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IMF Gives Green Light to BERT BUT…

The blogmaster must be honest and admit that the reform and structural changes required to transform the Barbados economy and society will have its negative impact. No austerity program can be rolled out without negatively affecting people. Unless one is rabidly partisan or dishonest it is obvious the work rate of the BLP government is…

The blogmaster must be honest and admit that the reform and structural changes required to transform the Barbados economy and society will have its negative impact. No austerity program can be rolled out without negatively affecting people. Unless one is rabidly partisan or dishonest it is obvious the work rate of the BLP government is much higher than that of the Stuart led government.  The IMF has given the thumbs up to targets met under the BERT plan. We look forward to the plans to encourage investment to fuel growth.

What the blogmaster will not ignore are decisions that expose the government as engaging in more of the same. A comment posted on another blog by SSS sums it up beautifully.

We know the IMF calling the shots. I have no problem with her BERT plan or the fact that restructuring is necessary. I got a serious issue with her laying off people, and hiring her people; ensuring that her father gets a special gift from her in the form of a Knighthood so he can strut his stuff through immigration officials without check because he is no longer to function as an ordinary citizen;how she did not do enough to ensure the layoff process was fair; how she proposing wire tapping and ensuring that another one of her loyals, Dottin, is not too far from her side when she brings it into fruition. I got a serious problem with the transparency she has shown in writing off tax defaulters millions owed. I want her to publish the names because if you forgiving them and they already sleeping better, you should not have a problem publish names of those who benefited under her tax amnesty – Sunshine Sunny Sunshine (SSS)

IMF Staff Concludes Visit to Barbados

February 12, 2019

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board meeting.
  • Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform program.
  • All indicative targets for end-December under the EFF have been met.
  • Two key pieces of legislation—the Public Financial Management Act, and the Town and Country Planning Act—were adopted in early 2019.

At the request of the Government of Barbados, an International Monetary Fund (IMF) team led by Bert van Selm visited Bridgetown from February 5–8, to discuss implementation of Barbados’ Economic Recovery and Transformation (BERT) plan, supported by the IMF under the Extended Fund Facility (EFF). A concluding meeting was held with Prime Minister Mottley in Washington D.C on February 11, 2019. To summarize the mission’s findings, Mr. van Selm made the following statement:

 

“Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform program.

“All indicative targets for end-December under the EFF have been met. The program target for Net International Reserves was met by a wide margin, as was the target for the Central Bank of Barbados’ Net Domestic Assets (NDA). The target for the primary surplus for end-December 2018 was also met by a wide margin.

“Good progress has been made in implementing end-December 2018 structural benchmarks under the EFF. Two key pieces of legislation—the Public Financial Management Act, and the Town and Country Planning Act—were adopted in early 2019.

“Preparation of the budget for FY2019/20 targeting a primary surplus of 6 percent of GDP is well underway. Full year effects of reforms set in motion during the current (2018/19) fiscal year, including the introduction of several new taxes and ongoing streamlining of public sector work force at state-owned enterprises, should help achieve this target. A detailed assessment of the budget will be made when it is finalized.

“Progress being made by the authorities in furthering good-faith discussions with external creditors is welcome. Continuing open dialogue and sharing of information will remain important in concluding an orderly debt restructuring process.

“The team is looking forward to return to Barbados in May to conduct the discussions for the first review under the EFF and would like to thank the authorities and the technical team for their openness and candid discussions.”

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

Phone: +1 202 623-7100Email: MEDIA@IMF.org

277 responses to “IMF Gives Green Light to BERT BUT…”

  1. Hal Austin Avatar
    Hal Austin

    The population of 280000 people is the biggest it has ever been in our history. Is the president saying that at no time in history Barbados was capable of supporting itself? Has Barbados always been a failed state? Is sovereignty a mirage?
    If we need a bigger population, what is acceptable? And what would be the purpose? Tax revenue? Manufacturing output? Unfilled job vacancies?
    We need proper economic explanations, not rhetoric.

  2. TLSN Avatar
    TLSN

    The reaction is mixed concerning Mia’s policies. However, there is common consensus from the phone-in-shows through to the limited print journals that Bert is hurting badly a large majority of the masses.

    On my return to Barbados – as has been noted in the press; there has been a mass clean up of Barbados. From what little I have seen of Barbados it looks extremely clean when compared to my last visit. I also noted that a lot of bush land has been cleared. A number of individuals were employed to carry out this duty. Apparently, they are going to be retained on a one week on; one week of basis.

    When Mia came into power, I suggested that it was critical to commence the regeneration of Barbados with similar low-hanging low cost work schemes.

    With regard to the recruitment of CARICOM workers. It puzzles me why Mia should want to invite these people to Barbados. The recent clean up campaign has proven that Barbadians are not afraid of hard work. The bulk of workers required would be agricultural workers. We need to find a way to reward our own so that they can benefit both financially and at the same time have a business stake within the agricultural industry.

  3. Hal Austin Avatar
    Hal Austin

    @TLNS

    Where is the BERT economic growth going to com from? Population growth? The president must spell out her ideas.

  4. David Avatar
    David

    You mean the prime minister?

  5. Hal Austin Avatar
    Hal Austin

    The president must level with the people of Barbados. What does she mean? This is not the first time she has talkd about the size of the Barbados population; she must fill in the missing gaps.
    What dos she mean by ‘capacity’ and when did she realise this? Dos this man th promiss of BERT were all bogus? If our economic future is tied up in CARICOM, why has it taken her nearly two years to say this, and how does she plan to improve matters?
    It will nd in tears.

    Barbados does not have the capacity, given its population, to go it alone to achieve economic development, and thus should be more welcoming of its regional neighbours, said Prime Minister Mia Mottley, as Parliament moved to tweak the law governing the entry of skilled CARICOM nationals.

    Introducing the CARICOM Freedom of Movement of Persons Amendment Bill to the House of Assembly this evening, she declared: “Barbados has a trade surplus with one region in the world, and that is the Organisation of Eastern Caribbean States, as well as with Guyana.
    “So when xenophobic staements come, we forget to recognise our economic stability is linked to our neighbours, and Trinidad is where the second or third largest source of investment into Barbados comes from.
    “And when we add that one in every five visitors to Barbados comes from the CARICOM region, we begin to understand why the political party I lead has a constitutional objective to pursue regional integration.
    “We cannot survive only on the 280,000 people who live here, because we do not have enough economic activity on our own.”
    The new bill clarifies some aspects of the original freedom of movement legislation as well as makes some new provisions.

