Tag Archives: BERT

Two More Years

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The article (below) by Barbados Today attempts to capture the contribution on VOB 92.9 Starcom by Minister in the Ministry of Finance Ryan Straughn on the economy and his forecast. To be honest after listening to Straughn – a key man on government’s finance team – the blogmaster was not optimistic the country will see an ease in two years. There are no shovel ready projects and the those in the pipeline are all tourism flavoured.

The banking systems is reported to be awash with money: Barbadians not borrowing, banks not lending or both. There is the sick National Insurance Fund. Not exhaustive but there is a beleaguered middles class who has endured belt tightening mode for more than 10 years under permutations of the Medium Term Fiscal Plan and the Medium Term Development Plan. Now there is BERT!

Thanks to @John A

David, blogmaster

Two years to ease

Marlon Madden

Article by
Published on
February 4, 2020

Minister in the Ministry of Finance Ryan Straughn is confident that households and businesses should start getting more wiggle room in another two years so they can start spending more again.

However, he insisted that a lot would depend on construction projects getting started.

He said despite geopolitical developments globally, the Mia Mottley administration has laid a “relatively certain” platform over the past 20 months that should encourage growth in coming years.

“The economy as we begin 2020 is delicately poised. This has come after the hard work of the Government to provide an era of stabilization over the last 20 months. Therefore, what we are anticipating for 2020 and going forward is an acceleration of the implementation of the reforms at the macro level and the unlocking of growth is going to be critical with respect to the average Barbadian seeing the benefits of the work we have done over the last 20 months,” he said.

“Nationally, there is a level of stability that allows businesses and individuals to plan. Therefore, as the Government gets itself right with the people and the public by repaying the arrears that were built up over the last ten years, I anticipate that the position of businesses and households in this country will change over the next two years,” said Straughn.

He said most households were not saving as they used to ten or 15 years ago, adding that until new infrastructure projects were started and consumption patterns change, growth would continue to be lacklustre.

The Central Bank last week predicted growth of between 1.25 per cent and 1.75 per cent for the economy this year.

Straughn said Government was doing what it could to encourage more economic activity by paying tax refunds it owed businesses and invididuals.

“The position that households and individuals find themselves in is that. like the Government, as we are paying persons now and trying to do so in an accelerated fashion, they are in a situation where they are paying down some of the debt they have.

“Therefore we are not seeing as yet new consumption, new investment, and certainly that could not have happened over the last 20 months, simply because of the nature we had to unravel Governments link in all of that,” he explained.

Insisting that people between the ages of 50 and 65 did not have the same level of savings they did 15 or so years ago, Straughn said they were now struggling to replenish that and they had to compete with younger people for jobs to do so.

He also acknowledged that there had been no salary increase for some time, forcing individuals to use what savings they had to pay down debt.

Straughn insisted that with Government paying the hundreds of millions it owes individuals and businesses in refunds space would be provided for more spending power and funds for investing.

Government had indicated that for the first two years of the Barbados Economic Recovery and Transformation (BERT) programme it would pay outstanding tax returns from 2011 to 2016.

Straughn, who was speaking on Voice of Barbados’ Down to Brasstacks on Monday, was not in a position to say how many companies Government owed or how much of the approximately $400 million has so far been paid. Those payments started in April last year.

In relation to individual refunds, Straughn said payments for the years 2011, 2012 and 2013 were complete.

In response to a query from a caller, Straughn gave the assurance that any hold up in income tax returns for 2018, was not as a result of Barbados Revenue Authority not having any money.

 

IMF Executive Gives Thumbs Up!

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The following is Press Release No. 19/235 on Barbados first review under the extended fund facility – David, Barbados Underground

IMF Executive Board Completes First Review Under the IMF’s Extended Fund Facility for Barbados and Approves US$48.7 Million Disbursement

June 24, 2019

  • The completion of the review enables an immediate disbursement of SDR 35 million (about US$48.70 million). A four-year EFF arrangement was approved on October 1, 2018.
  • Fiscal adjustment is ongoing, with the authorities targeting a primary surplus of 6 percent of GDP in FY2019/20 and several years thereafter.
  • A public debt restructuring is complementing the fiscal consolidation. The restructuring of domestic public debt completed in November 2018 has helped to substantially reduce the public debt burden. The authorities are engaging in good faith negotiations with external commercial creditors.

On June 24, 2019, the Executive Board of the International Monetary Fund (IMF) completed the first review of Barbados’ economic reform program supported by an arrangement under the Extended Fund Facility (EFF). The completion of the review allows the authorities to draw the equivalent of SDR 35 million (about US$48.70 million), bringing total disbursements to SDR 70 million (about US$97.40 million).

The four-year EFF arrangement amount equivalent to SDR 208 million (about US$289.41 million, or 220 percent of Barbados’s quota in the IMF) was approved by the Executive Board on October 1, 2018 (see Press Release No. 18/370).

