Barbados Must Bring Deficit Under Control: IMF
by Mike Godfrey, Lowtax.net, Washington
12 June, 2014
A team from the International Monetary Fund (IMF) has completed a week-long visit to Barbados to review economic developments and to discuss fiscal policy priorities. IMF staff met with senior government officials, the Governor of the Central Bank of Barbados, and representatives from the private sector.
Nicole Laframboise, who led the visit, noted that the Barbadian economy continues to face significant challenges, and the economy is expected to contract by 0.6 percent of gross domestic product (GDP) in 2014. The deficit in the fiscal year 2013/14 is estimated to have amounted to 12 percent of GDP, and the central government gross debt has risen to 96 percent of GDP as at March 2014.
Laframboise said: "The need for fiscal consolidation is urgent. The authorities agree and have implemented most of their announced budget measures. Follow up is essential to ensure that these measures produce material results in the near term to lower the government's financing needs. Slippages should be met with offsetting actions in order to meet budget targets."
"Strengthened oversight and fundamental reform of the public enterprises are key priorities in the near term. IMF staff welcomes progress in this area and the government's intention to significantly strengthen the monitoring and control of public enterprises, including through a high-level independent oversight committee and increased resources for the accounting unit responsible for monitoring performance."
"While awaiting the findings of a review of domestic taxation by technical experts, consolidation efforts should also focus on the other components of expenditure, including ways to improve the targeting and effectiveness of social services. This should include scaling back some universal programs available to higher income groups to ensure that they reach the most needy."
The IMF statement noted that the banking system remains liquid and well capitalized, and it praised the islands' commitment to implementing recommendations from the recent Financial Sector Assessment Update. These recommendations included measures to enhance the supervision and regulation of non-bank financial institutions and offshore banks.
In addition to the need for increased oversight, the IMF statement also highlighted the importance of promoting economic growth via public investment projects to boost capital inflows and productive capacity. It noted that the importance of removing administrative impediments to doing business and lower production costs in the country, such as unit labor costs.
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