    The Prime Minister said: “The bill before us defines very clearly what is meant by an agricultural worker, an artisan, an artist, a security officer, and we have also used the opportunity to clean up aspects of its functioning, to define what is a “community national”, a “qualifying CARICOM State” and we are also allowing for provisional entry for dependents of the person (for example spouses or young children), and over the last 18 months we have brought clarity to the Protocol on Contingent Rights to allow people to see what benefits they can get in moving from country to country.”
    Mottley noted Barbados was once a major exporter of labour in the years immediately following emancipation in 1838, and that once again, one of the dilemmas the region faced was that countries like Guyana and Suriname, despite having enormous potential for economic growth following the discovery of significant oil reserves, are short on people with the requisite skills to profit from it.
    The Prime Minister said: “Guyana is the size of England, Scotland and Wales combined, but while the UK has a population of 64 million, Guyana has 741,000 people.
    “While Suriname is bigger than the Netherlands but its population is 563,402.
    “Ironically, they are the least populated countries in CARICOM but they are expected to grow to unprecedented levels shortly.
    “Even with the best will in the world, we will have to work together, because if we don’t, nature abhors a vacuum and others will come in and fill it.

    “We have to recognise that there is great strength in unity and we need to build out a community greater than the sum total of us all.
    “The precept upon which the Revised Treaty of Chaguaramas was signed says we will treat each other better than anyone else who does not belong to the grouping, the most favored nation precept, so if we take that spirit, we must recognise we need to look at each other before we look at anyone else.
    “When the two energy ministers from Barbados and Trinidad signed an agreement to work together a year ago, it recognised Tirinidad has a century of working with oil and natural gas while Barbados does not.
    “It is better to work together than to have someone from ‘far and away’ to work with us and benefit themselves more than we do.”
    But she stressed that nothing in this amended law gives people who may be deported the right to stay.
    “So in all that we are doing, a country still has the right to protect itself from those who were deported for any particularly serious purpose, and the country has the right to take protective action to protect its borders, this normally relates to national security but also public health on occasion.”(Quote)

  6. Mariposa Avatar
    Mariposa

    Mia is over her head implementing policies which she does not have a clue
    All this free movement will end up like the Haitian debacle
    People does not enter a country just to be a helping hand for the new country but look for all the possible opportunities available to help themselves
    The long and short being people moving away from their homeland are seeking greener pastures
    Where are the greener pastures available for any one
    Right now the grass is dried and withered

  7. David Avatar
    David

    Who is the president?

    Who is the buffoon?

    Always so condescending for a big Rh man.

  8. Hal Austin Avatar
    Hal Austin

    Let us congratulate the Jamaicans for getting a licence to operate a bank in the UK. This is great news. Even though I dislike digital banking, as soon as it comes on stream I shall be opening an account with them. This is genuinely punching above your weight.

  9. David Avatar
    David

    Let us congratulate the Barbados government for signing a memorandum of understanding to share High Commissions/Embassies in the emerging markets of Africa and Asia. It embodies the spirit and mandate of Caricom.

  10. Hal Austin Avatar
    Hal Austin

    When are we going to get a revised BERT plan?

    Australia signals it may resort to QE after economic hit from virus
    Jamie Smyth reports from Sydney
    Australia’s central bank forecasts the coronavirus will knock at least half a percentage point off gross domestic product in the first quarter and signalled it may have to launch a quantitative easing programme to boost the economy.
    Guy Debelle, deputy governor of the Reserve Bank of Australia, told parliament the bank had capacity for only one more interest rate cut, which would reduce official rates to a new record low of 0.25 per cent.
    “Beyond that, we will have to consider quantitative easing,” said Mr Debelle, who spoke to MPs late on Wednesday following the RBA’s rate cut on Tuesday, which reduced official interest rates to a record low of 0.5 per cent.
    He said he did not think the RBA would consider negative interest rates.
    Economists are forecasting the economy will contract in the first quarter, raising concerns that Australia could experience its first recession in 29 years if the coronavirus outbreak is not brought under control speedily.
    Meanwhile, Australian authorities confirmed on Thursday that a 95-year-old nursing home resident who died on Tuesday had tested positive for the virus, making her the country’s second Covid-19 fatality.(Quote)

  11. Hal Austin Avatar
    Hal Austin

    The coronavirus pandemic is a human tragedy of potentially biblical proportions. Many today are living in fear of their lives or mourning their loved ones. The actions being taken by governments to prevent our health systems from being overwhelmed are brave and necessary. They must be supported.
    But those actions also come with a huge and unavoidable economic cost. While many face a loss of life, a great many more face a loss of livelihood. Day by day, the economic news is worsening. Companies face a loss of income across the whole economy. A great many are already downsizing and laying off workers. A deep recession is inevitable.
    The challenge we face is how to act with sufficient strength and speed to prevent the recession from morphing into a prolonged depression, made deeper by a plethora of defaults leaving irreversible damage.
    It is already clear that the answer must involve a significant increase in public debt. The loss of income incurred by the private sector — and any debt raised to fill the gap — must eventually be absorbed, wholly or in part, on to government balance sheets.
    Much higher public debt levels will become a permanent feature of our economies and will be accompanied by private debt cancellation.
    It is the proper role of the state to deploy its balance sheet to protect citizens and the economy against shocks that the private sector is not responsible for and cannot absorb.
    States have always done so in the face of national emergencies. Wars — the most relevant precedent — were financed by increases in public debt. During the first world war, in Italy and Germany between 6 and 15 per cent of war spending in real terms was financed from taxes.
    In Austria-Hungary, Russia and France, none of the continuing costs of the war were paid out of taxes. Everywhere, the tax base was eroded by war damage and conscription.
    Today, it is by the pandemic’s human distress and the shutdown. The key question is not whether but how the state should put its balance sheet to good use.
    The priority must not only be providing basic income for those who lose their jobs. We must protect people from losing their jobs in the first place. If we do not, we will emerge from this crisis with permanently lower employment and capacity, as families and companies struggle to repair their balance sheets and rebuild net assets.
    Employment and unemployment subsidies and the postponement of taxes are important steps that have already been introduced by many governments. But protecting employment and productive capacity at a time of dramatic income loss requires immediate liquidity support.
    This is essential for all businesses to cover their operating expenses during the crisis, be they large corporations or even more so small and medium-sized enterprises and self-employed entrepreneurs. Several governments have already introduced welcome measures to channel liquidity to struggling businesses. But a more comprehensive approach is needed.
    While different European countries have varying financial and industrial structures, the only effective way to reach immediately into every crack of the economy is to fully mobilise their entire financial systems: bond markets, mostly for large corporates, banking systems and in some countries even the postal system for everybody else.
    And it has to be done immediately, avoiding bureaucratic delays. Banks in particular extend across the entire economy and can create money instantly by allowing overdrafts or opening credit facilities.
    Banks must rapidly lend funds at zero cost to companies prepared to save jobs. Since in this way they are becoming a vehicle for public policy, the capital they need to perform this task must be provided by the government in the form of state guarantees on all additional overdrafts or loans.
    Neither regulation nor collateral rules should stand in the way of creating all the space needed in bank balance sheets for this purpose. Furthermore, the cost of these guarantees should not be based on the credit risk of the company that receives them, but should be zero regardless of the cost of funding of the government that issues them.
    Companies, however, will not draw on liquidity support simply because credit is cheap. In some cases, for example businesses with an order backlog, their losses may be recoverable and then they will repay debt.
    In other sectors, this will probably not be the case. Such companies may still be able to absorb this crisis for a short period of time and raise debt to keep their staff in work. But their accumulated losses risk impairing their ability to invest afterwards.
    And, were the virus outbreak and associated lockdowns to last, they could realistically remain in business only if the debt raised to keep people employed during that time were eventually cancelled.
    Either governments compensate borrowers for their expenses, or those borrowers will fail and the guarantee will be made good by the government. If moral hazard can be contained, the former is better for the economy.
    The second route is likely to be less costly for the budget. Both cases will lead to governments absorbing a large share of the income loss caused by the shutdown, if jobs and capacity are to be protected. Public debt levels will have increased. But the alternative — a permanent destruction of productive capacity and therefore of the fiscal base — would be much more damaging to the economy and eventually to government credit.
    We must also remember that given the present and probable future levels of interest rates, such an increase in government debt will not add to its servicing costs. In some respects, Europe is well equipped to deal with this extraordinary shock. It has a granular financial structure able to channel funds to every part of the economy that needs it. It has a strong public sector able to co-ordinate a rapid policy response.
    Speed is absolutely essential for effectiveness. Faced with unforeseen circumstances, a change of mindset is as necessary in this crisis as it would be in times of war. The shock we are facing is not cyclical. The loss of income is not the fault of any of those who suffer from it.
    The cost of hesitation may be irreversible. The memory of the sufferings of Europeans in the 1920s is enough of a cautionary tale. The speed of the deterioration of private balance sheets — caused by an economic shutdown that is both inevitable and desirable — must be met by equal speed in deploying government balance sheets, mobilising banks and, as Europeans, supporting each other in the pursuit of what is evidently a common cause.(Quote)

