TOMORROW will mark exactly one week since a team from the International Monetary Fund (IMF) had been in Barbados negotiating with local Government officials for a programme to assist this country out of its present predicament. The team has been at the request of the Prime Minister, Ms. Mia Amor Mottley who is very much in favour of the Washington D.C. based institution having a role in the economic resuscitation of the Barbados economy.
Indeed, she did make it clear during the campaign leading up to the May 24 general elections that the IMF would not be ruled out in a recovery programme should her Barbados Labour Party be successful at the polls. Well they were successful at the polls winning all 30 Parliamentary seats, and here the country is with the IMF right on the doorsteps.
There has been no official word on what the IMF will be asking for Barbados to do and what the local negotiators think is necessary for Barbados to pursue in this matter. There have been a number of suggestions which people are putting forward although all of them are based on hearsay and expectations which cannot be verified. Basically it is a lot of loose talk with no substance. As such all that can be done at this time is to speculate based on what usually happens when these matters are being considered at the highest level of Government.
Barbados’ present predicament is that its economy has not been growing; it has a high debt; the fiscal deficit that is still somewhat high even though it is on the decline; and the country’s foreign exchange reserves are low at around Bds$423.3 million, based on the last report of the Central Bank of Barbados. At March this year current expenditure was $936.0 million, compared to $884.5 million at March 2017. Transfers and Subsidies which have generated enormous talk and calls for that area of Government financing to be reduced significantly, came in at $428.0 million also at March this year, compared to $388.0 million at March 2017. These are some of the items which Government insisted have to be lowered. In that item (Transfers and Subsidies) can be found some of the spending which government undertakes with respect to State-owned Enterprises (SOEs).
The model which the IMF has used to correct imbalances in the areas mentioned earlier is the so-called Polak model named after Jacques Polak, considered a founding father of the IMF monetary model, and a former Director of the IMF Research Department. Polak looked at all the options which the IMF brings to a nation facing balance of payments crises. They include includes measures to promote economic growth; proposals to cut expenditure; both taxes and non-tax measures to boost revenue; a detailed look at whether exchange rates ought to be adjusted; safety net; a desire that countries hold a minimum level of international reserves so as to ensure that the exchange rate remains competitive; and inflationary targets.
Therefore, any of these and not necessarily all, can be included in a programme although that won’t be known until the arrangements are finalised between the IMF and the Government. From all indications and the magnitude of what is required, it could be a tough programme. However, we will wait and see.