The IMF 2015 Barbados Article IV Consultation reprinted from the IMF website. A couple weeks ago Barbadians learned the government of Barbados had suppressed the release of the report […] which was delivered around the time of the 2015 Financial Statement. Full Text of the IMF Report:
The IMF 2015 Barbados Article IV Consultation reprinted from the IMF website. A couple weeks ago Barbadians learned the government of Barbados had suppressed the release of the report […] which was delivered around the time of the 2015 Financial Statement.
Full Text of the IMF Report:
So on the basis that our “home-grown” financial strategy is always what the IMF recommends we are going to see:
– restructuring of the Statutory Boards
– more social support (interesting suggestion from an organisation which is portrayed as “rape and pillage”
– privatisation
– less money being printed by Mr Worrell
– more tax waivers being removed (didn’t think there were any left)
– a push for growth / investment
– relaxation of labour laws (wonder what that is – lower redundancy payments?)
Two other points, I like the IMF comment “Directors noted the inconsistency in GDP data”. Clearly they don’t believe Mr Worrell’s figures. Also ” Directors called for continued vigilance and close monitoring of asset quality and potential vulnerabilities in non-bank financial institutions”. I got it right on another thread – there are potential problems in the Credit Unions.
“They also encouraged the authorities to consider divesting some state assets in order to lower debt. On the revenue side, Directors welcomed the recent tax measures, and encouraged the authorities to broaden the tax base further and remove tax waivers.”
So we are here at last! We wonder what the dear P M has to say about this IMF ‘demand’ to privatize some of the commercial entities still owned by the State. Is he going to call them a gang of chokers and robbers or blackmailers holding his government to ransom?
Now which one should the P M start with?
CBC??? No! Who would want to kill and bury the sacred cow of propaganda?
NPC/BNOC/BNTCL? Most likely!
GAIA? Highly probable! A few Nigerian business people are queuing up!
Bridgetown Port Inc? Difficult to offload but possible!
The P M and his gang of liars and deceivers can procrastinate as much as they like but as sure as night follows day so shall the privatization programme be implemented either as a willing seller or by way of a fire sale Grecian style.
It’s been 3 years in the making over which period the potentially attractive assets have been badly impaired valuation wise. Pity the State has to come to such a disadvantageous place at the negotiation table; all because of blind jackasses sitting in a bloated Cabinet chasing an ugly black cat in a dark room.
Can we please hear ac and choir singing the praises of privatization or divestment in crescendo style? Is the choir awaiting directions from the sleeping band leader called Lord Fumble?
What is the consensus now, is the 2015 Budget home grown as stated by the MoF or is he a blasted liar.
The Central Bank of Bdos and the MoF will follow the script prepared by the IMF . Bdos economic report card must be signed by the IMF to enable an upgrade later this year.
Shortly the ” divesting some state assets “
@ CHAUCER July 18, 2015 at 9:56 AM
Shouldn’t this trigger a call for elections? The current administration was elected on a well propagandized and widely accepted programme of “No layoffs, No privatization”. The people gave it a mandate to carry out its stated programme.
Shouldn’t a fresh mandate be sought from the people? After all, the current administration will be selling or giving away the people’s assets without their consent.
@ millertheanunnaki, you smell blood.
Time fo MIA to bring back Owen and get 2 Dems to cross the floor.
Surely she has the motivation to save Barbados.
@David You actually thought the Budget and the fiscal adjustment program was “home grown”????? tell me you are being sarcastic!!!. If the IMF recommendations were documents to be copyrighted i would sue Stinkliar for plagiarism!!!!. This govt is all about smoke and mirrors…….The gov’t is obviously guided by the IMF and is throwing out the “home grown” tag to make it palatable to the people of this country.