  12. Hal Austin Avatar
    Hal Austin

    Here is what a former journalist, turned academic economist, has to say about the UK economy. Maybe now our tourism officials will get rid of their fantasy that tourism will return to normal after the coronavirus crisis. Are we going to get a revision of BERT?

    The UK economy is plunging into a deeper recession than the 2008-09 financial crisis, according to the most reliable data published so far, with unemployment surging and the public finances sliding sharply into the red because of the coronavirus pandemic.
    Economists said there was huge uncertainty over the depth of the coming recession and the speed of the subsequent recovery. Some predict the downturn will be short and sharp, but fear that like a decade ago, there will also be a painful transition to a persistently weaker path for economic growth.
    With most UK households under lockdown, high streets shuttered except for essential stores, and many companies struggling to keep going, large parts of the economy are grinding to a halt.
    Diane Coyle, professor of public policy economics at Cambridge university’s Bennett Institute, said the interconnected nature of the modern economy meant everyone was affected by the coronavirus crisis.(Quote)

  13. Hal Austin Avatar
    Hal Austin

    This government shows consistent economic incompetence, which boggles the mind. If they really want an austerity economy, then sell non-core assets, such as the 49 per cent share in LIAT. But, for reasons known only to their tiny minds, there is a belief that unless they have a major share in LIAT the struggling airline will stop coming to Barbados, a major destination. Nonsense.
    Sell the shares – in fact, auction them on the world market and sell to the highest bidder. LIAT will not miss a single flight to Barbados, unless there is an act of God.

    Barbados is putting $3 million into the operations of regional airline LIAT to keep it in the air during the COVID-19 crisis.
    Minister in the Ministry of Economic Affairs Ryan Straughn won approval yesterday to have the money transferred from the Consolidated Fund “to ensure the Government of Barbados can support the operations of LIAT”
    It was one of three money resolutions passed in the House of Assembly, and Straughn said it was being requested “in response to COVID 19”.
    He said: “There are limited aircraft coming into the country and goods and people still need to be transported around the region in a short space of time.”. (Quote)

  14. Hal Austin Avatar
    Hal Austin

    Five years ago this email was sent to a prominent Barbadian economist. The central issue remains today.

    A happy, healthy and prosperous New Year to you. Times have changed and we, even little islanders, must change with the times. There is nothing wrong with opening your mind to new ideas.
    In reply to Don Marshall, printing money – literally or electronically – does not pose any real insurmountable danger, as the latest theories have confirmed.
    We are in a low interest environment because we have learned to manage inflation, the major threat from the additional supply of liquidity.
    We can manage the over supply by removing some of the liquidity from the retail banks and managing bank lending or/and managing interest rates. I prefer a prices and incomes policy so that asset prices will not necessarily inflate, leading to demands for wage increases.
    That is the lesson of monetary policy globally – France, Australia, US, UK, eurozone, Japan, and other major economies.
    As to the warehousing of foreign reserves, we can best manage this through futures contracts and credit default swaps freeing up money to invest in local industry and infrastructure.

    Hal

  15. Hal Austin Avatar
    Hal Austin

    A Prime Minister Tries to Storm-Proof Her Island’s Finances
    Growing up in Barbados, Mia Mottley lived through the effects of climate change. Now she’s devising ways of shielding the nation’s budget from weather-related ruin.
    By Ezra Fieser
    4 April 2020, 10:00 BST

    Mia Mottley’s gravelly voice rang with urgency. Standing at the podium at the United Nations, the prime minister of Barbados was warning of the dangers her island faced as storms swollen by warmer oceans tore through the Caribbean. “This is a matter of life or death for us,” she said.

    It was late September 2018 hurricane season and Barbados was flooding. A tropical storm threatened neighboring St. Lucia. On the other side of the globe, a typhoon took aim at Japan. The confluence of disasters was almost unthinkable. Almost. “This is not a science fiction movie,” Mottley said. “This is not a cartoon. And if I ever thought that it was a fantasy, what transpired in the last 24 hours across the different poles of the world has reminded me that it is not.”

    Mottley had won office only four months earlier, becoming her nation’s first woman leader. This was her inaugural address to the UN, but she spoke with conviction, her words charged by decades of pent-up concern about a changing climate. She had seen for herself how flying fish, a once plentiful delicacy, were avoiding warming coastal waters, how rising seas were eating away at the wide white-sand beaches she’d known growing up, and how droughts were drying up aquifers that provide the islanders’ drinking water.

    Financially shaky Barbados had escaped the wrath of disastrous hurricanes, but for how much longer? “We cannot plan our affairs or that of our people on the basis of luck,” she said. “It must be on the basis of policy and decisive action, but above all else on the basis of caring and empathy. I ask the world to pause, pause, and just get this one right.”

    In front of her in the UN’s vast General Assembly hall, half the seats were empty. Some in the audience of dignitaries slumped in their seat. Others milled about. The signs were clear: Mottley was on her own. She returned to Barbados that day to work on a plan to protect the island, a plan of her own.
    With wildfires ripping through Australia and the Amazon and along the U.S. West Coast, rising seas threatening small islands, and supercharged storms killing thousands and costing billions of dollars, markets and public officials are grappling with how to respond. There’s little that the prime minister of a country of some 290,000 people can do on her own to cool the world. But she can prepare her island nation for the inevitable crisis and its financial impact.

