Aug 2016 Financial News

IMF: Barbados Economy Turning A Corner

Aug 29, 2016

BRIDGETOWN, Barbados, Saturday August 27, 2016 – The International Monetary Fund (IMF) says there has been a pickup in economic activity in Barbados and it appears the economy is turning the corner. But it warns that notwithstanding the authorities’ consolidation efforts, the large fiscal deficit and a further increase in public debt remain a challenge.

The assessment follows the IMF’s Article IV Consultation with Barbados concluded by the Fund’s Executive Board of Directors this week.

The directors said fiscal adjustment and public sector reforms are necessary to bring public debt on a downward path, preserve external sustainability, and improve investor sentiment. They also underscored the need to eliminate impediments to stronger long-term growth and bolster competitiveness.

The Board further commended the authorities’ commitment to fiscal adjustment and reforms, but said that further efforts are needed to put the high and growing public debt on a sustainable path, while minimizing the negative impact on growth and preserving social cohesion.

The IMF welcomed new measures outlined in last week’s budget, including reductions in current expenditure and new revenue measures such as a 2% National Social Responsibility Levy. It underscored the importance of completing the reform of the Barbados Revenue Authority and improving tax administration and increase compliance.

The directors also stressed that stronger efforts are also needed to reform state-owned enterprises through better governance, consideration of user fees, and potential divestment and consolidation of public entities. They called for swift action to eliminate government arrears and emphasized that the continued financing of the fiscal deficit by the Central Bank of Barbados (CBB) is inconsistent with maintenance of the exchange rate anchor.

The directors therefore encouraged the CBB to “allow domestic interest rates to rise in line with increases in US interest rates and ensure adequate international reserve buffers.”

Meantime, the IMF directors agreed that a comprehensive growth strategy is needed to lift the country’s long-term competitiveness in the key tourism sectors.

“Priorities for raising growth include timely implementation of tourism investment and infrastructure projects, improving public service efficiency and streamlining business regulation, increasing labour market flexibility, and unlocking agriculture’s growth potential,” they said.

Source:
Caribbean360
Sunday August 28, 2016

http://www.caribbean360.com/business/imf-barbados-economy-turning-corner