Based on an International Monetary Fund’s preliminary assessment, Barbados appears to be moving correctly along the path towards securing refinancing of its debt obligations and for national economic restructuring.
One week after winning the May 24 elections, the Mia Mottley administration responded to being confronted with a national debt, that has more than doubled in the 10 years of the last government, by suspending liability payments and calling in the IMF for assistance with the aim of getting soft loans to help Barbados meet its obligations while righting a declining economy.
Following Mottley’s meeting with IMF Managing Director Christine Legarde, an IMF team visited Barbados from July 02 to July 12 for talks with private and public officials and before leaving the island, declared the visit a success.
“Significant progress has been made during this IMF staff visit on the plan that could underpin financial support from the IMF. On its return to Washington the team will continue to analyze the government’s comprehensive reform program. We will remain closely engaged with the authorities in the coming weeks,” stated IMF mission leader, Bert van Selm.
The IMF visit is seen as a country assessment, which will lay the basis for the organisation’s talks with the island’s government that should lead to the release of hundreds of millions of dollars in loans at the concessionary interest rate of one per cent in a few months.
That rate conflicts drastically with the 7.5 to 8.5 percent interest condition under which the previous government borrowed US$225 million from Credit Suisse in 2013, and for which a payment of a reported US$60 million is now past due and falls under the list of debt obligations for which Barbados is seeking refinancing.
So far Bert van Selm appears pleased with what his team has found and will be reporting to the Fund’s Washington headquarters.
“The Barbadian authorities, in close consultation with their social partners, are taking effective steps to address current economic vulnerabilities,” he said, adding, “progress being made by the authorities in furthering good-faith discussions with domestic and external creditors is welcome. Continuing open dialogue and sharing information, will remain important in concluding an orderly debt restructuring process.”
When Mottley had announced suspension of payments due on debts owed to external commercial creditors and requested local creditors to roll over principal maturities until government strikes a restructuring agreement with them, she said “our debt has been unsustainable territory for some time. The arrears represent an effective default by the previous government to Barbadians.”
She said her administration had developed an ‘Economic Recovery and Transformation Plan’ intended to initially provide balance of payments support through IMF soft loans.
If words of the IMF mission leader are an indication of the intent of the Fund, then Barbados is well underway towards securing that balance of payments support.
“The IMF stands ready to partner with Barbados to restore macroeconomic stability in order to secure strong, durable and inclusive growth in the years ahead,” Bert van Selm stated.