BUSINESS MONDAY: IMF, DEBT and COVID

ECONOMIST Marla Dukharan says that the International Monetary Fund (IMF) is unlikely to abandon Barbados at this juncture.

At the same time she is projecting that this country’s debt to GDP ratio is expected to increase by the end of March this year.

The views by Ms. Dukharan are contained in her latest Caribbean Economic Report for January 2021.

The Economist said that Barbados has access to concessionary loans and that IMF support for the island will continue, while noting that the country’s international reserves have crossed the US$1 billion (Bds$2 billion) mark since September.

On the issue of debt, she said in the report that the debt to GDP ratio which reached 144 per cent by the end of December 2020, will increase to 146 per cent by March this year.

That amount, she stated, will not decline to 107 per cent until 2025.

Barbados has been forced to raise debt levels as a consequence of the COVID-19 pandemic which has created a demand for spending by the government.

Dukharan said that the COVID related spending is also expected to be 2.5 per cent of GDP in the current financial year which ends on March 31, 2021.

However, the economist indicated that an increase in the country’s extended arrangement with the International Monetary Fund (IMF) will provide financing for the newly lowered primary fiscal deficit target of one per cent of GDP.

Last week the Central Bank of Barbados gave its economic review of the performance of the Barbados economy in 2020. Governor Cleviston Haynes discussed how COVID-19 had impacted on the economy causing it to contract by 18 per cent. Following the July reopening, tourism, the island’s main economic sector plummeted 71 per cent and according to Ms. Dukharan the sector remained highly exposed to the USA and UK visitor markets which historically account for about 63 per cent of long stay visitors to Barbados.

“The recent second wave of COVID  and the lockdown will make for a slower than projected economic recovery,” Dukharan said.

The island’s current account deficitwas put at 8.3 per cent of GDP for 2020  and projections by the IMF are for that deficit to be 7.3 per cent in 2021.