Barbados gets IMF thumbs up
THE International Monetary Fund (IMF) has expressed strong support for efforts by the Government of Barbados to put public debt firmly on a downward path.
Such a correction would be crucial to maintaining domestic and external stability and growth, and to support Barbados’ external credit rating, the IMF said, but would require substantive measures on several fronts to control current spending and increase tax revenues.
“These measures could be accompanied by further actions to limit the impact on the poorest,” said Marcello Estevão, chief of an IMF mission which has just concluded a yearly review of the economy.
“The team commends the authorities for their prudent management of foreign reserves.”
The IMF Article IV Mission noted that Barbados has been severely affected by the global economic crisis.
The deep global recession has curbed tourism, it added, affecting related activities such as construction and trade which, in turn, depressed aggregate demand and raised unemployment.
“Despite a variety of policy measures to alleviate the impact of the crisis, the level of economic activity is expected to remain broadly unchanged in 2010. The team expects a return to moderate growth thereafter, as tourism receipts remain constrained by weak consumption growth in the United States and the United Kingdom.”
With public deficits and public debt now at high levels, the emphasis has shifted to fiscal consolidation, and the team strongly supported the authorities’ aim, as set out in the Medium-Term Fiscal Strategy, to reduce public debt.
While the banking system remained well capitalised, the IMF said, there had been a significant rise in nonperforming loans as a result of the recession.
Against this background, continued close monitoring remained appropriate, which would be aided by the recent creation of a financial stability unit in the Central Bank of Barbados and intensified bank reporting requirements.
“The team supports a quick resolution of CLICO Barbados. It also welcomes the authorities’ decision to strengthen supervision of nonbank financial institutions, including through consolidation of supervisory agencies into the planned Financial Services Commission, and improvements in methods and human capital in this area.” (AB)