Lagarde said in a statement: “Our ultimate goal is to help Barbados achieve higher living standards and more inclusive growth for the years ahead,” the IMF managing director said in response to Mottley’s call.
At a press briefing yesterday following talks with the island’s Social Partners, Prime Minister Mia Mottley said that she had telephoned Managing Director of the International Monetary Fund (IMF) Christine Lagarde overnight regarding her country's dire economic condition.
Mottley, whose Barbados Labour Party (BLP) said at the launch of its election manifesto it was not afraid of turning to the IMF as a last resort, has been forced to do so just one week after taking office.
Flanked by trade union and private sector officials, Mottley reported that the island’s economic situation was currently so dire that her Government was really left with no choice in the matter.
In fact, she said a major economic restructuring was now necessary in the face of an out-of-control debt of 175 per cent of gross domestic product, an estimated $15 billion which is said to be $9 billion more than what the previous Democratic Labour Party administration inherited in 2008 when it took office.
The Prime Minister announced the immediate suspension of payments due on debts owed to external commercial creditors. She advised that Government would endeavour to make scheduled domestic interest payments, but domestic creditors would be asked to roll over principal maturities until restructuring agreements were concluded.
These actions have taken into account the island’s critically low foreign reserves, which, as of May 31, 2018 stood at only US$220 million, or the equivalent to seven weeks’ worth of import cover, and the Central Bank of Barbados’ projections for further declines as the year progresses.
“My Government and all parts of the Social Partnership agree that there is no avoidance in delay in treating the economic and financial irresponsibility of the recent past. Our national reconstruction starts today. We set course, not on the easy or quick path but the right path. We will protect the most vulnerable, but we will all have to make sacrifices for our country.
“Today we move forward together in a new spirit of openness and with a new covenant of hope and opportunity. I ask our domestic and external creditors to accompany us on this journey of rescue, rebuilding and transformation,” Prime Minister Mottley said.
Mottley explained that as part of the comprehensive economic reform programme aimed at stabilizing the public finances and creating conditions for the return of sustained economic growth to Barbados, balance of payments support would be sought from the IMF.
“We are members of the International Monetary Fund, and last night I called Madame Lagarde, its managing director. I briefed her on the present state of the public finances, the current debt and reserve positions, and assured her that we are committed to taking decisive action to rebuild Barbados.
“In turn, Madame Lagarde assured me that the IMF stands ready to lend Barbados the necessary assistance and support to these actions,” the Prime Minister said, adding that “the hour is late, the path ahead is not easy, but dawn is on its way”.
In the same breath, Mottley is sticking to her party’s manifesto promises of raising the contributory and non-contributory pensions, as well as invalidity and survivor’s benefits; eliminating tuition fee payments for Barbadians attending the University of the West Indies, scrapping the National Social Responsibility Levy, providing trust loans for Barbadians and eliminating pit toilets.
However, no timeline was given for implementation of any of these promises, even though she had previously suggested that they would be fully in place within six months of assuming office.
The last time Barbados entered a formal programme with the IMF was back in the early 1990s when the then Erskine Sandiford-led DLP Government opted for a stabilization and adjustment programme that led to job losses and an across-the-board eight per cent cut in public sector wages.
The bitter medicine proved too much for ordinary Barbadians to bear and resulted in massive streets protests and the eventual demise of the Government.
Since then, there has been a general reluctance to go that route again, with the just ousted Freundel Stuart administration stubbornly refusing in recent months to ask the Fund for help even though the IMF has clearly said it stands ready to assist.
In a brief statement today, Lagarde revealed that an IMF team, led by Bert van Selm, would be visiting Bridgetown to start discussions on how the Fund can support the authorities’ economic plan.
“Our ultimate goal is to help Barbados achieve higher living standards and more inclusive growth for the years ahead,” the IMF managing director said in response to Mottley’s call.
- Countries: Barbados