Closer Look at IMF’s Austerity Programme for Barbados
Submitted by Tee White
On 17 May, an IMF team led by Bert van Selm, a Dutch economist and senior IMF functionary, held a press conference in Barbados’ capital, Bridgetown. At this, they announced their findings, after a 10 day review of the country’s implementation of its IMF approved austerity programme, the Barbados’ Economic Recovery and Transformation (BERT) plan. A statement issued by the IMF team declared that the government had made good progress in its implementation of the plan and had met all its targets up to the end of March 2019. To get a better idea of what these targets mean, it is necessary to review the IMF Executive Board’s approval, on 1 October 2018, of a BD$ 580 million (US$290 million) loan to Barbados under an Extended Fund Facility.
This agreement bears all the hallmarks of an IMF neo-liberal plan aimed at eroding the living standards of working class people and prioritising the funnelling of wealth out of the economy into the hands of local and foreign moneylenders. The agreement states clearly that its primary aim is to restore Barbados’ ‘debt sustainability’. Therefore, its priority is to ensure that the Barbados government is able to pay its debt repayments on time and in full, regardless of the social consequences for the country. It is not interested in consolidating and extending the social and economic gains that the people of Barbados have made over the last century, often at great sacrifice, or even in getting the country into a position where it could be debt free. Its intention is to make sure that Barbados remains a dependable revenue stream for those who make their living, not by working, but by living off interest payments. Unable to state its aims openly and honestly, the IMF resorts to easily recognised euphemisms to signal its intentions. Among its proposed measures to put Barbados’ public debt on a ‘sustainable path’ are ‘fiscal consolidation’, ‘reducing transfers to state-owned enterprises’, ‘mergers and divestment’ of state-owned enterprises, ‘reduction of the public sector wage bill’; ‘increase in user fees’ for accessing public services and ‘financial and labour market liberalization’. These euphemistic terms, like the use of ‘collateral damage’ in imperial wars of aggression, attempt to hide the human consequences of government policies through the use of innocent sounding words. However, they have very serious implications for working people in Barbados and represent a direct assault on the social and economic gains that have been achieved over the last century. They signal cuts in government spending on essential services such as public transport, privatisation of public services, redundancies for public sector workers, increased fees for accessing public services and granting finance capitalists greater freedom to do as they wish, while eroding the terms and conditions of workers, thereby making them less able to defend their interests.
The question arises as to what prompts the IMF to propose such a draconian assault on the living standards of working class Bajans. After all, although the country is classified by the World Bank as a high income country, the standard of living of the overwhelming majority of its citizens is most certainly not similar to that of people living in the developed capitalist countries. A trip on public transport or a visit to the island’s only public hospital would soon make that crystal clear. The IMF’s narrative is that the country’s debt burden is unsustainable and the measures outlined above are needed to make it sustainable. But is that what is really needed? When the current BLP government was elected in May 2018, the Prime Minister, Mia Mottley, stated that Barbados’ debt, when taking arrears into account, reached 175% of GDP, making it the third most highly indebted country in the world after Greece and Japan. Referring to the burden of the debt on Barbadian society, she declared, “”Today, servicing the debt consumes more money than the entire central Government’s wage bill. It consumes more than our education and health budget combined. It is a tight chain strangling our throat and has for a while”. It is, therefore, evident that the nub of the problem facing the government’s finances is the unbearable weight of the debt and that this is the problem that needs to be solved. The issue is not to use the debt as a justification for attacking the working people so that the debt can be sustainable. The issue is that the country needs to be freed from the debt noose that is strangling it and draining its wealth away. The IMF Executive have a different aim in mind and their statement declares, “”At 7½ percent of GDP, transfers from the central government to state-owned enterprises are very high, and a major contributor to fiscal risks”. This is where they want to direct their fire, not at the debt servicing which amounted to 17% of the country’s GDP.
In October 2018, the government announced that it had reached a debt restructuring agreement with its domestic creditors. These included local banks, insurance companies, charities, churches, cooperatives, credit unions, individual citizens and its own National Insurance Scheme and Central Bank. This restructuring, according to Deloitte, affected some 85% of the government’s debt, leaving the 15% owed to international creditors to be restructured. The government’s debt restructuring policy has been based on reducing the payable interest rate and extending the length of time over which the debt is repaid. Its 2019-2020 budget projects that, as a result, annual debt servicing will drop to BD$ 772 million, just under 8% of GDP, from its high of 17% in the 2017-18 budget. It is worth noting that even this reduced debt burden consumes more of the government’s finances than all its transfers to state owned enterprises which so concern the IMF and its Executive Board. In addition, the IMF’s BD$580 million loan, which is dispensed over the 4 year life of its Extended Fund Facility, actually amounts to no more than BD$145 million or 1.45% of GDP annually. Therefore its impact on balancing the government’s finances appears minimal. It is rather ironic, therefore, that the IMF is playing such a significant role in this issue and that while it is demanding austerity to address the country’s debt problems, it is itself adding more debt to the pile.
An analysis of the government’s finances does not justify the current austerity onslaught being waged against the working people of Barbados. It most certainly does not justify the efforts to roll back the social and economic gains that have been made at great human cost. Bajans must demand an end to the austerity measures and the defence of our people’s economic and social gains.