Barbados has embarked on a comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, addressing falling reserves, and increasing growth. The program seeks to protect vulnerable groups through strengthened social safety nets.

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair said:

“Barbados has made a strong start in implementing its ambitious and homegrown economic reform program. All performance criteria for March 2019 were met, and all structural benchmarks have been implemented, although a few with minor delays.

“The FY2019/20 budget provides a solid basis for the targeted fiscal consolidation of 6 percent of GDP. The adjustment effort is supported by several new taxes, ongoing reforms in public financial management, a reduction of transfers to State‑Owned Enterprises (SOEs), and adequate provisions for social safety nets and capital expenditure. If necessary, the authorities stand ready to take additional measures to reach the targeted primary surplus. The planned adoption of a fiscal rule in 2020 will help sustain the adjustment effort over the medium and long term.

“Reform of SOEs is critical for achieving the primary surplus target and maintaining it over the medium term. To secure fiscal space for investment in physical and human capital, transfers to SOEs are envisaged to significantly decline by a combination of stronger oversight of SOEs, cost reduction, revenue enhancement, and mergers and divestment.

“A comprehensive public debt restructuring complements the fiscal consolidation. The domestic debt restructuring completed in November 2018 has significantly reduced Barbados’s public debt burden without jeopardizing financial stability. The authorities are continuing good faith negotiations with external commercial creditors, which together with the domestic debt restructuring, should help restore debt sustainability.

“The fixed exchange rate has served as a key anchor for macroeconomic stability and international reserves have increased. The exchange rate peg and monetary regime would be further bolstered by the planned reforms to strengthen the central bank’s mandate, autonomy, and decision‑making structures.

“Structural reforms target improvements in the business environment to increase growth over the medium term. With the adoption of a new Town and Country Planning Law in January 2019, the process for providing construction permits has been streamlined. Going forward, the authorities intend to carefully review and address the different obstacles to growth.

“Adequate social spending and an improved safety net are key priorities for the program. The authorities have launched a training and outplacement program to mitigate the impact on unemployment from layoffs at the central government and SOEs.”

IMF Communications Department

 

Closer Look at IMF’s Austerity Programme for Barbados

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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.

IMF Staff gives Barbados Thumbs Up

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IMF Reaches Staff Level Agreement on the First Review of Barbados’ Economic Program under the Extended Fund Facility

May 17, 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. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

A staff-level agreement was reached between the IMF staff and the Barbadian authorities on the First review of Barbados’ Economic Recovery and Transformation program (BERT) supported by the Extended Fund Facility.
Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform program.

At the request of the Government of Barbados, an International Monetary Fund (IMF) team led by Bert van Selm visited Bridgetown from May 7–17, 2019 to discuss implementation of Barbados’ Economic Recovery and Transformation (BERT) plan, supported by the IMF under the Extended Fund Facility (EFF). To summarize the mission’s findings, Mr. van Selm made the following statement:

“Following productive discussions, the IMF team and the Barbadian authorities reached staff-level agreement on the completion of the first review under the EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to consider the review in June. Upon completion of the review, SDR 35 million (about US$49 million) will be made available to Barbados, bringing the total disbursement to SDR 70 million.

“Barbados continues to make strong progress in implementing its ambitious and comprehensive economic reform program. International reserves, which reached a low of US$220 million (5–6 weeks of import coverage) at end-May 2018, have more than doubled since then. The rapid completion of the domestic part of a debt restructuring has been very helpful in reducing economic uncertainty, and the new terms agreed with creditors have put debt on a clear downward trajectory. The authorities have started the reform of State-Owned Enterprises (SOEs) by tightening reporting requirements and shedding excess staff.

“All program targets for end-March 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 targets for the primary surplus, central government grants to SOEs, central government domestic arrears, and social spending were also met.

“In March, parliament adopted a budget FY2019/20 targeting a primary surplus of 6 percent of GDP. 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), should help achieve this target. A broadening of the base of the VAT and the land tax, adopted in March 2019 in the context of the FY2019/20 budget, will help support revenue. The budget approved for FY2019/20 provides a solid basis for the targeted fiscal consolidation; the authorities stand ready to take additional measures if necessary to reach the targeted 6 percent primary surplus.

“The Barbadian authorities continue to make good progress in implementing structural benchmarks under the EFF, including those that contribute to an improved business climate such as a new Planning and Development Act passed in January 2019 and a Sandbox regime to regulate fintech start-ups set up in October 2018. A new Public Financial Management Act passed in January 2019 introduced wide-ranging measures to strengthen fiscal transparency and accountability. The government has also introduced a system for monitoring SOE arrears on an ongoing basis and has submitted a consolidated report on the performance of SOEs to parliament.

“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 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

The Grenville Phillips Column – The Incurable Disease

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We are now in BERT Phase 3.  After the IMF’s recent assessment of the previous phases, the result of the BERT severe austerity program is foreseen – the BLP administration will meet the IMF’s targets.