The Governor of the Central BAnk and the Minister of Finance have been pushing the message the takeup of 60 million in savings bonds is an indication of confidence. BU contrast their position against the following extract from the IMF Report:
Central government debt excluding securities held by the National Insurance Scheme (NIS) rose to 101 percent f GDP at end-March 2015, up from 76 percent of GDP in March 2011. Financing of the government in 2014/15 came largely from the central bank (CBB), the nonbank financial sector, and a draw-down in government deposits in the banking system, while commercial banks reduced exposure to the sovereign by 1.5 percent of GDP. Domestic short term interest rates declined to about 2.8 percent on average in the first four months of 2015. The impact on liquidity of central bank lending to the government was offset largely by a rise in excess reserves at the CBB, reflecting the absence of new private sector lending and capital account restrictions.
All your observations/prescriptions are on the money.Any Prime Minister of Barbados,a small open economy,who either is unable or unwilling to assume the full control of the MoF is doomed to eat humble pie.This PM is hopelessly at the mercy of 2 wannabes and the IMF is fully aware that the 2 are juggling GDP data.In short,neither Worrell nor Sinckler are credible sources of the Barbados economy and Stuart is clueless.Poor Barbados.
Mia and BLP must now prepare for an election after NOV 2016, early in the first qtr of 2017. The 50th independence celebrations beginning NOV 2015 to NOV 2016, largesse in abundance. You can determine where the money for the 50th will come from.
Mia and BLP be armed don’t be side by the unions or Rev Durant
Gabriel, Barbados is a small open economy, or is it a small shallow economy? You better kiss that feet of those tourist who traverse the shores of Barbados annually, because without their cold cash God only knows where would the island of Barbados be today.
February 2016 is when pension eligibility kicks in. Anything could happen after that.
Big Brown @ 6:18 pm:
I think you’re right!
That is the signpost date. After that any number can play and before that look out for the starting up of several projects with high consultancy budgets or ones amenable to hiding significant overflows. When we hear of a bunching of such projects coming on stream, Look out, the time is near.
Big Brown July 18, 2015 at 6:18 PM #
All that is needed is legislation to change politicos eligibility for pension to the same age as the general population. Such a move would be welcomed by the masses.
The below excerpt was taken from the “Financial Statement and Budgetary Proposals,” which was delivered by Chris Sinckler on Monday, June 15, 2015.
“Today, I am able to say to you, to this Chamber and to the whole of Barbados that the HOME GROWN ECONOMIC STABILIZATION AND RECOVERY PLAN WHICH WE DEVISED RIGHT HERE IN BARBADOS (THE BARBADOS PROGRAMME) IS WORKING. As a result of our 19 month programme, the Barbados dollar is safe, the fiscal deficit has been cut by nearly half and is well on the way to more sustainable levels, and a tourism-led recovery in the Barbados economy is underway.”
Perhaps the name “Stinkliar” is befitting for Chris.
If you have a deficit at your business then you have a fixed set of options:
Increase revenues (economic growth, taxes, fees, levies, removal of tax allowances , exemptions for a government)
Cut expenditure (mainly salaries and wages, social services and now debt service)
sell assets
renegotiate debt with your creditors, which is really expenditure cutting.
Its really a matter of which combination the government chooses, there are no whole heap of choices. So to be frank David I see this whole homegrown vs IMF thing as bare boo and political, hyper government criticism, folly. As a result of this debate I have scoured the IMF website and the government is in no sort of IMF programme. If they choose to follow IMF advice thats their business, and if its good advice good for barbados. but I don’t see how the IMF advice will stray far from some combination of those four options, so any program will likely bare resemblance to the imf recommendations.
I am pleased at the substantial deficit reduction in the last fiscal year, and the further reductions proposed in the budget. any combination will have costs and benefits and what we do is easy just sit back and yap. but the combination worked in achieving a major deficit reduction last year. but I agree that the challenge to hold the line and achieve the reduction and the potential vulnerabilities make the task daunting. the politics is going to be very difficult especially with the no pain but gain outlokk we get in the local media. They got a 5% or so of gdp over the last year, if they can get another two percent or so off this year, we will be on better ground on at least one inidicator. so i will wait and see.
The government has argued that growth led by domestic spending will damage scarce reserves. I would like moremoney on the ground but not sure I can say they are wrong. I have not heard any of the experts question that we spend 80 cents or more of every dollar on imports. The growth options are therefore limited to forex earning sectors.
