its goal of seeking to support the most vulnerable during the economic adjustment process,” said van Selm, whose visit was to hold discussions on economic policies and possible IMF financial support of the government’s economic plan.
“At this juncture, the IMF’s recommendations contained in the 2017 Article IV Consultation remain highly relevant to rebuild confidence and address Barbados’ current challenges”.
He said substantial fiscal consolidation is needed to place debt on a clear downward trajectory in conjunction with the proposed debt restructuring and to address the balance of payments risks that cloud the country’s future.
“Since tax and revenues are relatively high, the adjustment effort should focus on the expenditure side, including by improving the efficiency and effectiveness of public services, containing wages, and reforming government pensions”
The IMF official said that government transfers to state-owned enterprises need to be reduced by reviewing user fees, exploring options for mergers and privatisation and by providing much stronger oversight.