To reduce government spending, the trend of laying-off persons will continue as planned.  To reduce the transfers to government corporations, we will be forced to overpay for services that we have already paid for many times over.  The operation will be successful – but the patient is unlikely to survive.

Our Members of Parliament are inflicted with an incurable disease whose symptoms continue to harm us.  We have become their perpetual patient on whom they operate.  It matters not how beneficial a program is to our health.  Once they have decided to target it for a political advantage, it must be rejected and we must lose its benefits.

Back in 2002, I was requested by the government, under the then BLP administration, to chair a group of some of the most highly qualified non-politically partisan experts from 25 professional associations.  For 3 months, we developed perhaps the most effective economic growth plan for Barbados.  It worked well for those who implemented it.  However, it had one vulnerability – political corruption.  The DLP appear to have entirely ignored the plan during their decade in office.

Since the plan was developed under the Owen Arthur led BLP administration, it was assumed that the current administration would use it now that an economic growth plan is desperately needed.  However, BERT publicly confirmed that they did not look at any such plan when they developed their severe austerity plan.  As if to confirm the incurable nature of their disease, they publicly confirmed that they will never look at it in the future.

Why would the current BLP administration refuse to even look at an excellent, workable and proven non-austerity home-grown economic growth plan designed specifically for Barbados, and instead embrace an IMF severe austerity plan that contains no effective economic growth initiatives whatsoever?  Why indeed.

It is finally beginning to dawn on some of them that when the patient dies, there will be no one left to applaud their achievement of meeting the IMF targets.  So they must find an economic growth plan from somewhere.  Unfortunately for us, the incurable nature of their disease dictates that they must ignore what they have already politicised.

The current administration acknowledged the critical need to improve the management of public services.  However, rather than actually improve their management, they have developed a public relations campaign where they must repeatedly mention “fit-for-purpose”, while laying off the very persons who can help them do just that.  That is not better management.

There is an international management standard called ISO 9001.  It works in public services across cultural boundaries.  It is desperately needed to improve the management of Barbados’ public services.

The customs department in El Salvador attracted typical complaints of delays, corruption, and significant abandonment of goods.  Once they implemented the ISO management standard, it was quickly transformed into the most modern customs department in South America, with significantly improved efficiency and almost no complaints.  Not a single employee was dismissed, even though many had worked in the Ministry of Finance for over 20 years and were over 50 years old.

The ISO philosophy is not ‘who is wrong’, but ‘what is wrong and correct it’.  Customer dissatisfaction is almost always a result of poor management, which can be corrected.  However, rather than properly manage our public workers, we are playing the lunatic by first sending them home and then searching for a management plan.

Barbados is a member of the ISO organisation, and the ISO 9001 international standard was developed for all nations, including ours.  So why are we the only nation on this planet to formally reject the ISO 9001 quality management standard?  Because the disease is incurable.  The BLP short-sightedly spent the entire election campaign ridiculing this excellent international management standard, and once they politicised it, we are to be automatically disqualified from its benefits.

The DLP, after consistent failure, appeared to have stumbled upon the National Social Responsibility Levy (NSRL), which was perhaps the fairest tax Barbados has ever had.  By contrast, VAT is by far, the most unfair tax we have ever had.  However, the NSRL was targeted as a political issue and the most gullible of us marched against one of the very few things that had actually benefited all of us.

The BLP and DLP have allowed their disease to be incurable for them by choice.  It compelled them to ridicule Solutions Barbados’ non-austerity policies that can only benefit Barbados.  Their disease can only remain incurable if their ideas are the only ones allowed to contend.  Tragically for us, their active supporters in the established media are doing themselves and all Barbadians a grave disservice by irresponsibly ensuring just that.

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados.  He can be reached at NextParty246@gmail.com

The White Elephant in the Room

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Submitted by Kemar J.D, Banking & Finance Student, University of the West Indies, Cave Hill Campus

Barbados is currently under the BERT program funded by the IMF to undertake structural adjustment in the political economy. With the domestic debt profile of the economy being restructured to the detriment of local investors this gave the Government of Barbados a reduction in Debt to GDP ratio from approximately 175% to 123% which some in parliament referenced as Fiscal Space and the GOB continues to focus on government expenditure reduction hence workers still being layed off, cuts to SOE’S and making government more efficient. What the Minister of Finance didn’t speak on was the Balance of Payment and the constructs of Investment, export, imports and that of National Income accounting. Our national income can be directly linked towards our net foreign asset position

Contrary to popular belief income is not primarily governed by investment alone but by rises in exports evidence suggests Barbados receives a plausible level of FDI but still experiences slides in foreign reserves habitually. This may be attributed to the fact that Barbados does not achieve trade surpluses constantly or significant enough to have any major increases of Income on the balance of payments. One other pattern of foreign capital into developing countries is through a FDI channel when there is a general upswing in the world economy which will give rise to imports more than exports and therefore increase reserves. Case Barbados the current reserves in Barbados are artificially high due to up swings in lending from the IMF, CDB and World Bank, on this premise is where investment is powerful in determining national income in developing countries if there’s Governmental planning to mobilize investment into income generating ventures.