They dont seem to want to do debt restructuring. Having gone through some in my business I know there are major costs to that and you still have to do options one to three if you are not going to wind up in the same problem.
I hope they show some more pragmatism and engage in asset sales as it will be likely be less painful than some of the other options.
Busy business weekend
@businessman
You may be correct by illustrating the theoretical. The missing variable though is the confidence of the people. It must be nurtured becuase without it we will struggle. We are not in an IMF program but we are following the script.
On 19 July 2015 at 15:29, Barbados Underground wrote:
>
businessman July 19, 2015 at 11:29 AM #
“So to be frank David I see this whole homegrown vs IMF thing as bare boo and political, hyper government criticism, folly. As a result of this debate I have scoured the IMF website and the government is in no sort of IMF programme. If they choose to follow IMF advice thats their business, and if its good advice good for barbados. but I don’t see how the IMF advice will stray far from some combination of those four options, so any program will likely bare resemblance to the imf recommendations.”
Perhaps you have never heard of CARTAC.
Surely, you have no understanding of economic issues, because I’m sure if you did, and listened to the budget, read and understood the CB’s second quarter report and now the IMF Article IV Consultation report, you would certainly have not wrote the above comments.
There are blatant inconsistencies contained therein these three economic analyses.
Essentially, there are always two sides of a story and when an individual prefers to choose one side, rather than look at both scenarios in an effort to make an objective assessment, that individual is demonstrating he/she has a particular bias.
Maybe there is a reason why you choose to be biased…….. that’s your business.
However, if you are indeed a business man, you need to be more rational in your thinking and do not rely solely on the government for information. You need to read all the economic data and information available to make a rational, objective and informed assessment.
There may be no alternative but to say this is a home-grown programme when the measures taken match those recommended by the IMF so closely, is hypocrisy.
@ businessman
Increase revenues (economic growth, taxes, fees, levies, removal of tax allowances , exemptions for a government)
Cut expenditure (mainly salaries and wages, social services and now debt service)
sell assets
renegotiate debt with your creditors, which is really expenditure cutting.
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What happened to the BEST POSSIBLE alternative (which happens to be missing from your ‘list’?)
Namely…..
Increase (maximise) efficiency /productivity.
This is the whole basis upon which a MERITOCRACY is founded. But we seem to have this idea that ANYTHING ELSE except pay for MERIT is on the table.
“By the sweat of a man’s brow should he eat bread.”
No sweat (productivity) no bread; Nuff sweat nuff bread.
…anything else is bare shiite…..
@Bush Tea
The recent Central Bank review shows national productivity has flat lined sine the 90s.
“However, if you are indeed a business man, you need to be more rational in your thinking and do not rely solely on the government for information. You need to read all the economic data and information available to make a rational, objective and informed assessment.”
To the eponymous Mr. Businessman:
Please respond to the above criticism from Artaxerxes @ July 19, 2015 at 12:24 PM.
How can the government be making ‘rational’ and informed decisions to stem the tide of economic dislocation using bogus data on the economy and monetary system prepared by a lying unprofessional joker calling himself Dr. Worrell?
Do you understand the serious implications of ‘printing money’ in a small open economy with very low productivity indicators and dwindling export earnings?
We have listened to the Budget, read the Central Bank’s second quarter report and now the IMF Article IV Consultation report, to give ourselves an idea on how the economy is performing as a result of government’s economic policies.
To get a better understanding of the island’s economy, we must take all the economic data and relevant information into consideration. To put things in perspective, I will first examine the losses incurred by the Central Bank of Barbados (CB).
Recall, with the exception of 2008 and 2010, the Central Bank (CB) has been consistently incurring losses, as follows:
2008 ………. 4,560,882
2009 ………. (9,441,376)
2010 ………. 2,970,794
2011 ………. (1,962,752)
2012 ………. (2,660,776)
2013 ………. (3,654,808)
2014 ………. (7,347,237)
We must determine if government’s financial reporting is transparent as it relates to the CB incurring losses on a consistent basis and what implications such losses would have on monetary policy and the exchange rate?
