THE funds to be provided under the proposed Extended Fund Facility (EFF) of the International Monetary Fund (IMF) will not be enough to solve the country’s Balance of Payment (BOP) problems.
This is the opinion of former Prime Minister of Barbados, the Rt Hon Owen Arthur, who said while he does not want to speculate on the terms of the Fund, what is known is that in order to stabilise foreign reserves to accepted levels, Barbados has to increase its reserves by approximately $600 million.
The former Minister of Finance was at the time delivering an hour-long presentation in a packed LT1 of the Roy Marshall Complex on Monday night, during a public lecture hosted by the University of the West Indies entitled, The IMF and the Caribbean: New Directions for a New Relationship.
During a recent press briefing, head of the IMF Barbados delegation Dr. Bert Van Selm stated that a staff level agreement has been reached, which would amount to US$290 million to be distributed to government in eight tranches over the next four years. When approved by the IMF Board, it is expected that $US49 million will immediately be made available to the Barbados government.
While crunching some of the numbers, Arthur told the large audience that in order for Barbados to reduce its debt to GDP ratio overhang which now stands at over 170 per cent of GDP to 60 per cent over a planned period, a very large fiscal effort reflecting a primary surplus that is at least twice more than the three percent primary surplus recorded annually between 1994 and 2008 will have to be realised over a sustained basis over a long period.
“To undertake a fiscal adjustment to realise such a primary surplus while also having to use fiscal policies to improve its foreign exchange reserves may prove to be a most difficult undertaking for Barbados.”