Tough times ahead

BARBADIANS should prepare themselves for a deep and prolonged fiscal austerity that will be implemented under an Extended Fund Facility (EFF) with the International Monetary Fund.

Governor of the Central Bank of Barbados, Cleviston Haynes, sounded the warning yesterday as he gave the clearest idea of what an IMF programme for Barbados could be like.

He said that given the medium term nature of this country’s adjustment needs, Barbados is likely to qualify for an EFF as opposed to a Standby Arrangement.

“When a country faces inherent structural deficiencies and is able and willing to implement deep and sustained structural reforms, consideration can be given to a programme under an EFF, which typically lasts between 36 and 48 months.

Reviewing the economy for the first half of 2018, Governor Haynes said that the fiscal consolidation will be a deep one. Explaining this, he told the media that the Government had committed itself to achieving a primary surplus of six per cent of GDP – the gap between revenue and non interest expenditure, which according to him is significant.

“So if you have a surplus of that magnitude it means you need a combination of measures from the revenue and expenditure side that will translate into that type of out turn and it means some adjustments have to be made,” he declared. Governor Haynes said it is still too early to say the nature of the reforms to be done as they relate to state-owned enterprises.

His understanding though is that the Government is not focused on wholesale lay offs in the public sector, which is part of what it has said.

While not divulging much in terms of the proposals, the top Economist remarked he could give no specifics since they are under discussion. Discussions between the Government and the IMF have already commenced on the elements of the programme that would support the disbursement of funds,” Haynes said.

“At the end of the day, the country has to cut the deficit,” he indicated while encouraging stakeholders to rally together to alter the macroeconomic fundamentals.

According to him, “We recognised that this adjustment will be challenging but with the will and commitment, we believe we should be able to look back in a year or two with satisfaction on what we would have been able to accomplish,” he said.

He also told the media that in designing the programme with the IMF, focus will be on trying to strengthen public finances. Already, the new administration announced additional measures to address some of the fiscal challenges by raising revenues and increasing some expenditure.

On balance there should be a net positive for the public finances of at least one per cent of GDP.

He stated that this fiscal effort has to be strengthened “and I think the Government has announced plans to look at how it can address transfers, and expenditure generally to strengthen the public finances.”

According to him, “But one has to look at how you improve the efficiency of services we currently deliver. Is it that we have to look at the fee structure of these state enterprises? There are a whole range of things we have to look at before one can come to the conclusion that it leads to the sending home of persons.”

What is critical, he pointed out, is that “we have to improve the delivery of services within the broader civil service and that may or may not involve job losses.”