BRIDGETOWN, Barbados, Jul 18 2015 – More bitter medicine could be in store for Barbadians.
Following its recent Article IV Consultation with Barbados, the International Monetary Fund (IMF) on Friday released its latest report card on the island’s economic performance.
In it, the Washington-based financial institution warns that the economy still faces “daunting” challenges, including external risks, a high fiscal deficit, as well as high debt levels, along with issues of competitiveness.
Against this backdrop, the IMF strongly urged the Freundel Stuart-led administration to implement “a comprehensive reform programme that includes strong fiscal adjustment and structural reforms to foster growth and external and debt sustainability”.
This advice comes on the heels of the Government’s implementation of a 19-month fiscal adjustment programme that has already lead to over 3,000 layoffs in the public sector.
While commending the authorities for their efforts at fiscal consolidation over the past year, and welcoming the direction of policies outlined in the recent Budget statement by Minister of Finance Chris Sinckler, the IMF stressed the need for “continued ambitious adjustment efforts”.
It underscored the importance of reducing current spending and addressing the stock of Government arrears.
The IMF also called on the authorities to consider divesting some state assets in order to lower debt.
While welcoming recent tax measures announced in the June 15 budget, the IMF encourages Government to broaden the tax base further and remove tax waivers.
Directors also highlighted the need for the Central Bank “to phase out direct financing of the Government and reorient monetary policy toward supporting the fixed exchange rate regime”. They agreed that, if financing sources were not sufficient, the Central Bank should allow domestic interest rates to rise to a level that reflects a credible country risk premium.
In the wake of this week’s Central Bank report of 0.5 per cent growth for the first half of 2015, directors underscored that the growth strategy should be focused on strengthening the business environment and improving the efficiency and effectiveness of public services.
The IMF also called for a review of labour regulations to boost job creation.
And based on the recent “inconsistency in GDP data”, it has encouraged the authorities to quickly resolve these issues, with help from IMF technical experts.