Currently the MOF expressed no planning policy to generate income into the domestic economy but sought to increase domestic taxes with no significant real wage increase or capital inflows which will further contract the economy also the world economy is expected to contract with predictions of a recession, BREXIT looms , de-dollarization, The Economic Partnership Agreement with the EU which will force Barbados into removing or significantly lowering import duties and tariffs from European goods and services which threatens our domestic sectors further. Lastly but most importantly absent is an economic policy to make available the savings from FDI available for domestic output as there is no incentive to do so in current climate and these excess savings will continue to drive up inflationary pressure in Barbados as soon as attempts are made to significantly increase employment

This is evident that Barbados cant sustain the level of reserves when international payments resume, without further borrowing, entering another debt restructuring as it extra-ordinary for a country the size of Barbados to maintain investment levels above export without a trade surplus policy in place to reduce the heavy burden on income sources of the GOB which are direct and indirect tax incomes in its majority. The GOB may embark on a drive to increase Net international investment position which brings Foreign Asset to more than Foreign liabilities achieving National Income increases which provides fiscal space needed to reduce domestic taxation which will bring generated growth to the GDP if managed properly

IMF Gives Green Light to BERT BUT…

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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

The Grenville Phillips Column – Let Sleeping Dogs Sleep

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We should celebrate good news, and the recent upgrades by international rating agencies is good news, especially after a decade of consistent downgrades. So, well done BLP.

Despite their partisan behaviour during the last general election, the national watch dogs are whispering a word of caution. However, before we review their caution, let us put Barbados’ economic situation in context.

The only economic plan that the BLP had before the last general election was to seek funding from the IMF. To secure those funds as soon as possible, the BLP took the risk of defaulting on our foreign loans. That gamble worked for them, but we must endure a severe austerity plan.

Our foreign reserves appear healthy mainly because we are borrowing foreign currency to repay foreign creditors, but we are refusing to pay them. The BLP is hoping that the foreign creditors will be as compliant as the managers of our pension and retirement savings plans, who voted to allow the Government not to pay us all of what we are owed.

Eventually we will be forced to repay our foreign creditors. In the meantime, the accumulated foreign reserves have given the BLP sufficient time to improve the management of public services, which can facilitate economic growth. This time should allow the Government to repay our foreign creditors from revenues accumulated from a larger economy.

So far, the BERT plan of raising taxes and laying off persons is not growing the economy, but hindering growth. The BERT spokespersons keep reminding us that their austerity plan has no other option but to work. That is because they placed all our eggs in the IMF basket, and have stated that they will not consider any other economic solution.

Once the IMF money is exhausted and there is still no economic growth, then there are no good options for us. Our national watch dogs, who overdosed on partisan political pills before the general election, are finally waking up to the foreseen economic ruin that lies before us if BERT fails.

In 2002, Lynette Eastmond was director of International Business when Barbados was negotiating international trade agreements. To her credit, she invited private sector representatives to help prepare Barbados to compete internationally. My assigned responsibility was to prepare the professional services sector of the economy to be internationally competitive.

I chaired a committee comprising leaders of 25 professional associations in Barbados. For the next three months, we collectively donated $0.5M of our time, and prepared a comprehensive report detailing the strategies and actions that each private sector stakeholder should pursue to be internationally competitive. It also included the critical actions that the Government needed to complete in the immediate, medium and long terms to facilitate this economic growth. The principles are relevant to all sectors of the Barbados economy.

The plan worked exactly as designed for those who chose to implement it. I led from the front by becoming the first person to qualify as a Chartered Structural Engineer in 15 years in Barbados. I then trained others, including my competitors, to successfully achieve the same international qualification.

Our firm became the first service company in the Caribbean to attain the ISO 9001 quality management standard, for which we won the BIDC’s Exceptional Quality award. I subsequently worked on projects worth over $500,000,000 over the next 5 years, and earned foreign currency in 10 Caribbean countries.

I continue to benefit from following that plan. For several years, over 80% of my earnings were in foreign currency. It was principally due to that plan that I was the 2014 winner of the National Innovation Competition, and president of Walbrent College.

When the economic ruin of Barbados was foreseen, I prepared an economic growth plan and tried to share it with the last DLP administration, but they would not listen. That growth plan became the backbone of Solutions Barbados’ economic plan, where we could repay all of our local and foreign creditors in full, by growing the national economy for the benefit of all, not just the few. The plan’s only vulnerability was political corruption; hence the reason for a contract against corruption for Solutions Barbados candidates.

We appealed to the national watch dogs to honestly evaluate all plans, including ours, but they would not. The BCCI responded by passing a new regulation to exclude everyone except members of Parliament from talking to their members about the economy. (Are they not the least capable to do so?).  ICAB, BES and BBA followed BCCI’s lead by refusing to allow us anywhere near their members, and the established media essentially shut us out.