    Now 54, Mottley has become a champion of what are known in sovereign debt contracts as natural-disaster clauses, measures that give the government a break from principal and interest payments in the event calamity strikes. Over the course of a year and a half of contentious negotiations to restructure Barbados’s sovereign debt, Mottley was finally able to persuade creditors to accept the clauses last October. She also needed to win the support of Bajans, as the people of Barbados are called, many of whom lost money when the government defaulted on its Treasury notes.
    “You’re not walking away from the liabilities, but you are walking away from the immediacy of the payments to create the cash flow that you need”
    But in the process, Mottley says, Barbados has developed a model for how countries can protect their finances from climate change, especially neighboring Caribbean islands, which have been prone to default. “You’re not walking away from the liabilities, but you are walking away from the immediacy of the payments to create the cash flow that you need,” she says, seated at the head of a conference table at government headquarters in Bridgetown.
    Under the deal the government and its creditors finalized in October, Barbados would get a two-year payment moratorium in the event of a disaster severe enough to trigger a payout from the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Co., a risk pool that provides coverage for calamities. The Mottley clauses, which now cover about 80% of the country’s outstanding debt, would free up as much as $700 million to spend on rebuilding if weather events cause the government to enact them in the next five years. That’s equivalent to almost 15% of the economy that otherwise would go to debt payments. After the moratorium, payments would resume, including on accrued interest.
    That sort of breathing space could preserve the ability of Barbados and other tiny nations to respond to ever-more-frequent disasters. Hurricanes have caused more than $212 billion in losses and damages in the Caribbean since 1980, according to the Center for Disaster Management and Risk Reduction Technology in Karlsruhe, Germany.
    The region is strewn with examples of the link between disaster and debt. The Bahamas, 1,400 miles northwest of Barbados, is borrowing as much as $300 million to deal with 2019’s Hurricane Dorian, the worst in its history. In 2017, Hurricane Maria crippled Puerto Rico’s ability to pay down the more than $70 billion in debt owed by the U.S. commonwealth at the time. Again and again, natural disasters have held back economic growth and, coupled with fiscal mismanagement, pushed countries into untenable situations.
    Caribbean countries have restructured debt more than a dozen times in the past 20 years. “We live in such a bad neighborhood in terms of our vulnerabilities,” says Monica La Bennett, a vice president of the Bridgetown-based Caribbean Development Bank. “Governments, multilateral institutions, and the financial markets are recognizing that this is now a new normal, and so these clauses have become more important as part of the armory these countries can put in place.”

    Mottley has lived under the specter of a natural catastrophe for all her life. At the decaying three-story concrete government headquarters in the capital, she recalls how two decades ago, when she was minister of education, she warned that a bad storm could set back the country, once one of the most prosperous in the eastern Caribbean because of a thriving tourism industry and its offshore banking businesses. “The gains of development you thought you had are immediately whittled away in hours,” she says.
    The 166-square-mile pear-shaped island sits closer to South America than the U.S. That’s put it outside the main Atlantic hurricane belt, sparing it so many times that locals quip, “God is Bajan.” And it can look that way. Across from Mottley’s offices, sailboats bob in the clear waters of a horseshoe-shaped bay while cruise ships the size of office buildings dock in the distance.
    But Barbados is small, flat, and vulnerable. Most of the population lives near the coast. Some Bajans live in rickety wooden homes known as chattel houses, their design dating to days when sugar plantations dominated the island and many residents were former slaves. “Nature—and what it brings with it—was our greatest threat,” Mottley says.
    In conversation, Mottley, who earned a law degree from the London School of Economics and Political Science in 1986, switches fluidly from climate science to international finance to economic policy. She wears polygonal glasses that contrast with a round face, and an occasional smile reveals a gap between her front teeth.
    Mottley’s immersion in Barbadian politics began early. Her grandfather was Bridgetown’s first mayor. Her father served as consul general in New York, where Mottley studied at the United Nations International School. She entered politics before turning 30, becoming one of the youngest education ministers in the country’s history. She rose to become leader of the then-minority Barbados Labour Party in 2013.
    By 2017 she was already hatching a plan to turn the country around. The economy had stopped growing a decade or so earlier, infrastructure was in such disrepair that sewage leaked into the sea, and the country’s debt-to-gross domestic product ratio was surpassed only by Japan and Greece.

    The economy of the former British colony depends massively on tourism, so when the financial crisis came along, it ravaged international travel. Growth contracted and didn’t return until 2015. The travel and tourism industry supports more than a third of the nation’s $5 billion GDP. In recent years, the number of foreign visitors has risen to more than 1.5 million annually. The coronavirus pandemic has hit the island hard. Tourists canceled thousands of hotel reservations in March, according to the Barbados Hotel & Tourism Association, even as cruise lines dropped voyages to the Caribbean, including Barbados, where some 800,000 passengers normally disembark each year.

    The year before the 2018 election, as leader of the opposition, Mottley recruited a team of advisers that included Avinash Persaud, a native Barbadian, who’d spent years abroad as an investment banker at global heavyweights including State Street Corp. and JPMorgan Chase & Co., winning recognition for his work on risk modeling.
    As Mottley’s team settled down to work, Persaud and the others couldn’t ignore what was going on around the region. The 2017 Atlantic hurricane season brought 10 of them, plus a handful of tropical storms that wreaked havoc in the U.S., the Caribbean, and Central America. Hurricanes Irma and Maria, Category 5 monsters, formed within days of each other, severely damaging Caribbean and Atlantic islands and the U.S. mainland. Irma destroyed tiny Barbuda. Maria left almost 3,000 dead in Puerto Rico. “It was just a horrific year,” Persaud says. “It led to a complete rethinking.’’

    Mottley was already familiar with debt clauses that could afford protection against storms. The idea was actually born in neighboring Grenada, a tiny island whose major exports are nutmeg, mace, and newly minted doctors from its medical school. Hurricane Ivan hammered it in 2004, beginning a decade of economic malaise that resulted in a default a decade later.
    During Grenada’s restructuring, financiers sought ways to cushion government indebtedness. A few ideas already existed, including so-called collective action clauses, which give a supermajority of bondholders power to make debt restructurings binding, as well as catastrophe bonds, mainly issued by insurance companies to protect against disasters.

    Grenada’s adviser in the restructuring was White Oak Advisory in London. Managing director J. Sebastian Espinosa, an ex-managing director at investment bank Houlihan Lokey Inc., and his partner David Nagoski, a former U.S. Treasury official, have advised governments throughout Africa and Latin America. In Grenada’s case, they developed a clause that would specifically address the government’s fiscal condition after a hurricane.
    “We wanted to come up with something that was conducive to bolstering resilience to rising climatic risks,” Espinosa says. “Adverse-weather clauses provide vulnerable sovereign debtors with a degree of flexibility by creating built-in buffers that can help them absorb some of the financial impact.”