Under ordinary circumstances a CB’s operations should be profitable with a “core level of earnings being derived from seigniorage.” (Profit earned by the government derived from the difference between the cost of printing money and its market value).
One of the reasons why the CB has been incurring losses may be attributed to quasi fiscal activities (QFA). Within the context of government operations, QFAs are activities the government authorizes the CB to undertake, where prices charged are usually less than the market rate.
Examples include:
1) Subsidized credit (CB providing government with loans at subsidized rates);
2) Non-commercial public services provided by statutory/quasi government organizations; Typical examples would be the Transport Board, National Housing Corporation, National Petroleum Corporation or the Barbados Water Authority providing the relevant services at below market prices, thus providing an implicit price subsidy;
3) Exchange rate guarantees given by the central bank on the repayment of principal and interest on foreign-currency denominated debt of other public sector or private sector entities.
According to IMF Working Paper WP/05/72: “Central Bank Losses and Experiences in Selected Countries”:
“A central bank incurring net operating losses is, effectively, creating liquidity since it is transferring more cash to external entities than it is receiving. Accordingly, when a central bank operates with such losses, and especially when these are significant and ongoing, central bank policy can be affected and the losses may in fact impair the effectiveness of monetary or exchange rate policy.”
@businessman the fact that the MoF and this govt is following IMF advice so closely is a definite sign that this Govt has a) has ran out of options to stabilize this economy on its own b) lost control of this economy in so far as to bring it back to stability and to growth. Implicit in resorting to the IMF is that you are telling the people of Barbados that you are incompetent as a gov’t to handle your own economic affairs!!!!!! It is liken to a driver that can’t drive his own car and wants help driving it!!!!!!. Historically the IMF may advocate growth but always advise programmes that cause pain in the short term which is politically undesirable!!!!!. This is why Owen and the BLP sought to not follow IMF programmes. Owen as an economist spotted problems from internal and external sources in the early that may have affected our economy and implemented measures to lessen the effects on the people of Barbados so that we could ride them out. The Barbados economy is very delicate mechanism that needs to be handled with finesse. Owen understood this and piloted the Barbados economy masterfully. We have no natural resourses, depend mostly on tourism but still have one of the highest standards of living in the Hemisphere!!!!!
Enter the DLP and from the first Budget in 2008 you know they had little clue, the madness started from then. There is no doubt that the global financial crisis of 2007-2008 had an effect everywhere, but of the 200+ countries in the world how many have had serious economic problems that weren’t on the precipice pre-2007? very few. The DLP is using the global financial crisis as a cloak to hide incompetence. It is the actions (or non action) of Fumble and Stinkliar that is causing the economy to go in a downward spiral.
We now come this latest Article IV consultation that among other things recommend divesting state assets (privatization). i waiting for the DEMs to hear what more nonsense they want to tell us now. The IMF that wunna following now advising yuh to do what wunna DEMs say wunna ain’t gine do, wunna blast the BLP on, misguided the people of Barbados about, and win an election on. i want to hear the DEMs 2015 spin on privatization now. I tell yuh, the amount of spin, smoke and mirrors, misdirection, obfuscation the DEMs could start their own movie, a tragedy and a comedy.
As far as I am aware I was referring to the IMF document, or is that a government document.
I trying to read, listen and understand. The governor was at pains in his most recent report to point out that because banks were placing excess liquidity with the central and the bank was using that to fund its purchases of government paper, the liquidity added to the system in barbados by central bank buying of government paper was around 40ml. based on my understanding of this technical matter if the central bank purchases of government paper was heating up the system we would see a spike in inflation and more importantly an increase in retained imports. I can see no evidence of either. maybe one of the experts on those blog can help me understand this a lil better.
In an earlier release the governor had said that the central bank purchases of government paper would allow the country and government to function and not default on debt while the fiscal programme was being undertaken. why should the governor follow the IMF, stop purchases of government paper, let the country default on debt or force an even faster and deeper fiscal adjustment with all the pain we blab about on this blog, if the additional liquidity injected in the system is minimal because the banks are flush anyway. of those course those who are invested in the demise of the administration must hate this.