I write 52 articles every year, but only a handful ever make it past their editors. So, we post our articles on Facebook to this limited audience, and appreciate everyone who reads, comments or shares.

After their shameful politically partisan behaviour, our national watchdogs are timidly suggesting to the BLP that in the midst of their celebrations, they should perhaps consider thinking about strategies to grow the national economy. They should either tell us something that we do not already know – or go back to sleep.

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados. He can be reached at NextParty246@gmail.com

IMF Staff Concludes Visit Post BERT

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The following IMF report was re;eased today – Barbados Underground

December 7, 2018

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 has made an excellent start in implementing its ambitious and comprehensive economic reform program.
  • The rapid completion of the domestic part of the public debt restructuring has been very helpful in reducing uncertainty.
  • The government has engaged in intensive discussions with the social partnership to build public support for its economic reform program.

At the request of the Government of Barbados, an International Monetary Fund (IMF) team led by Bert van Selm visited Bridgetown from December 4-7, to discuss implementation of Barbados’ Economic Recovery and Transformation (BERT) plan, supported by the IMF under the Extended Fund Facility (EFF). At the end of the visit, Mr. van Selm made the following statement:

“Barbados has made an excellent start in implementing its ambitious and comprehensive economic reform program. The country’s international reserves, which reached a low of US$220 million (5-6 weeks of import coverage) at end-May 2018, have more than doubled since then, amounting to more than US$500 million in early December. This has helped to rebuild confidence in the country’s macroeconomic framework.

“A comprehensive debt restructuring was announced on June 1, 2018. After intensive discussions, an exchange offer for domestic debt (Barbados dollar-denominated) was launched in early September. On October 15, the government announced reaching agreement with an overwhelming majority of domestic creditors, with support of all commercial banks, general and life insurers, the National Insurance Scheme, the Central Bank of Barbados, and smaller creditors. The domestic debt exchange operation was finalized on November 19. The rapid completion of the domestic part of the debt restructuring has been very helpful in reducing economic uncertainty, and the terms agreed with creditors will help put public debt on a clear downward trajectory. A much-reduced government interest bill will help create much-needed fiscal space for increased social spending and investment in infrastructure.

“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; completion of the external debt restructuring would help further reduce uncertainty.

“The government reported a primary surplus of 2½ percent of (annual) GDP in the first six months of FY2018/19 (April-September 2018). In October, the authorities launched a program to improve efficiency and reduce the public wage bill by laying off and retraining workers in the central government and public entities. This should help create a leaner, more efficient public sector, geared towards facilitating private sector-led growth. It should also help reduce central government transfers to state-owned enterprises, from a level that had become unsustainably high. In November, the authorities announced plans to modify the corporate income tax (CIT) framework, seeking to unify rates that apply to the international business sector and local enterprises. There are some risks to this reform, including making corporate income tax revenues more dependent on maintaining international competitiveness.

“Barbados has also made good progress towards meeting end-December 2018 structural benchmarks under the EFF. In October, a regulatory sandbox for fintech start-ups was created to allow them to try out new technologies in a well-defined and controlled space. Legislation to facilitate a more efficient process for providing construction permits is underway, as is legislation to support a more efficient budget process, and stronger oversight of SOEs.

“Following IMF Executive Board approval of the EFF on October 1, 2018, both the Caribbean Development Bank and the Inter-American Development Bank approved policy-based loans. These operations, worth US$75 million and U$100 million respectively (a combined 3½ percent of GDP), will help finance the government, rebuild reserves, and support the reform process with policy advice.

“The government has engaged in intensive consultations with the Social Partnership to build public support for its economic reform program. In October, a BERT Monitoring Committee was set up, and tasked to report to the Social Partnership and the public. Strong ownership and broad societal support bode well for successful program implementation and helping Barbados to achieve better living standards for all its citizens.

“The team would like to take this opportunity to thank Barbados’ 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

Did We Listen to Mia?

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Submitted by Kemar J. Stuart, Banking and Finance Student, University of the West Indies

My fascination with finance and budgetary analysis started started at secondary school because of the late PM David Thompson and with my persistence, I annoyed a UWI student at the time to tell me everything he could about finance.

In 2018 I am a benefactor of a Banking and finance education where conversations surrounded the policies of last MOF Chris Sinckler and his perceived financial mismanagement. The highlight being then opposition leader Mia Mottley going as far as no confidence motions, marches and even offering a sound economic point in which I will address.

Most notably in the 2016-2017 Official Budgetary Reply delivered by then opposition leader Mia Mottley on August 17 2016, where she offered a stellar point to then MOF Chris Sinckler. I quote “there is something called a Government Sinking Fund for foreign debt” ‘established under the External loans Act’ “which makes it absolutely clear that proceeds of the Government sinking fund for foreign debt can only be used to service foreign debt”. She highlighted this figure for this facility to be $322 million. She went on to say “the reason why this parliament passed a sinking fund for foreign debt is to make sure that when foreign debt becomes due and payable that the Government of Barbados is in a position to be able to pay because every year it puts aside 2 1/2% of whatever the foreign debt is.”

