Investment, Inequality and Coordination Between Governments and Central Banks

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The International Banking Seminar held on October 20, following the conclusion of the Annual Meetings of the IMF and World Bank, was an occasion to reflect on the main concerns of the international financial community. Three issues stood out in the presentations at the seminar: the lack of adequate investment globally, particularly in infrastructure and projects to reverse the worsening health of the environment; the absence of policies to address global inequalities, despite much hand-wringing; and the need to coordinate the policies of Governments and their central banks.

Financial markets are flooded with money, but there is little investment in infrastructure and improving the environment
The trade disruptions caused by the aggressive tariff policies of the US administration, and low and negative interest rates were cited as the main reasons for the lack of interest by private finance in investment projects. The backlash against globalisation, most clearly manifested in the Brexit referendum, has worsened the general sense of uncertainty. Anyone investing in a hotel in Barbados or an ethanol plant in Trinidad will be expecting to attract an adequate rate of return on their investment. The imposition of new tariffs, fluctuations in the rate of exchange, setting up of new borders and erratic movements in commodity prices, all raise question marks about the demand for products and services, and the prices at which they may be sold. In these circumstances the typical investor will hold off investment until prospects become clearer.

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DeLisle Worrell: Investment, Inequality and Coordination Between Governments and Central Banks

10 thoughts on “Investment, Inequality and Coordination Between Governments and Central Banks

  1. “no-one had anything to offer for circumstances when Government does not exercise financial prudence, ignoring the advice of the Central Bank.”
    And here endeth today’s lesson.

  2. One important tool to deal with inequality is to provide titling to land. We must strive for a ownership society. Regularise squatters settlement, speed up the time and made affordable the land titling process. We have too many dead assets tied up in untitled properties.

    • There was a project being undertaken at the registry to digitize the documents on file. If only those concerned found it useful to update its public.

  3. @David. New Zealand is know world wide for their effective and efficient land titling process.They scored high on this metric annually. We should try and learn from New Zealand is this area.

  4. We should be issuing at least 1500 new titles annually. The government seek a 30-year POLICY LOAN from the World Bank for a project of this nature. Hire more surveyors, land valuators, real estate lawyers and subsided the titling fees for those who are financially challenged.

    • The government has been preaching about egovernment and going digital. The Constitution was amended to fly in a body in the person of Kay Mcconney to lead the process. Could a transformation for land registry be in the works? We pray and hope.

  5. With the proliferation of motor vehicles on this densely populated ROCK, our road and drainage networks are in need of a major upgrading and rehabilitation.

  6. The global capital market in the west is in a conundrum. While some regions are strarving for investment capital with decent return to be made , there are over $US7 trillion invested in developed countries bond yield less than zero%. Investors are literally paying government to borrow money. Even debt riddle Greece, is paying very little (3%) to borrow money.

  7. Barbados: Staff Concluding Statement of the 2019 Article IV and Second Review under the Extended Fund Facility

    November 15, 2019

    A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

    The authorities have consented to the publication of this statement. 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. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

    Barbados continues to make good progress in implementing its ambitious economic reform program. The homegrown BERT (Barbados Economic Recovery and Transformation) plan aims to restore macroeconomic and debt stability, increase international reserves, and raise growth. International reserves, which reached a low of US$220 million (5-6 weeks of import coverage) at end-May 2018, have recovered to more than US$600 million by end-October 2019. The completion of a domestic debt restructuring in late 2018 has been very helpful in reducing economic uncertainty, and the terms agreed with creditors have helped to put debt on a clear downward trajectory.

    The agreement reached in October 2019 between the government of Barbados and the external creditor committee reduces debt and uncertainty. The agreed terms will bring about an immediate reduction in public debt, with a 26 percent haircut on principal and accrued interest, and will support further debt reduction, with a lower interest rate. The terms of the new instrument will help Barbados reach its medium-term target of 80 percent debt/GDP by 2027/28, and 60 percent by 2033/34. The inclusion of a natural disaster clause in the new debt will help Barbados remain current on its debt obligations in the event of a natural disaster. By reducing uncertainty, the completion of the external debt restructuring improves prospects for investment.

