‘Bring IMF on board’
Try the?International?Monetary Fund (IMF).
The Barbados Chamber of Commerce and Industry (BCCI) has strongly recommended that Government immediately pursue a “hybrid” economic solution to the country’s problems which would include engaging the International Monetary Fund (IMF).
In a July 12, 2013 letter addressed to Minister of Finance and Economic Affairs Chris Sinckler in anticipation of tomorrow’s Budget, the Chamber said it was in favour of a collaborative adjustment between Government and the Washington-based IMF rather than a fully internal or external solution.
Under this approach, the Chamber said Government would take the necessary steps to demonstrate that it was “extremely serious” about addressing the fiscal imbalances by seeking to cut current expenditure by at least $200 million by the end of the current fiscal year.
These fiscal cuts had to be accompanied by rationalization of Government agencies and the removal of many of the statutory agencies which now existed, the private sector group said in the document obtained by the BARBADOS BUSINESS AUTHORITY.
The Chamber said these actions would signal to both domestic and foreign investors that Barbados’ fiscal authorities were taking credible actions to remedy the economic situation.
“With some measure of fiscal credibility restored and a firm commitment to pursue more fiscal and structural reforms in the next two fiscal years, we should then consider the feasibility of engaging the IMF to enter into a standby arrangement to avoid a balance of payments crisis in the very near term,” the letter said.
The Chamber was of the opinion that this option would allow Barbados to drive the process and determine its level of engagement with the IMF.
“It is our understanding that the IMF has changed its tact recently regarding devaluation, at least semantically. There is every reason to believe that Barbados could be used as a test case, for lack of a better term, where the IMF can demonstrate that it is more in tune with the needs of the member country by allowing us to participate in the internal framing of the standby arrangement, that would not include adjusting our fixed rate of exchange,” the BCCI said.
The Chamber said this option could be a “win-win” for all and if it was not taken on board, Government might be left in a situation where it had no choice but to follow external advice without giving any input.
In the nine-page document, the BCCI also made several recommendations to put the country back on a sustainable path.
It said that “the situation has reached crisis proportions with foreign reserves plummeting from 19 weeks in March 2013 to 16 weeks in June 2013” and indicated its willingness to support Government in making the necessary tough decisions.