After such a beautifully orated economic and fact based solution Barbados received it’s first credit default on foreign debt courtesy of ‘I am not sure who’ since there are 3 Finance Ministers and 2 special economic advisors.

For clarity and to give the financial community some sense of stability, can any of the five economic wizards provide a financial analysis of the default with an explanation if the above recommended advice by then opposition leader Mia Mottley was considered before default, the gain/loss on the country’s international debt portfolio and derived benefits from defaulting ,lastly the financial projection of the debt portfolio given that we did not default and gain/loss Associated. Given the butchered approach to financing our interactional debt obligations what if the international community does not take any debt restructuring offers ? Is our special drawing rights going to be sold under the IMF condition to provide balance of payments support if the BERT plan fails?

Through the five of you one of you need to be man/woman enough to face the many possibilities that our financial fortune faces and gives us the raw deal surrounding our international capital market capacity

The Grenville Phillips Column – Cowards of the Highest Order

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Some soldiers are so terrified of the horrors of war, that they intentionally harm themselves so that they can be transported away from the battlefield and receive priority medical treatment.  I am very sympathetic to soldiers who have been prematurely deployed to the battlefield.  A properly trained soldier has accepted the responsibility of defending citizens, which may require the ultimate sacrifice of death.

The Government encouraged us to prepare for our old-age by making National Insurance Scheme (NIS) contributions and investing in pension plans.  We were told that we could confidently invest in our future this way because the NIS Board consisted of eminently qualified persons.

The NIS Board has one main responsibility, which is to protect the money that should be paid to us in our old-age.  The NIS Board decided to lend our money to the Government.  The Government had difficulty in repaying what was owed to us.  As lender acting on our behalf, the NIS Board could easily have allowed the Government to repay our money over a longer repayment period, given the state of the national economy.  That would be acting in both our interests and the Government’s.

Shockingly, our eminent NIS Board members voted to allow the Government never to repay approximately $800M of our money.  What could have possessed them to harm us like this?

If they were intimidated by having their families threatened, then I could understand why they appeared to betray us.  However, once they were forced to vote against our best interests, they should have resigned.  If they are already compromised, then why are they loitering on the NIS Board pretending to represent our interests?

The Banks managing our pension plans knew that voting against our interests would harm us financially, but they did it anyway.  However, unlike the NIS Board members who may be subject to intimidation, all of our banks are foreign owned.  What possible reason could they offer for acting so cowardly?

Their decision to vote against our best interests means that they also voted against theirs.  Why would they do something so lunatic?  How can that level of cowardice inspire any confidence in their banks?  Why would anyone want to deposit money in cowardly banks who chose not to fight for depositors or themselves?

The banks are now recouping their losses by greedily charging us higher banking fees, but none of that money goes to our pension funds.  Based on their politically partisan behaviour during the last general election, the only rational reason for their decision to harm us financially, appears to be that they are still politically compromised.

The NIS Board and Barbados based banks would not have had to make the decision to financially harm us if the BLP administration had the courage to fight for us, rather than critically wounding us by defaulting on foreign loans.

Once the BLP administration had economically ruined us, they rushed us to the IMF, who made a quick decision to operate.  Now they have the gall to boast about how fast they got the doctor to see us – after they figuratively shot us in the gut.  Are they serious?

The politically compromised radio and newspapers have lost all journalistic integrity as they defend every irresponsible action of the BLP administration as brave and caring.  Are they mad?  What is so brave about defaulting on a loan?  Any idiot can do that.  It takes courage, creativity and perseverance to make those payments, especially after losing your job.

What is so brave and caring about laying-off people.  Any simpleton can do that.  It takes intelligence to properly manage people to be productive, and there seems to be none of that in BERT.  What is so brave and caring about raising taxes.  The most incompetent among us can easily do the same.  It takes bravery to lower taxes, and intelligence to provide an enabling economic environment where low-taxed persons can thrive.

Unfortunately, BERT’s demonstrated incompetence appears to be just the start of things to come.  Despite being fully aware that there are non-austerity alternatives to their severe austerity plan, BERT refuses to consider any of them.  That would normally be front-page news of a media outlet committed to truthfully informing the public.  But not our news media who appear to shamelessly play the role of propaganda-arm of the BLP administration.

Our sycophant news media refuse to report on any non-austerity plan, including Solutions Barbados’.  Instead, they continue to mislead the public that the mass suffering of Barbadians is the necessary and only solution. They are dead wrong and cowards of the highest order.

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados.  He can be reached at NextParty246@gmail.com

The Grenville Phillips Column – We Are Sunk

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The DLP administration made itself offensive to the voting public with their arrogance and excessive taxes. They also alarmed investors by attracting downgrades due primarily to their printing of money to an unsustainable level.

