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.

138 comments

  • William Skinner

    When Owen Arthur spent millions refurbishing the airport he refused to put landing docks. I certainly welcome the landing docks, as usual we are paying for all the mismanagement and lack of common sense , going back well over forty years.
    Further lack of vision by both political parties and now we have to pay through our nostrils.
    Duopoly Rules.

    Liked by 1 person

  • The press conference is posted. No need to ask silly questions.

    Like

  • Ms Baker said ” once the initial stage is completed then bids will be sent out for tender of the operations of the airport by private entities ” . What you think that means but a long term lease to a private operator for the general running of the airport in the medium to long term. Call it what you want it is privatisation under a different name, which I support.

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  • @John,

    The upgrades are to be financed by an investor in a public/private sector partnership, yet to be found, but who would be backed by the International Finance Corporation (IFC), an investment and advisory arm of the World Bank Group.(Quote)

    According to this report, the government is still in search of an investment partner. Will part of this deal be a day-to-day management agreement?

    Regional vice-president of the IFC’s Latin America, Caribbean Europe and Central Asia division, Georgina Baker, said the public/private partnership meant the private sector would be responsible for undertaking the required capital works, financing operations and maintenance of the airport under a long term contract obligation.(Quote)

    The report talks about a concession (….the concession granted would be approximately 25 to 30 years. – Quote). Is this the same long- term contract for the undertakings mentioned above by Ms Baker, or is it a separate management concession? Or will day-to-day management remain in the hands of the same team.
    It is nothing to do with state control or private control; it is about clarity, which the report does not make clear and the BU debate is taking the usual turn. Think finance and not politics. Have you noticed there is no mention of costs?
    Has there been a cost/benefit analysis? Or an application to Town and Country Planning, which should be made public, before it is agreed, not after? Has there been an environmental impact analysis?
    .

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  • The Nigerian who it is said owns 5 airports in the U.K. Including Gatwick and Edinburgh?

    https://allafrica.com/stories/201208040520.html

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  • Hal as usual you doing an excellent job reading between the lines sir and apllying them to the future and actual application. It seems the plan will to be retain ownership of the asset but removing us from the day to day liability of retrofitting and operation on our own is one option. How it will play out in the details is to me not that important, as long as the PM makes sure we get a good guaranteed return on the asset.

    This can pan out 2 ways as I see it.

    We find a private partner who will come in and partner with government for the rehabilitation, then put a finished product up for tender for a 30 year lease say.
    A private company comes in and says we will take it as is, do the capital works and then take a long term 30 year lease so as to recover their investment at a lower rate taking into account current condition of the asset.

    We can fix a house up and sell it or sell it cheaper and let the buyer fight up with the upgrades. This case is no different just the numbers bigger.

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  • Gabriel yes the company AIG is foreign owned. From all reports it has done an excellent job over the last few years with the airports as well.

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  • Gabriel yes they are AIG and are a foreign based company. They have been said to of done a good job since taking them over a few years back

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  • Sorry about the double comment. Lol

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  • How the World Bank is organized

    The World Bank has created new organizations within itself that specialize in different activities. All these organizations together are called the World Bank Group. It consists of:

    • IBRD lends to low- and middle-income countries;
    • International Development Association (IDA) lends to low-income countries;
    • International Finance Corporation (IFC) lends to the private sector;
    • Multilateral Investment Guarantee Agency (MIGA) encourages private companies to invest in foreign countries; and
    • International Centre for Settlement of Investment Disputes (ICSID) helps private investors and foreign countries work out differences when they don’t agree.

    International Finance Corporation (IFC) lends to the private sector;

    Liked by 1 person

  • William Skinner

    @ Hal

    Seems to me that we are temporarily renting out the airport. Let’s hope it’s not a rent to buy !!!

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  • It’s good to do the relevant research on these things. Public Private Partnerships are not new and often entail a long term commitment of the government to make payments to the private company or consortium who have constructed and/or manage the facility. Often these payments dwarf the amount that it would have cost the government if it did the work itself.

    As Hal rightly points out, none of these reports include any sums of money, nor clarify who will pay what, to who and for how long. This will only become apparent at the contract signing stage and the way that Barbados works, citizens might never find out. An interesting report on the use of PPPs in the UK: https://jubileedebt.org.uk/wp-content/uploads/2017/02/The-UKs-PPPs-disaster_Final-version_02.17.pdf

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  • Gabriel bang on yes these guys come in and take over the airport and run it, hence guaranteeing the country a return. They usually would do so under an extended lease say 20 to 30 years. They don’t actually own the airport though, that remains the property of the state. Don’t worry there was nuff talk in England when it first happened too but time has proven it to have been a good move.

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  • Another article on Britain’s experience with the privatisation of public services https://sputniknews.com/columnists/201905231075271770-40-years-privatisation-britons/

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  • Tee there was also an excellent article in the FT on it about 2 or so years ago. They looked at the pros and cons but in the end said it does remove liability from the state while leading to greater productivity in the end most of the time.

    I will look for the FT article and if I find it share the link.

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  • I hope Fenty Beauty will be signature brand at the modernized duty free concourse.

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  • the people of barbados have to decide if they want a fairly priced good service or government ownership. time has taught us that those are mostly two different things. what if light and power service was being delivered similar to water, garbage and transport? government should be the protector of its people and facilitator for the service, not necessarily the owner or service provider. do we wants another gems? some i am sure can’t wait for this bad patch to pass, so we can get back to the good old days.

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  • William Skinner

    @ BA

    We always talk about good service. What about good wages. Must the people always work for less than three hundred dollars per week ?
    Whenever this economy is underwater by both parties, it is the same poor people that get laid off and over taxed in order to bring it back.
    We keep doing the same thing over and over and expect the same results.
    Let’s have a real conversation about progressive worker participation.

