BARBADOS-FINANCE- IMF approves funds for Barbados

WASHINGTON, The International Monetary Fund (IMF) Wednesday approved US$113 million under a 36-month Extended Fund Facility (EFF) program for Barbados in addition to US$189 million Resilient and Sustainability Fund (RSF) to maintain and strengthen macroeconomic stability, support the structural reform agenda, and increase resilience to climate change.

The Washington-based financial institution said that the new program would build on the achievements of Barbados’ 2018-22 EFF and draw on the authorities’ updated economic reform program (BERT 2022), including efforts focusing on building resilience to natural disasters and climate change as well as reducing greenhouse gas emissions and transition risks.

It said despite a series of global and regional economic shocks, Barbados continues the strong implementation of its ambitious economic reform program aimed at restoring fiscal sustainability, increasing reserves, and unlocking growth potential.

“Economic activity in Barbados is starting to recover from the COVID-19 pandemic, but risks to the outlook remain elevated, with higher global commodity prices pushing up inflation,” the IMF executive board said in announcing the program of assistance.

IMF Deputy Managing Director and Acting Chair of the Board, Kenji Okamura, said, “Barbados continues to make good progress in implementing its homegrown Economic Recovery and Transformation Plan, despite a very challenging global economic environment.

He said macroeconomic stability was restored in 2018 and 2019 with a combination of fiscal consolidation, comprehensive debt restructuring, and structural reforms to support growth. This created space for a countercyclical policy response to the COVID-19 pandemic in 2020 and 2021. Public debt was put back on a clear downward trajectory starting the financial year 2021/22.

“While Barbados continues to confront challenges owing to the global pandemic and Russia’s invasion of Ukraine, the economic recovery is now well underway. Inflation has been rising since the second half of 2021 owing to supply chain disruptions and increasing global food and oil prices. The economic recovery is expected to continue over the medium term, but downside risks to the outlook remain high.”

Okamura said building on the successful completion of a 2018-22 EFF, the new arrangement aims to maintain and strengthen hard-won macroeconomic stability and promote the unfinished structural reform agenda.

“Key elements of the program would be the gradual and sustained increase in primary surpluses and ambitious structural reforms, such as strengthening of tax and customs administration as well as Public Financial Management (PFM), adoption and implementation of pension reform, the rationalization and consolidation of State-Owned Enterprises (SOEs), and growth-enhancing measures, including additional steps to improve the business climate. “

Okamura said the program targets a primary surplus of two percent of gross domestic product (GDP) in the financial year 2022/23, up from minus one percent of GDP recorded in both the financial year 2020/21 and financial year 2021/22.

The IMF official said the arrangement under the RSF will provide financing to support the country’s climate change adaptation and mitigation efforts and support Barbados’ ambitious goal of transitioning to a fully renewable-based economy by 2030.

“Reforms under the RSF include the mainstreaming of climate change in the budget, the introduction of ‘green Public Financial Management, including in procurement, and measures that would incentivize private sector investments in resilient climate infrastructure and into renewable energy projects.

“These measures were identified in close coordination with the World Bank and other international partners,” Okamura added.