Barbados is set to receive US$56 million (BDS$112 million) more in financing from the International Monetary Fund (IMF).
The Washington-headquartered agency said on Friday it would immediately release the money after its executive board concluded the third review of the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). US$19 million (BDS$38 million) of the money is being paid out under the EFF while the US$37 million (BDS$74 million) falls under the RSF.
This latest release will bring the total disbursement which Barbados has received under the two funds to US$112 million (BDS$224 million).
Following a visit by a mission team May 13-21, the IMF reported on Friday that as far as the programme implementation for the EFF was concerned, “all quantitative performance criteria for this review have been met”, and in some cases surpassed target.
“Key structural benchmarks have also been completed, including those to: implement a formal and time-bound process for requalification of tax exemptions and waivers under the modernised framework; establish a Cash Management Unit in the Treasury Department; develop standard contracts for routine government procurement; and approve of plans for the reform of key state-owned enterprises,” it added.
However, two end-March structural benchmarks were not met: The National Insurance and Social Security Service (NISSS) has only submitted some financial statements, with the others to be handed in in the coming months; and efforts to launch a central online platform for government services and monitoring of public investment are still progressing,
“albeit with some technical delays”, the IMF said.
“Modifications to the June and September primary balance targets are proposed to accommodate a modest frontloading of critical capital expenditure ahead of the rainy season,” the international lender said.
As for the RSF, the IMF said the Barbadian authorities had completed both reform measures for this review. It noted that in March, the government tabled a Stormwater Management Act, replacing the Prevention of Floods Act; and Cabinet approved the Energy Efficiency and Conservation Policy
Framework to reduce energy use of all government agencies and develop efficient public lighting.
According to the IMF: “The authorities are also advancing important work on: a new Electricity Supply Bill to enhance competition and promote local participation in renewable energy investment; integration of climate risks into financial stability assessments; and integration of climate concerns into the public financial management process.”
The IMF noted that the island’s economy has recovered to pre-COVID-19 pandemic levels and its external position has improved. It further highlighted that gross domestic product (GDP) growth is expected to remain strong in 2024, driven by a rebound in tourism and related sectors.
The island’s US$1.5 billion in international reserves at the end of 2023, which represented seven months of import cover, was also highlighted by the Fund.
At the same time, the IMF highlighted a number of risks to the growth outlook for the economy, including the potential global economic and financial shocks, as well as natural disasters.
“The medium-term growth outlook remains vulnerable to potential global economic and financial shocks and natural disasters. An abrupt global slowdown or recession in key source markets (US, UK, and Canada) could impact tourism and weaken growth,” it said.
“An intensification of regional conflicts could also increase global
commodity prices and inflation, reducing real incomes in both source markets and Barbados. An abrupt adjustment in global financial markets could also see a rise in global risk aversion and a further increase in the cost of external financing, affecting the fiscal and external accounts.
“The economy remains highly vulnerable to climate change risks and natural disasters, which could have an adverse impact on economic activity, increase the fiscal deficit and public debt, and pose
financial stability risks. On the domestic front, deceleration of reform momentum could generate concerns about the fiscal consolidation and debt sustainability,” it added.
However, it added, these risks are mitigated by “the authorities’ excellent track record of implementation and strong commitment to reform”.
(IMC1)
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