As the International Monetary Fund (IMF) ends its visit to Barbados, it has told the Government that fiscal consolidation is urgent.
And one Government minister has dismissed speculation that its visit to the country, which began Monday and ended today, had nothing to do with Moody’s Investor Services’ downgrade of Government’s bond rating earlier this week.
Donville Inniss
Speaking today after a consultation with business leaders at the Baobab Towers, Warrens, St Michael, Minister of International Business Donville Inniss said: “The truth of the matter is that the IMF really comes into a jurisdiction at the invitation of the Government, and when we met with the IMF late in the last quarter last year, it was made clear that we would be happy to receive a staff team, to help us address some technical issues, namely, addressing matters pertinent to statutory corporations in Barbados, their structure [and] what should be done about them going forward.
“Now there are those who would think that a Moody’s report and an IMF visit mean a devaluation of the Barbados dollar. None of us gathered in this room would wish for that to happen; and the Government is very, very committed to ensuring that that is nowhere on our radar.”
In a statement issued by the head of the IMF team, Nicole Laframboise, at the end of the visit which was held to review Barbados’ recent economic developments and discuss the main policy priorities, the IMF noted that the Barbadian economy continues to face major challenges, including low growth, a very large fiscal deficit and a high debt burden.
It said not only must Government reduce the deficit, but it must take steps to raise growth as the economy is expected to decline by 0.6 per cent year and inflation is expected to remain subdued and private sector credit growth weak.
“The need for fiscal consolidation is urgent. The authorities agree and have implemented most of their announced budget measures. Follow up is essential to ensure that these measures produce material results in the near term to lower the government’s financing needs. Slippages should be met with offsetting actions in order to meet budget targets,” Laframboise said.
“Strengthened oversight and fundamental reform of the public enterprises are key priorities in the near term. IMF staff welcomes progress in this area and the Government’s intention to significantly strengthen the monitoring and control of public enterprises, including through a high-level independent oversight committee and increased resources for the accounting unit responsible for monitoring performance.”
Laframboise also advised the Freundel Stuart administration that while it awaits the findings of a review of domestic taxation by technical experts, consolidation efforts should also focus on the other components of expenditure, including ways to improve the targeting and effectiveness of social services.
She said that should include scaling back some universal programmes available to higher income groups to ensure that they reach the most needy.
“In parallel with deficit reduction, steps to raise growth are equally important. A number of large private and public investment projects in the pipeline should boost capital inflows and productive capacity. Efforts will be needed though to remove administrative impediments to doing business and lower production costs in the country, including unit labour costs. This is important for strengthening competitiveness under the fixed exchange rate regime,” the statement said.
Meanwhile, Inniss said he was satisfied that the private sector was willing to work with the Government to drive the economy forward in a sustainable manner, to create jobs, and earn and save foreign exchange.
He said while his administration would not ignore what others said, it was not going to be distracted from working to make Barbados a much better place than it was in the past couple of years. (EJ/DP)