Bright markers on Barbados’ recovery
By George Alleyne
Two recent reports, one
from the International
Monetary Fund and another
from world credit rating
agency, Moody’s, have given
the Barbados government a
vote of confidence as it goes
about returning viability to an
economy that was on the verge
of collapse.
When the current
administration took office in
the last week of May 2018 it
reacted to an overwhelming
burden of financial repayments
due, a bloated inefficient public
service, and dwindling foreign
exchange reserves, by first
suspending debt payments and
striking a deal with the IMF to
cut operating costs, work out
repayment deals with creditors,
and gradually reduce debt
to GDP ratio from the near
impossible figure of just above
155 percent.
Since embarking on the
Barbados Economic Recovery
and Transformation (BERT)
program in September the
island was subjected to three
periodical checks to ensure
goals are being met, and
the country has come out of
those evaluations with flying
colours.
“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,” read
part of that last IMF assessment
report published in late June.
Part of the condition of the
IMF four-year arrangement is
that a portion of a $289.41
million special concessionary
loan will be handed over to
the island following every
inspection.
Among the factors that
pleased the visiting IMF team
is that Barbados has moved
its foreign exchange reserves
from the dangerously low level
of $220 million to now be in
excess of $530 million.
Government has settled a
debt repayment scheme with
local creditors and is in the
process of finalising a similar
deal with external lenders.
The public service has been
trimmed and state-owned
enterprises are expected to
Caribbean L 22 ife, July 12–18, 2019 BQ
be put on an efficient footing
shortly.
The administration has
shaved down the percentage
points of the debt to GDP ratio
from 155 to 125.6 per cent. The
international standard for debt
to GDP ratio is 60 percent.
These and other financial
factors caused Central Bank
Governor, Cleviston Haynes,
to forecast, “the outlook for
the Barbadian economy has
become more favourable as
macroeconomic indicators
continue to improve in line
with expectations under the
BERT program.”
The international credit
upgrade by the New Yorkbased
agency, Moody’s, is
itself a special case because
Barbadians were accustomed to
being hit by news of successive
downgrades since 2008. The
more than 20 downgrades
spanning a 10-year period had
taken all aspects of the island’s
credit rating to junk status.
Moody’s however announced
last week that it “has …
upgraded Barbados’ foreign
and local currency issuer
ratings to Caa1 from Caa3,
affirmed the foreign currency
senior unsecured bond rating
at Caa3, and maintained the
stable outlook”.
Barbados is far away from
the objective of restoring a
vibrant and viable economy
but the markers along the
road to recovery are becoming
brighter as administrators
navigate through large debt
obligations while meeting
challenge of attracting new
investment, but the first in
what is expected to be a series
of credit rating upgrades
twinned with positive IMF
reports should make that task
easier.
Barbados Central Bank Governor, Cleviston Haynes.
Photo by George Alleyne
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