The BLP administration has increased taxes far beyond what the DLP administration levied. They also brought us to the point of economic ruin by defaulting on foreign debts, which resulted in a downgrade more severe than any downgrade under the last administration.

With the International Monetary Fund (IMF) being our lender of last resort, there was an urgency in setting economic targets with which the IMF would agree. The Barbados Economic Recovery Team (BERT) developed a plan to meet these targets, but after they have offended both foreign and local lenders, if we do not meet these targets, the consequences for all of us will be dire.

BERT is trying to meet these targets through severe austerity methods, including: increasing taxes, laying off public workers, and breaking contractual agreements with local investors. However, there are proven non-austerity methods that can meet these targets, which Solutions Barbados published over 3 years ago.

At the recently held Nation Talkback event, panellist Shane Lowe of the Barbados Economics Society noted that it would be foolish not to evaluate all opportunities. In response to my question at that event, Dr Kevin Greenidge admitted that BERT did not examine any of the non-austerity economic plans when developing their plan.

I asked whether BERT will finally examine Solutions Barbados’ non-austerity plan now that the urgency in getting an IMF agreement had passed. Dr Greenidge indicated that they would not. The reason given was that he believed that all solutions must include public suffering. He is, of course, entirely wrong.

BERT refused to examine the non-austerity plans, not for reasons of urgency, but because they stubbornly embraced a questionable academic economic philosophy. They appear to be so blinded by their academic theories, that they are even willing to violate one of Prime Minister Mottley’s first post-election promises that all ideas must contend.

For the record, the non-austerity approaches of lowering taxes, effectively addressing corruption and properly managing public services are proven revenue generators. Barbados reduced taxes under the Arthur administration, Singapore properly managed their public services, and Switzerland effectively addressed corruption. All three benefitted economically without the need for austerity. Yet, because a small group of economists have tightly embraced severe austerity-based economic theories normally used by the IMF, which have failed so many countries in the past, most Barbadians are destined to needlessly suffer.

The media are unquestioningly parroting BERT’s misinformation that severe austerity is absolutely necessary and the only solution. They also appear to restrict any fair analysis of the current administration on their platforms.

The Prime Minister acknowledged the dire economic situation that she faced upon entering office. To her credit, her directive that all ideas must contend was a wise and responsible approach. With limited time available and with a general election that saw the emergence of several new ideas, it was important that all ideas be considered and rigorously scrutinised prior to their implementation – including BERT’s.

Since BERT appears to be allowed to behave restrained, and without any meaningful scrutiny from the media, then we are truly sunk. Our media need to be reminded that an unquestioning support of one political party normally facilitates the rise of dictators – who normally target a free press once they consolidate power. They should be guided by Albert Einstein’s relevant observation: “Unthinking respect for authority is the greatest enemy of truth.”

 

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados. He can be reached at NextParty246@gmail.com

Proposed Public Sector Expenditure Reduction Programme Document

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A consequence of government’s public sector expenditure reduction program is the rationalization of some SOEs and retrenchment that has started. The following document details the Proposed Public Sector Expenditure Reduction Programme.

Read it and weep!

Barbadians Wake Up, Time to Take Back Our Country from Ourselves

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drakes

Opposition Senator Crystal Drakes – Economist

The blogmaster listened to the contributions of Opposition Senators Caswell Franklyn and  Crystal Drakes yesterday and it caused the blogmaster to pause about the state of the country in 2018.

No surprise that Caswell’s response was pro labour and questioned why public sector workers are being sacrificed by BERT instead of pursuing other options. Caswell also made the point that the BLP made all kinds of unrealistic campaign promises despite the perilous state of the economy. Senator Caswell you negated your argument with your observation.

Senator Crystal Drakes clinically used numbers which her training as an economist influenced to question the decision to default on debt and the validity of revenue projections based on BERT extracting one billion in taxes from the economy by her calculation. Again Senator Drakes although earning points for being articulate failed in her presentation to connect some important dots. What are the underlying issues that caused Barbados to be the third highest indebted country in the world Senator? Has BERT addressed  those underlying concerns?

caswell_franklyn

Caswell Franklyn, Head of Unity Workers Union

A suggestion from the blogmaster to the Prime Minister and her Jong led Communications  Team is to go back to basics with the message. What are the key performance indices we have to turn around and the behaviours at the household and business level that must be modified to trigger real change to sustain a quality of life.

 

 

 

The blogmaster is a fan of the Financial Stability Report 2017 and lifted a few of the graphs that capture the economic performance of Barbados in recent years.

Commercial bank spreads - 2017

This graph is interesting given the accusations levelled at banks and exorbitant fees being charged. 1)Interest income on loans dipped a ‘little’ since 2012. 2)The interest spread moved UP since 2015 which coincides with central bank’s decision to not set a minimum rate on savings deposits. 3) Interest expense on deposits dropped to 0%.