    The fiscal adjustment is proceeding as programmed, with the authorities targeting a 6 percent of GDP primary surplus for FY2019/20. Full year effects of reforms set in motion during FY2018/19, including the introduction of several new taxes (an airline travel fee, room levies, a new fuel tax, and a new health service contribution), are helping to achieve this target. A broadening of the base of the VAT and the land tax, implemented in March 2019 in the context of the FY2019/20 budget, are also supporting revenue. The budget approved for FY2019/20 provides a solid basis for the targeted fiscal consolidation.

    Reducing transfers to SOEs is key for sustainable fiscal consolidation. At close to 8 percent of GDP in FY2017/18, transfers to SOEs had become a significant burden on the budget, and a major contributor to fiscal risks. Under the BERT program, grants to SOEs are targeted to decline to under 6 percent of GDP by FY 2021/22, by a combination of: (i) much stronger oversight of SOEs, supported by improved reporting and tighter control over SOE borrowing; (ii) cost reduction, including reduction of the wage bill; (iii) revenue enhancement, including an increase in user fees, combined with investments to improve services delivered by SOEs; and (iv) mergers and divestment.

    Together with addressing the fiscal dominance problem, the central bank needs to be equipped with tools and facilities to be able to manage liquidity consistent with the exchange rate peg. Following several years with high monetary financing, the Central Bank of Barbados (CBB) now provides liquidity to the government only to smooth unforeseen developments in revenue and spending. A new CBB law will clarify the mandate of the CBB, enhance the decision-making structures of the central bank, and introduce safeguards to protect the institutional and functional autonomy of the CBB. Work on this new law is well underway.

    The financial sector remains sound despite a significant impact from the domestic debt restructuring. Depositary corporations are in general well-capitalized and liquid. The authorities are providing explicit and time-bound regulatory forbearance targeting select financial institutions with high (post debt restructuring) concentration ratios until they rebuild capital buffers. With the expected improvements in the business climate and fiscal sustainability, credit growth is expected to pick up through increased confidence and enhanced opportunities for lending.

    Structural reform is necessary to unlock Barbados’ growth potential. The authorities have started to address challenges related to the business climate with several initiatives. The process for providing construction permits has been streamlined. The credit bureau regime is being formalized by preparing a Fair Credit Reporting Act and a Code of Conduct for the operation of credit bureaus. There is much scope for further improvement in the business climate, including by reforming customs administration to facilitate trading across borders, streamlining processes for setting up new businesses, and strengthening protection of minority shareholders.

    Improving resilience to natural disasters and climate change will help strengthen the outlook. Given limited fiscal space and low fiscal buffers, it is important to make good use of contingent financing and insurance options. Barbados insures natural disaster risks through the Caribbean Catastrophe Risk Insurance Facility (CCRIF). With the inclusion of natural disaster clauses into the new domestic and external bonds, the government of Barbados effectively used the debt restructuring to strengthen its protection against natural disasters.

    The authorities’ BERT program, supported by the IMF’s Extended Fund Facility, is on track. All program targets for end-September 2019 under the EFF have been met. The program target for primary surplus was met by a comfortable margin, which bodes well for reaching the FY2019/20 primary surplus target of 6 percent of GDP. The Barbadian authorities also continue to make good progress in implementing structural benchmarks under the EFF. Following productive discussions, the IMF team and the Barbadian authorities reached staff-level agreement on the completion of the second review under the EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to consider the review in December. Upon completion of the review, SDR 35 million (about US$48 million) will be made available to Barbados, bringing the total disbursement to SDR 105 million.

    The team visited Barbados November 5-15 and would like to thank the authorities and the technical team for their openness and candid discussions.

    IMF Communications Department

    PRESS OFFICER: Randa Elnagar

    Phone: +1 202 623-7100Email:


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