IMF Reaches Staff-Level Agreement with Barbados on an Economic Program under the Extended Fund Facility

IMF News, September 7, 2018

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Staff-level agreement reached on a 48-months Extended Fund Facility (EFF).
Total access: SDR 208 million (equivalent to 220 percent of quota, or about US$290 million).
If approved by the IMF Executive Board, SDR 35 million (about US$49 million) would be immediately available.
Staff envisages that the IMF’s Executive Board would consider the proposed arrangement under the EFF by early October.

In the last decade the Barbadian economy experienced low growth, widening fiscal deficits, and increasing debt.
International reserves have dwindled to US$240 million, described as well below reserve adequacy levels.
Central government debt has become unsustainable.
The Barbados’s Economic Recovery and Transformation Plan aims to:
- restore macroeconomic stability;
- put the economy on a path of strong, sustainable and inclusive growth;
- safeguard the resilience of the financial sector.

The cornerstone of the program is a strong front-loaded fiscal adjustment focused on curbing current expenditure while maintaining space for bolstering social safety nets and infrastructure spending.
Measures announced in late August aim to improve efficiency and effectiveness of public services and reduce government transfers to state-owned enterprises by:
- reviewing user fees;
- exploring options for mergers;
- strengthening oversight.
Target: reach a primary surplus of 6 percent of GDP in 2019/20.

Fiscal adjustment will be complemented by a comprehensive debt restructuring to secure meaningful debt reduction, reduce financing needs, and restore debt sustainability.
Central government debt path:
- estimated 157 percent of GDP at present;
- target of 60 percent of GDP by 2033.
Progress noted in good-faith discussions with domestic and external creditors; continued open dialogue and information sharing emphasized as important for an orderly restructuring.

Strategy to accelerate growth focuses on attracting new investment in:
- renewable energy;
- creative and artistic industries;
- education and health services;
- agro-industries;
- research;
- the international business sector;
- tourism.
The program and IMF resource commitment are framed as a vote of confidence in Barbados’ Economic Recovery and Transformation Plan.

Success will require an extraordinary effort and resolve by the authorities and other segments of society, as well as broad international support.
Initial implementation period expected to be challenging but intended to position Barbados to generate growth and job creation.

Press Release No. 18/343 — September 7, 2018. IMF Communications Department.