    Grenada’s restructuring culminated in 2015, and Mottley would build on that work. Having won office in a landslide in May 2018, she promptly announced the island would default on its debt of about $8 billion. She took the born-in-Grenada idea and expanded it, hiring White Oak for Barbados’s restructuring. The company drafted clauses that would include all types of natural disaster and cover almost all of Barbados’s obligations. Mottley sees the clause as a way to free up cash for rebuilding that would otherwise go to creditors. “If you have an event, you need fiscal space,” she says. “How do you best do that but by suspending your debt payments?”
    To get the restructuring done, however, Barbados needed buy-in from skeptical creditors. Mottley also needed the support of her own citizenry, who in a restructuring risked losing money from their savings and from retirement plans.

    In the end, Mottley was able to spread out the pain of austerity. She raised taxes on tourism, reasoning that visitors use infrastructure and services as much as residents, if not more. She also announced that foreign loans and bonds would be renegotiated, a surprise from a country that once boasted of its investment-grade credit rating and history of fiscal prudence.
    Reaching an agreement with foreign holders of dollar-denominated bonds proved more contentious. Mottley tried to sell the natural-disaster clause as protection for lenders, because the government, without the clause, might default on its debts following a big storm.
    Creditors didn’t buy it. Several institutional bondholders formed a committee, including Eaton Vance Corp., Greylock Capital Management, Teachers Advisors, and the Guyana Bank for Trade & Industry. The group wanted Barbados to consider an alternative approach, such as an insurance policy, says Rafael Molina, managing partner at Newstate Partners LLP, an advisory firm in London for the creditors. “I can understand the government of Barbados is concerned about hurricanes, because the threat of climate change is very real,” he says. “But from the beginning, creditors said they didn’t want this clause. There is no market for bonds with these clauses. It has to be driven by the market.”
    Mottley took a hard-line approach. Negotiations dragged on and at times appeared stalled. Having secured a $290 million bailout package from the International Monetary Fund, she could afford to bide her time because Barbados didn’t necessarily need to borrow from capital markets.
    In the end, fatigue set in, Molina says. Despite the creditors’ objection to the clause and to other government demands, they wanted to close the deal. “The thought was, Do we really want this to drag on for two years? We’ll just take it and move on,” he says.
    The creditor committee accepted the government’s deal, with one caveat designed to make the bonds more salable: If natural disaster strikes, Barbados has to notify creditors of its intent to enact the clause. If a committee majority votes against its use, it can’t be enacted.
    The wrangling over the Barbados deal exposed a weakness that may inhibit widespread use of Mottley clauses: The market hasn’t figured out how to price the risk in such cases. So far, though, investors seem welcoming. Similar bonds issued by Grenada were trading around par before the March credit sell-off. Buyers have actually pushed up the price for the new Barbados dollar bond, which matures in 2029 and carries a 6.5% coupon, since it started trading in December.
    Just as Barbados built on Grenada’s experience, other countries may build on Mottley’s. As they consider ways to balance the needs of countries and creditors alike, the IMF and World Bank have held discussions on the clauses. In the Bahamas, where Hurricane Dorian caused $3.4 billion in losses and damages, the government has considered a similar provision in new debt sales.
    For now, the clauses are “experimental,” says Michael Papaioannou, a visiting scholar at Drexel University in Philadelphia and an expert on emerging-market debt. They could become common if multilaterals such as the World Bank and IMF include them in loan contracts. “We are seeing the first steps,” he says.
    “It does require a few pioneers. Financiers love to let someone else be first. They get paid a lot of money, but they’re risk-averse”
    Barbados is determined to keep taking them. Although wide-scale acceptance of the clauses “will take a while,” Persaud says, Barbados plans to include the clause in all future debt sales, blazing a path for other governments. “It does require a few pioneers,” he says. “Financiers love to let someone else be first. They get paid a lot of money, but they’re risk-averse.”
    On a January afternoon in Bridgetown, Mottley gathers her cabinet together to go over the numbers for the coming budget year. She whips out an iPad to check spreadsheets that show debt has declined to 114% of GDP from about 176% when she took office. She points to a part of the spreadsheet that shows how much the country will save if it has to enact the hurricane clause—a bit of certainty amid the wild unpredictability of climate change.
    Outside, a steady, light rain is falling. It’s a welcome respite from a punishing dry spell. But even this relatively small amount of precipitation is inundating streets that have never flooded before. “Even without hurricanes you have normal floods,” she tells the room. She mentions that it’s been six decades since a catastrophic hurricane struck the island. She turns to a wooden tabletop and raps it with her knuckles. “Barbados has been luckier than most.”
    Fieser is a credit market reporter based in Bogotá.

  16. Hal Austin Avatar
    Hal Austin

    The Japanese have just passed nearly US$1trn to stimulate the economy. Is there a lesson here for BERT and Barbados?

  17. Miller Avatar
    Miller

    Why should the Barbados government instruct its Central Bank to ‘Print Money’ for consumers to buy what?

    The hundreds of imported second-hand vehicles ‘lying idle’ in the numerous used cars lots owned by your favourite business clan of new Barbadians?

    What about the few remaining stocks of trinkets and processed food produced in China and imported by foreign-owned wholesalers?

    At this stage of the economic crisis the printing of Bajan Mickey mouse dollars could only help the local agricultural sector by stimulating the production of locally-grown foods which will soon become the saviour of Bajans from starvation and worshipped as the goddess Carmeta

