AN INTERNATIONAL MONETARY FUND (IMF) team has left Barbados convinced that Government is not doing enough to fix its fiscal problems.
Judith Gold, head of the IMF delegation that conducted the annual Article IV consultation between November 7 and Tuesday, is therefore urging the Freundel Stuart administration to cut its spending further. Failing this, the island’s debt problems would continue, she warned.
The IMF is also offering its help to Government. It “stands ready to assist the Government of Barbados, including through continued policy dialogue and technical assistance”, Gold said.
During its visit to the island, the team from Washington met with Minister of Finance Chris Sinckler, Acting Central Bank Governor Cleviston Haynes, Minister of Industry Donville Inniss, Leader of the Opposition Mia Mottley, senior Government officials, and representatives of the private sector, labour organisations and academia.
In a statement released after departing the island, Gold said while continued strong growth in long-stay tourism supported Barbados’ economic growth, fiscal consolidation was contributing to a slowdown.
The economist said “substantial further fiscal effort is needed to decisively place the debt on a downward trajectory”.
“Given the urgency in addressing funding, balance of payment risks, the high debt and the limited policy options, the fiscal adjustment must continue, with a focus on accelerating [state-owned enterprises] reforms to facilitate a significant and durable reduction in transfers,” she added.
Gold said Government’s adjustment strategy should focus on addressing the high transfers, containing other current expenditures and maintaining a strong revenue effort.
“Reforms of state-owned enterprises should include improved management, cost recovery, reduced services, mergers, closures and privatisation. Containing other current expenditures, including the wage bill and Government pensions, is also critical,” she advised.
“Tax policy should be reviewed with a view to broadening the tax base and improving its progressivity, while efforts to strengthen tax administration must continue. Further, arrears to the private sector should be cleared, and remaining current should be a Government priority.”
The IMF also wants Government to focus on structural reforms “to support growth and improve the business climate for domestic and foreign investment are also urgent.
“These reforms would aim to improve business processes, such as significantly reducing clearance times for immigration and customs, accelerating approval of building permits and streamlining legal procedures,” Gold said.
The IMF representative also suggested that Government’s “ambitious” May 30 Budget was likely to miss its targets due to National Social Responsibility Levy exemptions, lower than expected non-oil imports, shortfalls in some other revenues, and high transfers. (SC)