 

credit card transaction - 2017

A central bank report confirmed that Barbadians racked up 347 million in debt up to 2017. This graph supports the spectacular rise in debt from 2008 which correlates with the value of credit card transactions in both the personal and business sectors.

credit cards issued - 2017

A picture is worth a thousand words who said? See the spike in credit cards issued from 2015!

currency in circulation - 2017

The upward trend of currency in circulation rose from 2005 to coincide with the cooling off of the global economic boom cycle and continued more aggressively in the post 2008 period to covers the start of the global recession in 2007/8.

International Reserves - 2017

It is worth mentioning the former government inherited 1.8 billion or 20 weeks of import cover in foreign reserves and when they were booted from office the reserves had dwindled to 6 weeks and about 400 million dollars.

net interest margin - 2017

This graph is interest for a number of reasons. Will allow the BU intelligentsia to share why this is the case.

total credit card debt % of toal loans

Another interest graph when we plunk a trendline on it. What can we say about household behaviour in Barbados from 2007?

public debt

See what happens when the printing press doesn’t switch off?

The adage a picture is worth a thousand words holds true.

The Grenville Phillips Column – Heed the IMF’s Warning

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On 4 October 2018, the International Monetary Fund (IMF) published their report on the Government’s austerity program.  Despite the current administration’s claims of being more transparent that the previous one, reading these IMF reports suggests that they are similarly non-transparent.  Speaking more often does not equate to transparency.

The IMF report provides significantly more detail than what is reported locally.  The report confirms that that the severe austerity was designed by the current administration, and that the Government is accountable to the IMF for implementing the measures.  An analysis of the report follows.

To reduce Government spending, the Government must: provide less money to Government services managed by boards and Chief Executive Officers, increase taxes on the tourism sector, increase personal income tax rates, and increase corporate income tax rates.

If less money is going to Government services like water, public transportation, garbage collection, the Queen Elizabeth Hospital, the Airport, etc, then normally we would expect one of two outcomes.  We would either expect worse service because of the reduced resources provided, or we would expect to be forced to over-pay for the services that we have already paid for with our taxes, by paying user-fees.  Unfortunately, we in Barbados can expect both outcomes.

The IMF report notes that the Government’s plan includes a reduction in the wage bill and an increase in user fees for these Government services.  We have already been charged additional amounts for water, garbage collection, health, and airline travel.  Additional user fees, and the laying off of staff providing these services, can be expected.

Laid-off workers would feel justifiably angry with the continued mismanagement of Government services and the under-representation by their ‘all-aboard’ union representatives.  To demand that the public ‘double-pay’ for government services, and then still send home workers, appears to signal that the real problems of substandard management, wastage, and gross corruption will continue to be ignored.

Both administrations have rejected the proven international management standard, ISO 9001, in favour of their failed public sector reform efforts.  We can expect the usual partisan yardfowls to continue to ridicule this international standard that has greatly benefited the public services of other nations.

The IMF notes that divestment is also part of the plan.  Other than gross incompetence, selling public services cheaply to politically-favoured entities is the only logical explanation for rejecting an international quality management standard.  Poorly managed public services are worth significantly less than well-managed services.  Politically partisan media persons who continue to ridicule the ISO 9001 standard are doing Barbados a grave disservice.

Increased personal income tax rates normally result in families having less money to spend after paying their monthly expenses.  However, in Barbados, where the increased income tax is coupled with us significantly over-paying for public services, there will be no disposal income left.  We can expect most persons’ personal savings to be exhausted.

Increased corporate tax rates may result in some increases in products if businesses want to maintain their profits, or no increases if businesses are willing to accept reduced profits in this challenging economic environment.  Given that the private sector representatives were irresponsibly promoting an austerity-only solution, we can expect an increase in the cost of products, since those who promote austerity normally do so for others, not themselves.

The IMF report also noted that the plan included measures to address the slow processes for obtaining town planning approval.  That this was included in the severe austerity plan demonstrates the inordinate influence of developers who appear to have been misled by their agents.  So, we must all suffer while the Government tries to correct the wrong problem.

Many development applications are simply substandard, requiring multiple resubmissions to the Town Planning department.  Agents normally deflect blame from their substandard work by unfairly blaming the Town Planning department for the delays.  Weakening an already ineffective building standard regulatory environment, to get applications approved faster, is dangerously irresponsible.

The IMF ‘s report appears to give only one warning: “It is important to continue good faith negotiations with domestic and external creditors.”  When countries are challenged to honour debt contracts backed by the Government, there are normally two options.  The first is to negotiate repayment terms with creditors, which is the way of democracies.  The other is to pass laws to make not paying legal, which is the way of dictators.  The Government needs to reconsider the Debt Holder Bill and heed the IMF’s warning.

Grenville Phillips II is a Chartered Structural Engineer and the founder of Solutions Barbados.  He can be reached at NextParty246@gmail.com