I am only a businessman without the learning of many of you but I am no fool. I can see the political side of this big as a football. You highlight the scale of the deficit and the adjustment needed, safe in the knowledge that that scale of adjustment is political suicide, and will bring down the government. the central bank policy must be driving the some crazy. Unlike you folks I don’t have all the answers, no political axe to grind, i truing to learn and understand and hope for the best for the country. Not sure that debt default and faster deeper cuts in expenditure are the best for the country.
But wait I thought they were supposed to be following an IMF script. when I read this IMF statement I see clear divides.
David, the shallow, flippant and sometimes downright stupid analysis we get from harry russell, hoyos and others annoys an uneducated fool like me, who looking to them for guidance. A clown like me could see that the IMF wants interest rates to rise in bim, while the government is doing everything to lower them. They removed the minimum savings rates and the central bank is intervening in the tbill market at very low rates. an uneducated ass like me can see that the government is trying to lower interest rates and get the benefit of a debt restructuring without actually engaging in a formal one. i dont know if that is good policy or not. sounds a lil creative though and out of the box thinking.
let them educate me on that strategy rather than the stupid debate about government following IMF when a blind man on a pitch black night can see a clear divide between the government and the imf on interest rate policy, central bank policy and the pace and depth of the fiscal adjustment. ,maybe its all about confidence. that other cop out and excuse for shallowness in dealing with the issues before us.
I see constant references to greece as we discuss barbados. as i read on this issue one of the things i one of greece’s problems is that they use the euro which means they in effect have no central bank. Their debts are in euros, they cant print any euros so they have to get bailouts which come with conditions that require inflicting all manner of pain on the population. most of our debt is local debt as far as i can recall. if that gives us a lil more flexibility why not use it? i am asking .
@businessman
Some believe the government ‘s intervention is self serving to reduce the cost of high debt servicing.
The intellectually and politically backward, bankrupt and discredited DLP and BLP factions have absolutely no vision or cosmology for a brighter and better Barbados, socially, politically, materially and financially. None whatsoever!!
And so long as they exist they will have no vision or cosmology either for a brighter and better Barbados in those terms. None whatsoever!!
As a result, as many hands and as many political strategies as possible must be on deck in the necessary thrust to absolutely permanently remove the DLP and BLP from the political parliamentary landscape in less than three years or not within the next 6 -11 years Barbados will become a virtual failed state.
PDC
businessman July 19, 2015 at 2:40 PM #
“I am only a businessman without the learning of many of you but I am no fool. I can see the political side of this big as a football.”
Apparently, you obviously think many of us as fools. Sir, I hope you appreciate that your political bias can be seen as “big as a football” as well.
+++++++++++++++++++++++++++++++++++++++++
businessman July 19, 2015 at 3:07 PM #
“David, the shallow, flippant and sometimes downright stupid analysis we get from harry russell, hoyos and others annoys an uneducated fool like me, who looking to them for guidance.”
And you mentioned you don’t have a political axe to grind??? Your above comments clearly come from the same script used by “NationBLPnewspaper.”
What annoys me with people like you is the fact you think you are justified in displaying your political bias, while describing those who have views that may not necessarily agree with government’s policy, as being “political” and wanting to see the demise of the government.
And by demonstrating your support for the government, without considering an alternative view, you don’t see yourself as being “political”, but as one who “puts country first.”
My friend, your comments comes directly from the book of political rhetoric the usual supporters of this administration use in their contributions to BU.
businessman July 19, 2015 at 3:07 PM #
“A clown like me could see that the IMF wants interest rates to rise in bim, while the government is doing everything to lower them. They removed the minimum savings rates and the central bank is intervening in the tbill market at very low rates. an uneducated ass like me can see that the government is trying to lower interest rates and get the benefit of a debt restructuring without actually engaging in a formal one.”
<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>>>
Your above comments are not entirely correct (well…… except for “A clown like me” and “an uneducated ass like me” bit…… lol).
There was a reason I mentioned to you that, while commenting on economic data, we should always avail ourselves to ALL THE INFORMATION AVAILABLE ON THE TOPIC, lest we rely only on that information, which may promote our political bias or agenda.
