The International Monetary Fund (IMF) has approved a further $188 million to help Barbados meet the economic challenges brought on by the global COVID-19 pandemic.
After completing its fourth review under its Extended Fund Facility (EFF) ending December 31, 2020 for the overarching, home-grown Barbados Economic Recovery and Transformation (BERT) programme, the IMF sanctioned the additional disbursement.
In its assessment of that same period, the BERT Monitoring Committee also stated in its just-released progress report that this money includes an augmentation of the EFF by an additional $138 million “to address the continuing challenges the Barbados economy face owing to the global coronavirus pandemic.”
“Concurrent with its review, the IMF executive board agreed with the GOB’s [Government of Barbados] requests for the further modification of performance criteria allowing for a reduced primary surplus target of minus 1 per cent of GDP for fiscal year 2020/21 – down from a positive 1 per cent revised target agreed at the time of the third review,” the BERT Monitoring Committee said.
According to the group, this change is in recognition of significant revenue losses and the need to support spending on public health and social protection in response to the pandemic.
“In addition, four new structural benchmarks were introduced, and the due dates for three others were reset due to the impacts of the pandemic on progress,” the committee added.
This report coincides with the ninth set of targets under the EFF on which the BERT committee has commented.
“During the period, the IMF executive board completed its fourth review under the EFF agreeing that all performance criteria had been met, all structural benchmarks had been completed,” the local monitors announced.
For example, the report revealed that the government achieved its performance criteria for all of its fiscal targets including exceeding its minimum goal of $33 million on the primary balance.
The actual balance reached was $243 million.
The Government had also met its goal of not accumulating any external debt arrears as well as not making more than $338 million in transfers and grants to public institutions. It actually made transfers and grants of only $297 million.
According to the monitoring committee, the ceiling on public debt also ended up some $330 million within the target set.
The maximum debt which the Mia Mottley administration had established it did not want to exceed was $13.1 billion. It accumulated debt of $12.8 billion.
With reference to the monetary targets, the BERT monitors disclosed that the administration had established a target of just over $1 billion for the country’s international reserves; instead, it accumulated $2.1 billion.
The committee also assessed the primary balance which represents total revenues and grants less all expenditure, but excluding interest.
“While overall revenue collection fell short of the target under the BERT plan, expenditure was sufficiently contained allowing the adjusted primary balance minimum target of $33 million to be achieved,” the report declared.
Regarding government’s revenue collection, the monitoring team noted that total revenue for the first three quarters ended December 31, 2020 was $1,873 million, representing a decrease of $265 million on the total of $2,138 million collected in the same period in the prior year. The report said that tax revenue was $1,796 million versus $2,014 million in the prior year, a decline of 10.8 per cent.
The team also noted that the primary contributors to the shortfall in revenue versus the prior year included $118 million from income tax due to the significant lay-offs arising from the pandemic and two reductions in the personal tax rates that became effective in July 2019 and January 2020. The committee also pointed to the $26 million related to land tax due to a delay in the invoicing compared to the previous year and the $309 million on various indirect taxes including VAT, excise tax, import duties, fuel taxes and tourism levies because of reduced economic activity due to the pandemic.
The BERT committee said that total spending in the first three quarters of the fiscal year was $1,909 million, which was $92 million or 5.1 per cent higher than the $1,817 million in the prior year.
“The majority of the additional expenditure ($89 million) related to interest now that the restructured debt is being serviced again. Twenty-five million dollars of the increase was on grants to public institutions and a further $22 million on capital expenditure primarily in the Ministry of Energy and Water Resources on infrastructure upgrades and in the Ministry of Health and Wellness related to COVID-19 management,” declared the committee.
“These increases were partly offset by reductions in spending on goods and services which has so far been $35 million lower than the prior year. It should be noted that the additional interest expense has no impact on the primary balance,” it contended.