  18. Hal Austin Avatar
    Hal Austin

    Loblaw Companies Ltd. is off the hook for $368 million in taxes, after the Federal Court of Appeal overturned a 2018 ruling that found the company used a Barbados bank as a tax shelter.
    The ruling from a three-judge panel on Thursday sent the matter back to the Minister of National Revenue for reassessment.
    In an emailed statement, Loblaw said that it pays all of the taxes it owes.
    “We know that Canadians expect us to pay our taxes fully and fairly — and we do,” said the statement from Kevin Groh, Loblaw’s senior vice-president of corporate affairs and communication. “We are pleased that the Court of Appeal reversed the decision of the lower court, confirming that we were compliant in our tax filings and that we had paid all amounts due.”
    The details of the case are extremely long, and the specific rules around foreign accrual property income (FAPI) are “extremely complex,” in the words of Judge Judith Woods, who authored the written decision from the case.
    SCompanies Ltd. is off the hook for $368 million in taxes, after the Federal Court of Appeal overturned a 2018 ruling that found the company used a Barbados bank as a tax shelter.
    The ruling from a three-judge panel on Thursday sent the matter back to the Minister of National Revenue for reassessment.
    In an emailed statement, Loblaw said that it pays all of the taxes it owes.
    “We know that Canadians expect us to pay our taxes fully and fairly — and we do,” said the statement from Kevin Groh, Loblaw’s senior vice-president of corporate affairs and communication. “We are pleased that the Court of Appeal reversed the decision of the lower court, confirming that we were compliant in our tax filings and that we had paid all amounts due.”
    The details of the case are extremely long, and the specific rules around foreign accrual property income (FAPI) are “extremely complex,” in the words of Judge Judith Woods, who authored the written decision from the case.
    Not even Loblaw, Canada’s biggest grocer, is prepared to stick to its earnings forecast
    Loblaw owned Glenhuron Bank Ltd. in Barbados from the early 1990s, when it was set up to avoid some proposed tax changes in the Netherlands, until it was liquidated in 2013.
    The crux of the case boils down to how Glenhuron should be taxed based on those complex provisions in the Income Tax Act; Loblaw argued that it should be exempt from the FAPI rules because it was a regulated foreign bank under the laws of Barbados.
    This led to some difficult questions being tackled by the Court of Appeal judges, such as: what is a bank?
    Referring to a Supreme Court decision on the topic, Woods said that “‘banking’ is an elusive concept, difficult to define, and its meaning should be based on a formal, institutional approach rather than a substantive approach, in the sense of the functions of banking.”
    Canada Revenue Agency argued that because the Glenhuron bank in Barbados got most of its money from the parent company, it was not “arm’s length” and therefore effectively a subsidiary of Loblaw.
    The company argued that because most of the bank’s transactions were done with arm’s length parties on the open market, the bank’s operations were effectively arm’s length from Loblaw’s business.
    Government lawyers argued that if the court sided with Loblaw, it would basically nullify the whole point of the foreign accrual property income rules.
    “Finally, the Crown submits that if Loblaw Financial’s position is accepted, the very target of the FAPI legislation, which is an investment portfolio held offshore, would be exempt. The concern is a valid one, but it does not enable a court to give the legislation a broader interpretation than it can reasonably bear,” Woods wrote.
    She also noted that the federal government appears to have since amended the law to change the definition of a foreign bank specifically to address the issue.
    Toby Sanger, director of Canadians for Tax Fairness, said the whole situation is a demonstration that the international tax system is fundamentally broken.
    Sanger said Ottawa has talked a good game about international efforts to handle tax evasion, but the government hasn’t been aggressive about actual enforcement.
    “I’ve been a bit frustrated that the Canadian government has simply said we’re going to see what the outcome of this is, instead of pushing for reforms ourselves,” Sanger said.
    “Federal and also provincial governments are losing billions of dollars from this.”
    Sanger said he worries that the government losing a long-running, high-profile case like this will lead them to be less aggressive about future enforcement.
    Aaron Wudrick federal director of the Canadian Taxpayers’ Federation, said that the federal ruling is a cause for worry that corporate tax law is too loose in Canada.
    “This decision should concern anyone worried about corporations exploiting tax loopholes to offshore money and avoid paying taxes in Canada,” Wudrick said.
    The Court of Appeal ordered the federal government to pay $1.8 million “plus reasonable disbursements” to cover Loblaw’s legal costs.
    CRA declined to comment, except to say that it will be “analyzing the decision in due course” and the agency couldn’t comment on specifics due to confidentiality rules.
    Not even Loblaw, Canada’s biggest grocer, is prepared to stick to its earnings forecast
    Loblaw owned Glenhuron Bank Ltd. in Barbados from the early 1990s, when it was set up to avoid some proposed tax changes in the Netherlands, until it was liquidated in 2013.
    The crux of the case boils down to how Glenhuron should be taxed based on those complex provisions in the Income Tax Act; Loblaw argued that it should be exempt from the FAPI rules because it was a regulated foreign bank under the laws of Barbados.
    This led to some difficult questions being tackled by the Court of Appeal judges, such as: what is a bank?
    Referring to a Supreme Court decision on the topic, Woods said that “‘banking’ is an elusive concept, difficult to define, and its meaning should be based on a formal, institutional approach rather than a substantive approach, in the sense of the functions of banking.”
    Canada Revenue Agency argued that because the Glenhuron bank in Barbados got most of its money from the parent company, it was not “arm’s length” and therefore effectively a subsidiary of Loblaw.
    The company argued that because most of the bank’s transactions were done with arm’s length parties on the open market, the bank’s operations were effectively arm’s length from Loblaw’s business.
    Government lawyers argued that if the court sided with Loblaw, it would basically nullify the whole point of the foreign accrual property income rules.
    “Finally, the Crown submits that if Loblaw Financial’s position is accepted, the very target of the FAPI legislation, which is an investment portfolio held offshore, would be exempt. The concern is a valid one, but it does not enable a court to give the legislation a broader interpretation than it can reasonably bear,” Woods wrote.
    She also noted that the federal government appears to have since amended the law to change the definition of a foreign bank specifically to address the issue.
    Toby Sanger, director of Canadians for Tax Fairness, said the whole situation is a demonstration that the international tax system is fundamentally broken.
    Sanger said Ottawa has talked a good game about international efforts to handle tax evasion, but the government hasn’t been aggressive about actual enforcement.
    “I’ve been a bit frustrated that the Canadian government has simply said we’re going to see what the outcome of this is, instead of pushing for reforms ourselves,” Sanger said.
    “Federal and also provincial governments are losing billions of dollars from this.”
    Sanger said he worries that the government losing a long-running, high-profile case like this will lead them to be less aggressive about future enforcement.
    Aaron Wudrick federal director of the Canadian Taxpayers’ Federation, said that the federal ruling is a cause for worry that corporate tax law is too loose in Canada.
    “This decision should concern anyone worried about corporations exploiting tax loopholes to offshore money and avoid paying taxes in Canada,” Wudrick said.
    The Court of Appeal ordered the federal government to pay $1.8 million “plus reasonable disbursements” to cover Loblaw’s legal costs.
    CRA declined to comment, except to say that it will be “analyzing the decision in due course” and the agency couldn’t comment on specifics due to confidentiality rules.(Quote)

  19. Hal Austin Avatar
    Hal Austin

    So BERT is now officially buried, or is it? Maybe the minister of finance and/or her advisers will now tell us what has changed between now and May 2018, apart from the CoVid pandemic?
    So, why was austerity, including a default on our debt, appropriate then, and a stimulus is now the answer?

  20. Hal Austin Avatar
    Hal Austin

    Have the other members of the CoVid economic council been appointed? If so, who are they? Or have I missed a trick? If not, has the president gone ahead with a Bds$2bn stimulus without consulting the CoVid economic experts?

  21. Frank Layton Avatar
    Frank Layton

    what utter and unadulterated nonsense.
    is this a fake economics class, assume the substantive shock never happened
    please explain

  22. Frank Layton Avatar
    Frank Layton

    The role of the press is to ask difficult questions. You are a one-person interrogator on BU.
    how can mariposa be a 1-person interrogator. you asked 7 questions in two short posts
    please explain in simple terms

  23. Hal Austin Avatar
    Hal Austin

    Below is another bogus statement from the Mottley government’s two top economic consultants. Are they ministers? Whey then do they speak on behalf of the government? Where is the Minister of Finance and Economic Affairs? Does she have an opinion? Where are the junior ministers? Is this government by apparatchiks?
    What out for this mottley lot slipping through policy during the proroguing of parliament. Watch also for the content of the Queen’s Speech.

    Nothing, not even the terms of an International Monetary Fund (IMF) agreement, will hinder the Mia Mottley-led administration’s commitment to the social welfare of citizens, two high-profile Government advisors have promised.
    Senior Advisor Dr Kevin Greenidge and Special Envoy to the PM on Investment Professor Avinash Persaud, in separate interviews with Barbados TODAY on Monday, stressed that the Government is willing to further revise its fiscal target of a one per cent surplus to boost spending for job creation and welfare as it navigates the uncertainties of COVID-19.
    The economists were responding to recent suggestions that the IMF-supported Barbados Economic Recovery and Transformation (BERT) programme is out of touch with the social realities of a Barbadian society that is facing unemployment rates of over 35 per cent brought on by the collapse of tourism due to COVID-19.
    Persaud told Barbados TODAY: “We recognise that this is the deepest contraction of the economy in living memory. No one can overestimate the impact on a tourism-dependent economy of there being practically no foreign tourism. The official numbers indicate that around 35 000 lost their jobs as a result of COVID…and there will be many who are not part of the regular economy who have lost their jobs. They may not be in the official figures but we know their challenges are just as real.”
    Meanwhile, he pointed to the $75 million in unemployment benefits paid to 29 000 workers since March. He also pointed to payouts from new instruments like the Business Interruption Benefit, the Small Firm Wage Fund, and the Household Mitigation Unit.
    “We are not being held back today by targets or money. If we need to change our targets or spend more money, we will, but today, the challenge is managing in a time of COVID and getting projects ready to the point of where we can spend and get jobs. We understand the difficulties and are working non-stop to try to ease the challenges everyone is facing,” added Persaud.
    In addition to shielding welfare, Dr Greenidge indicated that Government has not shied away from increasing expenditure to outfit hospitals, polyclinics and isolation centres.
    “About $35 million was spent outfitting Harrison’s Point [COVID-19 isolation facility], bolstering drug services, and providing new equipment at polyclinics. How was that done if the programme is untouchable?” asked Dr Greenidge.
    Government’s fiscal target for the year 2020/2021 under BERT was revised from six per cent of GDP to one per cent of GDP at the end of March, following the onset of the pandemic, placing an additional $500 million at government’s disposal.
    During a press conference last Friday, Opposition Senator Crystal Drakes called for a complete re-examination of the programme, including a further revision of the one per cent primary fiscal surplus target. A handful of academics, including Director of the Sir Arthur Lewis Institute of Social and Economic Studies Dr Don Marshall and retired academic Dr Michael Howard have also weighed in.
    The academics described the BERT programme as being too restrictive at a time when economic recovery depends on increased government spending.
    However, as a September meeting looms between Government and IMF officials, Dr Greenidge admitted that further adjustments would be made if necessary.
    “The IMF now allows countries to own, develop and take charge of their programmes while helping you to meet your targets, championing your cause and providing some financing. This is Barbados’ programme,” he stressed.
    “So, if we have to go to a primary deficit because of what we are seeing, then that will happen. We have already gone from a surplus of six per cent to a surplus of one per cent and we have an IMF mission starting next month and we will look at it again.”
    The Government advisor also defended the recently implemented Barbados Optional Savings Scheme (BOSS) which is projected to provide an additional $45 million for capital works projects to generate employment. He also argued that local unemployment projections are no different than in many other countries crippled by the pandemic.
    “Everywhere in the world was hit by COVID, but we are soaking up unemployment with capital works projects. The BERT programme is a dynamic programme. It is not static, and it is designed to transform, but because of the lash from COVID, we have increased spending in certain areas to respond,” Dr Greenidge added… (Quote)

  24. Mariposa Avatar
    Mariposa

    A humanatarian crisis at hand and govt plays Russian roulette with the local economy while pushing households to the brink of economic disaster

  25. Hal Austin Avatar
    Hal Austin

    Below is a classic example of the misallocation of resources by the Mottley government, and the fallacy of the notion of fiscal space. According to this Barbados Today report, CoVid has meant that Bds$1.5bn has not been fully utilised and, as a result, has been re-allocated. Just look at how they are spending this money, revenue from an unintended fiscal space, for a post-CoVid world.
    In the Queen’s Speech, the president made a big play of a post office/credit union bank. Here is the opportunity to fund that project and again, it has been overlooked.
    This government is a disaster. Read on:

    Government is allocating $1.59 million for projects and programmes sidelined by the COVID-19 pandemic.

    Of that figure, just under $17 million is earmarked for the Ministry of Maritime Affairs, while the Ministry of Transport, Works and Water Resources should receive close to $90 million.

    This was revealed by Minister in the Ministry of Finance Ryan Straughn during debate on the Appropriation (Amendment) Bill, 2020, in the House of Assembly yesterday.

    With these allocations, Barbados’ fishing industry will be given a major boost with major improvements to the infrastructure at fisheries complexes, while the road network will see much needed improvements, beginning with Phase 1 of the Highway 1 Rehabilitation Project due to start next week.

    While introducing the bill, Straughn told the House the legislation was being brought “in the midst of the fact that we continue from a budgetary perspective to monitor very carefully” the performance of revenue and expenditure. He gave the assurance Government had the financing which would “very comfortably” take it to the end of this financial year, despite the predicted shortfall in revenue. ..(Quote, Barbados Today, |Oct 2020)

  26. Hal Austin Avatar
    Hal Austin

    With Barbados having the highest pension expenses in the region, a recommendation is being made for the revision of current systems to ensure the sustainability of state-operated pension schemes.

    The issue was highlighted by Inter-American Development Bank (IDB) officials in the recently released Quarterly Bulletin for December, titled Economic Institutions to Advance Beyond 2020.

    “In 2019, Barbados had the highest level of public pension spending among Caribbean countries, reaching 7.7 per cent of gross domestic product (GDP), followed by Trinidad and Tobago (5.59 per cent), Guyana (5.28 per cent), and Suriname
    (4.05 per cent). Rising costs going forward could be a challenge, particularly given the impact of the debt restructuring and the pressure of COVID-19 on the National Insurance Scheme,” the IDB said.

    “Policymakers should also periodically review the design of multi-pillar systems and assess what parametric and non-parametric changes in the pension schemes are required to achieve adequate benefits, expanded coverage, and financial sustainability
    of the systems,” it added.

    The 58-page document pointed out that pension expenses in Barbados are the highest in the Caribbean region, adding that the island had a broad social security system that includes both contributory and non-contributory pensions, as well as a public
    service pension scheme.

    It also pointed to a “rapidly” aging population that supports a high dependency ratio of about 24.3 per cent, compared to 28.9 per cent in member countries of the Organisation of Eastern Caribbean States, which it said was responsible for helping to drive up pension costs.

    Among Caribbean countries, Barbados has the highest ratio of contributors as a share of the workforce (78.99 per cent), with more women contributors than men. Barbados also has the highest pension expenses among Caribbean countries, with a point estimate of 8.9 per cent of GDP and a range from 7.5 to 13.2 per cent of GDP.

    “The disbursement of pension expenses for civil servants as a share of total pension expenses is also the largest in the Caribbean at 33.2 per cent,” said the IDB in its publication, which examined several aspects of the region’s economies.

    When it came to Barbados’ financial sector, the Washington-based development financial institution highlighted that in terms of market discipline, despite the importance of an accurate audit, Barbados did not grant the power to supervisors to take legal actions against external auditors, and that the specific requirements or extent of the nature of audits were not spelled out.

    “The country could also reinforce transparency, as banks currently do not have to disclose off-balance-sheet items or their governance and risk management framework to the public.

    “In addition, bank directors are not legally liable if disclosed information is erroneous or misleading,”
    the publication authors highlighted.

    The IDB said, “Given the macro prudential approach in the region, the implementation of all or some elements of Basel III is highly recommended”. Basel III is an international regulatory framework developed to address deficiencies in financial regulation relating
    to areas of stress testing, capital adequacy, and market liquidity risk.

    The IDB added that greater support for supervisory authorities “with a clear, verifiable, and quantifiable guide for the diversification of assets in bank portfolios is also advised”.

    “Finally, promoting rules that support greater market discipline is recommended, particularly with regard to audits and transparency,” it added.

    The IDB also raised concern that barriers to financial access and inclusion remain in Barbados, despite some progress over the years.

    “Despite the country enjoying high income levels and performing well on many socio-economic indicators, barriers to finance for individuals and firms persist.

    “Barbados performs well on indicators related to financial access for individuals, including the level of deposits in commercial banks, which stands at 98.5 per cent of GDP compared to the Caribbean average of 57.9 per cent. The ratio of commercial bank loans to GDP is also higher in Barbados (64.6 per cent) than the average for all Caribbean countries (40.6 per cent).

    “However, some impediments remain with respect to the ability of individuals to access financial services, including increasingly stringent know-your-client and documentation requirements. Firms and banks in Barbados also report that the strict know-your-client and regulatory burdens, including those related to anti-money laundering/combating the financing of terrorism, hinder domestic financial transactions and credit provision,” the institution explained.

    The IDB recommended that in order to address some of those challenges, there should be promotion of greater use of new and innovative financial technologies and the revision of relevant regulatory requirements.

    “In this context, the authorities should consider policies and initiatives aimed at further exploring and addressing barriers to financial access and inclusion. For example, fostering greater use of technologies, such as digital payment services, could support lower fee structures and costs for users, following examples of other countries around the world (Beecher, Bissessar, and Julien 2018).

    This would require supportive regulations and the revision of relevant legislation and regulatory processes, as well as greater coordination and improvements of supervisory agents,” the IDB explained…..(Quote)

    Now the IDB is saying we need to reform state pensions let us see what happens.

  27. Hal Austin Avatar
    Hal Austin

    January 2021

    The main task ahead for the Barbados economy is for Government to build out other sectors rather than continuing to focus heavily on tourism, an economist has suggested.
    But Kemar Stuart maintains doubt that the Mia Mottley administration would take the required policy direction necessary to drive the economy in the short- to medium-term as it continues to focus on managing the COVID-19 pandemic.
    He was reacting to the latest Central Bank report, which recorded a cataclysmic 90 per cent fall in long-stay visitor arrivals over the last three quarters of 2020, reducing arrivals by 71 per cent over the course of the year.
    In his economic review of 2020 on Wednesday, Governor of the Central Bank of Barbados Cleviston Haynes said depressed tourism activity, a dampening of consumption and delayed investment projects led to a sharp contraction in the economy, elevated jobless levels, subdued government revenues and amplified our economic vulnerabilities.
    The economy declined by 17.6 per cent last year but is estimated to grow by “below five per cent”, according to the central bank.
    The report also showed that Government shored up its international reserves, which reached a comfortable $2.7 billion at the end of December last year amid massive borrowing – $980 million from multinational financial institutions – driving up the country’s debt to around 144 per cent of gross domestic product (GDP).
    Stuart said coming out that report, the main pillar of survival for the Barbados economy is “the ability to mobilize debt support from the International Monetary Fund (IMF) through the Barbados Economic Recovery and Transformation (BERT) programme”.
    He highlighted five examples to explain the “life support” the IMF and other international financial institutions are currently providing the economy: changes to the Central Bank Act to limit the bank’s role in financing Government’s roles in the economy, the inability to borrow from an “over-leveraged” National Insurance Scheme (NIS), a dampened bond market, an ineffective stock market, and an inability to borrow from any private capital market in any substantial way.
    Stuart said the major challenge ahead was “getting other pillars of the economy outside of tourism working”.
    But, he said: “Given the uncertainty of the pandemic and a pending rollout of a vaccine programme, Government may continue to waver on a policy direction to build out and drive the local economy. This drive may wean Barbados off the worrying trend of IMF life support.”
    In his outlook, Haynes had also touted the need for urgent growth of other industries, stating that “as we move forward, we have to reduce our economic vulnerabilities”.
    The central banker cited alternative energy and the adoption of technology and digital transformation as areas that would help the country emerge from the current economic climate created by the pandemic.
    Stuart is of the view that slow and inefficient public sector processes, lack of financial guarantees and adequate support from the government, no new investment and lack of reform to investment laws also continued to delay critical progress in the Barbados economy.
    He said: “The Central Bank Governor constantly mentioned capital works programmes as a way to revive the dire economy and bring growth over the medium term and I firmly agree. However, the government has not been pulling weight.”
    There is also a “restrictive clause on spend towards capital works programmes as a condition of BERT, and unless renegotiated at recent meetings, this spending ceiling will inhibit government’s ability to do major expansions of spending in the economy for 2021”, the economist argued.
    In relation to Government revenue, which declined by about 12 per cent last year, due mainly to lower collections of transaction-based taxes, Stuart said: “It is clear that if the ravishing of revenue continues by prolonged uncertainty of the pandemic.
    “The country will need to run additional deficits and borrow additional debt from foreign institutions to finance the shortfalls to come in 2021.
    “The Governor did mention that what government makes over what government spends coupled with debt targets will remain under review in 2021. This scenario as described by the late Professor Owen Arthur is a ‘borrowing relationship’ with the IMF.”
    Stuart’s comments echo the views of regional economic advisor Marla Dukharan who suggested in her January economic outlook letter that when it comes to tourism, Government should consider focusing “solely” on the Welcome Stamp initiative.
    Earlier, Dukharan had also suggested that more interest be given to making the country self-sufficient in the area of agriculture, while building out solar and renewable energy, the offshore financial services sector and the digital economy.
    Dukharan said: “Barbados is on solid ground externally and fiscally, thanks to strong and decisive leadership. We therefore don’t even need to continue to take the risks inherent in a five-day quarantine.
    “Welcome Stampers are more likely to agree to and comply fully with a two-week quarantine, because so much more is at stake.
    “Why not focus solely on this market, at least until the pandemic is brought under control?”
    Dukharan also noted that the recent second-wave of COVID-19 infections and the coming lockdown will make for a slower than projected recovery.
    She said: “COVID-related spending is expected to reach 2.5 per cent of GDP in this financial year. An increase in the extended arrangement with the IMF will provide financing for the newly lowered primary fiscal deficit target of one per cent of GDP. Debt-to-GDP will increase to 146 per cent in financial year 2020/2021, and will not decline to 107 per cent until 2025.”
    (marlonmadden@barbadostoday.bb)…(Quote)

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