The government or CB did NOT “remove the minimum savings rates”, but RELINQUISHED CONTROL OF DETERMINING DOMESTIC INTEREST RATES on savings.
If you read the April 7, 2015 edition of the Official Gazette, you would have noticed the CB stated that effective April 21, 2015, it would no longer set the minimum savings rate on deposit and going forward, “each commercial bank and deposit-taking institution would be responsible for setting its own interest rate.”
This policy gave commercial banks the authority to determine their own rates and the ability to adjust them accordingly. Hence, the first thing the banks did was to lower interest rates on savings and increased interest rates on loans, mortgages, etc.
It also paved the way for the CB to issue bonds, which were previously offered in December 2014, at interest rates higher than what the banks are presently offering on savings and attractive enough to solicit investment.
It is also erroneous to suggest “the government is trying to lower interest rates and get the benefit of a debt restructuring without actually engaging in a formal one,” especially taking into consideration the CB relinquished control of interest rates and Barbados has had consecutive credit rating downgrades, which ultimately increased the costs associated with borrowing.
Instead, the cost of borrowing would be largely determined by the loan markets (probably US interest rates) and how investors perceive the strength of the Barbadian dollar.
Your comments relative to “the central bank is intervening in the tbill market at very low rates” was correct.
However, this policy initiative was announced in April 2013…….TWO YEARS AGO.
Perhaps you read an article dated Friday, April 5, 2013 on “Central Bank News.Info,” which stated the CB was “launching a new approach to influencing interest rates by intervening directly in the market for Treasury bills instead of using the minimum deposit rate as a guide to affecting commercial banks’ lending rates and thus economic activity.”
The article also referred to a Central Bank Working Paper, entitled “A Framework For Interest Rate Policy In Barbados,” written by Delisle Worrell, Michelle Doyle-Lowe, Anton Belgrave, Darrin Downes And Kester Guy.
The paper articulated this policy and explained “the rationale behind taking an alternative approach to interest rate policy, which fits the Barbadian reality.”
The CB’s decision of April 7, 2015 relative to relinquishing control of interest rates, obviously negates the previous decision of April 2013, as it relates to controlling interest rates by introducing T-bills in the market.
These are pertinent facts that “an uneducated ass” (your words, not mine) has obviously overlooked.
businessman July 19, 2015 at 2:40 PM #
“I trying to read, listen and understand. The governor was at pains in his most recent report to point out that because banks were placing excess liquidity with the central and the bank was using that to fund its purchases of government paper, the liquidity added to the system in barbados by central bank buying of government paper was around 40ml. based on my understanding of this technical matter if the central bank purchases of government paper was heating up the system we would see a spike in inflation and more importantly an increase in retained imports. I can see no evidence of either. maybe one of the experts on those blog can help me understand this a lil better.”
<<<<<<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>
You said you “read and understand.” Surely you must remember that on Monday, September 29, 2014, the CB governor admitted that local banks were skeptical to invest in government long-term securities.
You must also be aware that due the credit rating downgrades, which increased to cost of borrowing, the government relied heavily on borrowing from the NIS fund to finance the deficit.
The CB also engaged in the printing of money to finance the deficit as well; but this was denied by Governor, Dr. Worrell. As I mentioned in a previous contribution, with the exception of the years 2008 and 2010, the CB has been consistently incurring losses.
By the end of December 2014, the CB increased its stock of government debt by approximately $386.3M, increasing from $223.7M in 2011 to $610M.
Perhaps you would want to share with BU where, in your opinion, the CB was able to acquire these funds over the 3 year period to purchase government paper, against the background of incurring losses and in the absence of loan financing.
Per Barbados Today ”Ministry of Health transitioning to regulator of health services. Health Minister John Boyce has announced that the Ministry of Health is transitioning from the main role of healthcare provider to that of regulator of health services.”
XXXX
Yup, privatization of the healthcare in Barbados. Transport Board next.
Bajans cyan wait until next election and vexxxxxxxxxx.
Why is the media ging the central bank and minister of finance a pass? We should be having an ongoing discussion about the economy to maintain the tension.
The blogmaster invites you to join the discussion.