    Like

  • William Skinner

    Should read : “ and expect different results”

    Liked by 1 person

  • The good thing about this GAIA expansion is that a lot of construction jobs will be created.

    Hopefully local Architects and Engineers will get a piece of the sweet bread.

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  • Hants I think we will end up leasing it as is to the management company and they will then do the work. As Hal said, as of today no company has come forward to partner with government to renovate it under a private/ public share holder arrangement. I think that may be a blessing though, as then the company that gets the 30 year contract can do it to their specs even if they pay a lower lease based on this.

    This is not a bad idea at all and I think the PM is on a good road here. We just need to ensure a decent return and maintain customs and immigration for obvious reasons. It also opens opportunities for persons to form their own internal service companies and work for the management company. For instance the Red Caps could form a company and then contract their company to the company holding the head lease. Properly planned this could turn many workers into share holders

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  • @John A
    For instance the Red Caps could form a company and then contract their company to the company holding the head lease
    +++++++++++++
    Who thinks that Red caps will be part of a modernized Airport?

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  • Sergeant that is a matter for negotiation and if the PM places that as a condition of the head lease it will occur. When the UK government handed over Heathrow it came with conditions governing the lease. It was not a case of AIG handling the UK government a cheque and them giving AIG the keys and saying carry on smartly. They were conditions covering the airport Taxis etc. The same can be done here too.

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  • If I remember correctly projects financed by the World Bank allows bidding by World Bank Member Countries.

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  • The airport in Antigua is easily the best I’ve been to in the Caribbean and it’s government run. Government run doesn’t equate with badly run and privately run doesn’t equate with well run.

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  • WS in many parts of the world unskilled labour is relatively poorly paid vs skilled labour and capital. but like here, skilled labour is always in short supply and makes more than ample. tomorrow get 5 plumbers to turn up at your house at the time you determine. and this in a building recession. anyone with a skill can travel the world and get employment tomorrow. the problem with the new world is that it does not reward the unskilled that are plentiful and easily replaceable with a machine. america has the same problem. overpaid factory workers that bankrupted their auto industry were replaced with machines and mexican labour. the replacement jobs for those americans is flipping burgers. the real wages increases came from programming those very machines. get a skill, especially one in short supply, turn up on time, achieve the objective and anyone can get rich. how we transform our unskilled, unreliable work force into a skilled professional one? maybe hand out govt jobs and bankrupt all of us.

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  • Tee the secret behind Antigua’s new airport success in the concession business is a company known as C A Plus Limited whose system manages all their concession income and business. Give them a search and check it out. But yes it’s a lovely airport built for around $90 million USD including the flight bridges.

    Like

  • Last year , on this day May 23, 2018, around this hour….David BU was busy out in the night dew campaigning for his Beloved Labour Party – BLP !

    One year later David and his BLP has successfully delivered :

    The largest Cabinet in Barbados’ history !

    $ 21 million Consultants !

    Fuel Tax !

    Garbage Tax !

    Severe job cuts in the public service !

    Vicious pension cuts !

    Higher Land Tax bills !

    $ 3.50 bus fare increase – per trip !

    $ 54 BDS…White Hoax…a.k.a OAK !

    And the list can go on & on !!!

    And through all the mayhem….David BU screams to his followers everyday ……my BLP is awesome !!

    Oh Holy Smoke !!!!

    Like

  • According to the latest Redbook published by Terra Caribbean, which details real estate sales in Barbados, 90 high-end properties were purchased in 2018 with a gross value of US$150 million (BDS$300 million). In 2017, total sales of 19 properties averaged around $90 million.

    http://www.nationnews.com/print_article/nationnews/news/239932/rich-buying?print=true

    Like

  • @ Fractured BLP
    —-You hav a cropover entry—-

    t’s a mystery
    What’s being done by the largest cabinet in history
    Whaplax
    We got hit by land and fuel tax
    Lashes to the head and the guts
    Not hair but pension cuts
    Then the greatest hoax
    Going by the name of white Oaks
    And then this group of scammers
    Came up with US 40M for scanners
    Look how they are giving me the chills
    With higher Land Tax bills
    And when you think you saw all their tricks
    They hit you with a $3.50 bus trip
    Yet the boss of BU continue to spew
    The nonsense he campaigned with in night dew
    Things good for he
    Are they for you

    I bet many thought I lost my magic spell
    But that should summon Lorenzo from the depth of hell
    Abracadabra
    Pooch
    Layena

    Later folks
    HAGN

    Like

  • TheoGazerts

    A hot tune you have there – yourself !

    A pity David BU gine …..ban we tunes !

    lol 🙏

    Like

  • https://barbadostoday.bb/2019/05/23/payback-time-3/

    Wuhloss !!

    The BLP get the poor & vulnerable borrow to the $ 5 000.00 loans , after retrenching them and NOW threatening to lock them up for not REPAYING the loan !!

    Sounds like TRUMPISM !!!

    Ode to BERT !!!

    Bajans

    Experiencing

    Ravage

    Turmoil !!!!!

    Like

  • “The highly-publicized US$400 million Beaches project being undertaken by Sandals Resorts International (SRI) remains in limbo, the northern site a ghost town.”

    https://barbadostoday.bb/2019/05/24/talks-stalled/

    Like

  • @ Theophillus Gazerts

    You seem to be moonlighting as a singer at the Calypso Tents in Barbados unbeknownst to de rest of we!

    May dat tund sound real real bad my man i gine gots to put dat to music my man, it cyan jes be lef out so!

    heheheheheheheh

    Like

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