Barbados’ economy ‘back to the start line’

The Barbados government has announced a US$10m (BD$20m) “survival” stimulus package in response to a significant loss inrevenue from tourism and increased expenditure as a result of the coronavirus. In a statement to Parliament the Prime Minister Mia Mottley said that the crisis had taken Barbados back to when her government started its IMF recovery programme.

She said that the package would provide critical assistance to Barbadians and businesses in the light of an expected downturn in tourism by as much as 80%.

In a three-hour speech, she announced the establishment of a Household Survival Programme to help more 1,500 vulnerable families. This, she said, will give up to BDS$600 (US$300) per month to each family and increase by 40% all rates and fees paid by the country’s Welfare Department to less well-off individuals. She also said that her government had asked the private sector to match this through an Adopt-a-Family programme, where those who earn more than BDS$100,000 (US$50,000) annually, would also provide up to BDS$600 per month to the fund for families in need. The fund, which is to be in place for an initial three to six months period, is backed by CIBC FirstCaribbean Bank.

Mottley, who is also finance minister, said that the government had been hoping for at least 1.5% growth in the coming fiscal year but “we have gone back to the start line”. The impact of COVID-19 on global travel would she said, result in a decline in all economic activity. She however noted that foreign reserves of just over BDS$1.56bn (US$780m) or 5.5 months’ import cover had been boosted by an additional BDS$360m (US$180m) or one month’s extra import cover by the IMF, allowing the use of some of its earlier agreed support as reserves cover and budgetary support should this be needed.

She said the additional funds will constitute the BDS$160m (US$80m) approved by the Inter-American Development Bank (IDB) and a reinforcement of BDS$200m (US$100m) from the International Monetary Fund (IMF) under the Enhanced Structural Adjustment Facility, which is currently about BDS$440m (US$220m). The IMF, in October 2018, approved a US$290m Extended Arrangement under the Extended Fund Facility (EFF) for Barbados.

Observing that with just 11 days to go to the end of the 2019-20 fiscal year, Barbados had been recording a primary surplus of 5.7% or BDS$597.5m (US$298.7m), Mottley, however noted that there was “no glory in hitting targets and people are suffering”.

She said she had already informed the IMF that Barbados “can no longer run a 6% primary surplus” and the IMF and Government had an “initial understanding” that the country would move to a surplus of 3% of GDP based on a scenario of the island witnessing a 50% reduction in tourism. However, she said should the severe scenario of an 80% reduction come to pass, which “it is looking more and more like”, then the target would move down to 2% of GDP.

“The reserves will decline by at least BD$206m (US$103m) but more likely to be just over BD$400m (US$200m) with the scenarios that we have,” she told parliamentarians. As for Government’s revenue in the next financial year, Mottley said we can see anywhere between BD$157m (US$78.5m) to BD$240m (US$120m)less in tax revenues in this country,” she said.

This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication.