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Caribbean L 18 ife, June 19-25, 2020
Barbados Prime Minister, Mia Mottley. Photo by George Alleyne
Challenges ahead for
Barbados’ economy
By George Alleyne
In spite of a halt in many businesses,
including an almost total shut down of
its main economic sector -the tourism
industry — owing to effects of COVID-
19 pandemic, Barbados so far continues
to meet targets, but dark days loom.
In taking over the helm of government
in 2018 with the country almost
bankrupt, the current administration
defaulted on its external debt, successfully
renegotiated a new financial
arrangement with all international and
local creditors; struck up an economic
recovery plan agreement with the International
Monetary Fund that opened
the door for concessionary loans from
the IMF and other organizations.
Since then the island’s economy has
been on an upswing, earning it in 2019
positive ratings from New York-based
international financial rating agency,
Standard and Poor’s that raised Barbados’
credit rating six notches from to
‘’B-/B’ from ‘SD/SD’ (selective default)’.
Also Trinidad-based regional financial
rating agency, CariCRIS, removed its
CariD (Default) Regional Scale Foreign
Currency Rating of the Government of
Barbados and assigned an upward rating
of a CariBB-, with a stable outlook.
These international credit rating
upgrades were the first the island has
had in 11 years, following 22 consecutive
downgrades that ended in 2018.
But despite what the IMF termed
earlier this month as ‘reduced economic
uncertainty’ because of how
the Prime Mia Mottley administration
renegotiated its financial debt
and devised the Barbados Economic
Recovery Transformation (BERT) plan
the organiation warned, “prospects for
2020 have deteriorated significantly
owing to the global pandemic, and
risks to the outlook are now very high
and tilted to the downside.”
The IMF comments came in a statement
as it announced the handing
over of $139 million, $91 million of
which is to assist the country in withstanding
economic shock from the
pandemic, and the remaining $48 million
under the Extended Fund Facility
in which the organization agreed to a
loan $290 at one per cent concessionary
interest rate to be paid in tranches
following periodic reviews. One such
review was completed this month.
“All performance criteria for the
review were met,” the IMF stated, but
added in light of the expected economic
downturn, “resetting of benchmarks
for future reviews is proposed due to
the global coronavirus pandemic.”
Citing reasons for revised benchmarks
the IMF stated, “the coronavirus
pandemic has halted tourism
arrivals and the local outbreak was
contained. Starting with March 2020,
tourism has come to standstill: most
hotels have closed, occupancy has
plummeted at facilities that are still
open, and bookings for the coming
months have been cancelled. Airlines
have sharply reduced the number of
flights or suspended flights to Barbados
altogether. This external shock
has started having a large negative
impact on the economy and fiscal revenues,
and increased risks to debt sustainability.
Unemployment has more
than doubled and a large recession is
projected for 2020.”
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