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IMF Executive Board Concludes 2019 Article IV Consultation and Second Review Under the IMF’s Extended Fund Facility for Barbados

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Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2019 Article IV Consultation and Second Review Under the IMF’s Extended Fund Facility for Barbados







December 16, 2019











  • The completion of the review enables an immediate disbursement equivalent to SDR 35 million (about US$48 million). A four-year extended arrangement under the EFF was approved on October 1, 2018.
  • Program implementation is strong. All program targets for end-June and end-September 2019 have been met.
  • Since May 2018, international reserves have increased from a low of US$220 million to more than US$600 million at end-October 2019.

On December 16, 2019, the Executive Board of the International Monetary
Fund (IMF) completed the second review of Barbados’ economic reform
program supported by an arrangement under the Extended Fund Facility
(EFF). The completion of the review allows the authorities to draw the
equivalent of SDR 35 million (about US$48 million), bringing total
disbursements to the equivalent of SDR 105 million (about US$145
million).

The four-year extended arrangement under the EFF, for an amount equivalent
to SDR 208 million (about US$288 million, or 220 percent of Barbados’s
quota in the IMF), was approved by the Executive Board on October 1, 2018
(see Press Release No.

18/370

).

The Executive Board today also concluded the 2019 Article IV consultation
with Barbados. The associated press release will be issued separately.

Following the Board discussion of the review, Mr. Tao Zhang, Deputy
Managing Director, and Acting Chair made the following statement:

“Barbados continues to make good progress in implementing its comprehensive
homegrown economic reform program. All quantitative performance criteria,
indicative targets, and all structural benchmarks for end-September 2019
were met.

“The fiscal adjustment continues as programmed with the primary surplus
targeted at 6 percent of GDP for FY2019/20 and subsequent years. This
target for end-September 2019 was met by a significant margin, and the
FY2019/20 budget provides a solid basis for reaching the target for the
next fiscal year. Tax policy reforms aim to enhance revenue, while
improvements in tax and customs administration are essential to support
medium-term revenue. The planned adoption of a fiscal rule in 2020 will
help sustain the adjustment effort over the medium and long term.

“State-Owned Enterprise (SOE) reforms are essential for achieving the
primary surplus target and maintaining it over the medium term. To secure
fiscal space for investment in physical and human capital, transfers to
SOEs are envisaged to significantly decline by a combination of stronger
oversight of SOEs, cost reduction, revenue enhancement, and mergers and
divestment.

“Adequate social spending and an improved safety net to protect the most
vulnerable members of society are key priorities of the program. Social
spending is being protected, preserving Barbados’ strong social safety net
and limiting the impact of the stabilization program on low-income
households.

“A comprehensive public debt restructuring complements the fiscal
consolidation. The recent agreement reached with commercial external
creditors will help reduce uncertainty and improve prospects for
investment. Under the program’s macroeconomic framework, the restructuring
agreement will facilitate reaching the 80 percent of GDP medium-term debt
target in FY2027/28, and the 60 percent of GDP long-term anchor in
FY2033/34.

“An improved governance framework of the Central Bank of Barbados would
facilitate limiting monetary financing to the government, and strengthening
the central bank’s mandate, autonomy, and decision-making structure.
Measures to strengthen the AML/CFT regime would also be helpful.

“Strengthening disaster resilience is key to boosting medium-term economic
prospects. Climate change is likely to increase Barbados’ vulnerability to
weather-related events that could have a major impact on its economy. With
the inclusion of natural disaster clauses into new domestic and external
bonds, Barbados effectively used the debt restructuring to strengthen its
protection against natural disasters.

“Structural reforms are needed to unlock Barbados’ growth potential. While
the process for providing construction permits has been streamlined, much
room for improvement in the business climate remains. Deeper regional
integration would also help increase Barbados’ growth prospects.”



Table 1. Barbados: Selected Economic, Financial,
and Social Indicators


I. Social and Demographic Indicators (most recent
year)

Population (2017 est., thousand)

285.7

Adult literacy rate

99.7

Per capita GDP (2017 est., US$ thousand)

17.4

Poverty rate (individual, 2010)

19.3

Life expectancy at birth in years (2013)

75.3

Gini coefficient (2010)

47.0

Rank in UNDP Development Index (2014)

57

Unemployment rate (2018 est.)

10.1

Main products, services and exports: tourism, financial
services, rum, sugar, and chemicals.

II. Economic Indicators

Est.

Proj.

2016

2017

2018

2019

2020

(Annual percentage change)

Output, prices, and employment

Real GDP

2.5

0.5

-0.6

-0.1

0.6

CPI inflation (average)

1.5

4.4

3.7

4.0

4.8

CPI inflation (end of period)

3.8

6.6

0.6

6.5

2.3

External sector

Exports of goods and services

6.6

0.8

0.0

3.3

3.0

Imports of goods and services

0.2

-0.4

-0.4

6.3

1.1

Real effective exchange rate (average)

0.9

2.5

1.2

Money and credit

Net domestic assets

7.1

2.8

4.1

1.8

2.9

Of which:
Private sector credit

1.5

3.2

0.4

0.0

3.6

Broad money

4.2

1.2

-0.2

4.2

2.9

CG Public finances (fiscal year) 1/

Revenue and grants

28.3

28.6

29.3

30.5

30.2

Expenditure

33.6

32.9

29.6

27.0

27.5

Fiscal Balance

-5.3

-4.3

-0.3

3.5

2.7

Interest Expenditure

7.6

7.6

3.8

2.5

3.3

Primary Balance

2.2

3.3

3.5

6.0

6.0

Public Debt (fiscal year) 1/

Central gov’t gross debt (incl. guaranteed and arrears)

149.5

158.3

125.6

115.9

109.9

External

31.3

28.5

32.6

28.7

28.1

Domestic

118.2

129.8

93.0

87.2

81.9

Balance of payments 2/

Current account balance

-4.3

-3.8

-3.7

-3.7

-3.6

Capital and financial account balance

0.8

0.8

9.1

6.3

5.4

o/w Public Sector

-1.8

-1.4

3.5

3.3

1.8

o/w IMF disbursement

0.0

0.0

1.0

1.9

1.4

Private Sector

2.6

2.2

4.1

3.1

3.5

o/w FDI

3.4

3.1

4.4

3.5

3.7

Net Errors and Omissions

1.0

0.3

0.3

0.0

0.0

Overall balance

-2.5

-2.6

5.7

2.6

1.8

Memorandum items:

Exchange rate (BDS$/US$)

2.0

2.0

2.0

Gross international reserves (US$ million)

320.0

205.7

499.6

636.5

733.7

In months of imports of G&S

1.9

1.2

3.0

3.6

4.1

In percent of ARA

65.8

40.8

102.6

125.4

135.9

Nominal GDP, CY (BDS$ millions)

9,660

9,956

10,173

10,414

10,682

Nominal GDP, FY (BDS$ millions)

9,734

10,011

10,234

10,481

10,786

Sources: Barbados authorities; UNDP Human Development
Report; Barbados Country Assessment of Living
Conditions 2010 (December 2012); and Fund staff
estimates and projections.

1/ Fiscal year is from April to March.

2/ After external commercial debt restructuring.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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