BRIDGETOWN, Barbados — THE Barbados Chamber of Industry and Commerce (BCCI) Wednesday said it had urged the Freundel Stuart government to consider entering into a standby agreement with the International Monetary Fund (IMF) as the island grapples to turn around an ailing economy.
BCCI president Tracey Shuffle, addressing a business breakfast meeting here, said that the private sector had suggested that once a reasonable portion of the present fiscal deficit had been reduced, “the government of Barbados could then consider the feasibility of engaging the IMF to enter into a standby arrangement.
“We believed that would have allowed government to avoid any further erosion to the balance of payments while gaining access to funding to help fuel growth through critical project activations.
“We also believed that would have given Barbados the flexibility to determine its level of engagement with the IMF while meeting agreed fiscal targets and having access to lower cost funding for capital projects to feed major sectors of the economy.”
She said that it would appear that a permutation of the first part of our suggestion has been undertaken while the second part has so far been roundly rejected.
“What is clear is that the 19 -month adjustment programme undertaken by government has been sluggish and well behind targeted pace in both revenue generation and expenditure cutting.
“Reserves have been shored up by borrowings and seem to have stabilised for the last several months. So has this 19-month adjustment programme brought with it the confidence that our economy will be fuelled up and ready for growth over the next three to five years? Clearly not,” she noted.
Shuffle told the breakfast meeting discussing the “Merits and Demerits of a Formal IMF Programme”
“We all know that a formal IMF engagement can only be established by government invitation but we believe that whether or not such a decision is taken in coming months, the business community must be adequately informed about what that is likely to mean.”
She said as a result it was important to have a “well researched, experiential and balanced discussion about such an important topic”.
The private sector leader said that there is a belief in the country that when the IMF is formally engaged by a government, that government has completely “failed” to adequately manage its financial affairs.
“In fact, many countries wait until they are in absolutely dire financial straits to engage the IMF as the Fund is often seen as a rescue of last resort, a time when financial power is handed over to outside interests.
“Others believe that a formal programme is one of the most effective ways to access lower cost loans and to signal that the hardest structural decisions are more likely to be successfully implemented, giving an overall confidence boost to the economy. “
Shuffle said that as always, there are shades and nuances not captured in either of these two positions, noting that there are some Barbadians who believe “our only hope is the IMF, because government can’t properly execute a home grown programme quickly enough for us to move into growth in the next few years.
“Others believe the IMF is insensitive to small, open economies like Barbados and they will essentially imperil the foundations of the economy we have collectively worked to build, even if the fiscal deficit is markedly improved.”
But she told the breakfast meeting that IMF programmes have traditionally consisted of reforming the tax system, making the exchange rate more competitive or allowing devaluation to occur, liberalising trade regimes, increasing privatisation and reducing fiscal deficits.
“While it is clear that some of the traditional IMF approaches have become more member-sensitive in their recent Caribbean engagements, devaluation is usually placed firmly on the table as part of the standard toolkit along with removal of a number of concessions and comprehensive tax reforms.”
– CMC
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Chamber pushes for IMF deal for Barbados
