Carlos Forte, a Barbadian economist based in Canada, believes Barbados no longer needs to be in an International Monetary Fund (IMF) programme.
He is also questioning the necessity of the second Barbados Economic Recovery and Transformation (BERT) plan initiated in 2022, while noting that regarding some important public finance matters, “the first IMF programme achieved its core objectives”.
Forte, who is a former senior economist in the Ministry of Finance and Economic Affairs and was also a statistician at the Central Bank of Barbados, gave his assessment of Barbados’ latest arrangement with the IMF after the international financial institution’s executive board recently approved
the latest staff review and a US$56 million loan disbursement.
“The first IMF Extended Fund Facility (BERT 1) was successful in restoring fiscal prudence to Barbados’ public finances, creating fiscal space, stabilising Barbados’ economy and unlocking access to loans from multilateral lending institutions,” he said.
“Foreign loans from the multilateral institutions and the IMF loans have resulted in record high foreign reserves, which have removed any anxiety about the country’s ability to finance imports, repatriate profits to foreign owners of local capital, or anxiety about the Government’s ability to pay foreign debt and interests when they are due in the short-term.
“Of course, the debt restructuring also resulted in putting the debt to GDP ratio on a downward trajectory – an important target of the IMF programme,” the economist stated.
Forte’s view was that “with respect to those important issues, the IMF first programme has achieved its core objectives”.
He noted, however, that “due in part to the COVID pandemic, reform of SOEs (state-owned enterprises) to reduce Government expenditure was placed on the backburner”.
“Those reforms were an important plank of BERT 1 and are an important pillar of BERT 2.”
While he pointed to the benefits of the first BERT programme/IMF arrangement, Forte’s position is that “the jury is still out on the success of BERT 2”.
“However, what I would say is that BERT 2 was not necessary and Barbados no longer needs to be in an IMF programme. In my view, BERT 2 was and is an insurance policy designed to enable the Government to continue to access loans from the IMF and other multilaterals. You may have recognised that the Government remains heavily reliant on foreign debt,” he asserted.
Forte stressed the importance of recognising that IMF programmes “are not economic growth or development plans”.
“Though it is critical that Barbados achieves its BERT 1 and BERT 2 targets, it is foolhardy to be triumphant about each occasion the IMF announces that Barbados has met its IMF targets and the IMF executive board has approved an additional tranche of funding for Barbados,” he asserted.
“Why? Because IMF targets are minimal standards of public finance management and macro-economic stability. In other words, repeated celebration of an austerity programme that imposes hardship on a captive population and commits a government to do those things that countries are expected to do in order to properly manage their economic affairs is misguided at best.”
He continued: “Barbados is still yet to achieve meaningful reforms in SOEs to deliver quality public services and reduce their burden on taxpayers. Barbados’ economy is still yet to be diversified from its over reliance on tourism.
“Barbados still has tremendous difficulty earning enough foreign exchange to pay its way in the world and ignite real progress and development.”
In his opinion, “the jury is still out on Barbados’ ability to sustain economic growth and build a platform for affordable economic and social development that improves the lives of most Barbadians”.
“Local confidence in commercial and individual lending to the Government has not yet returned; and Barbados is still struggling to attract sufficient foreign direct investment. The targets under BERT 2 for investment are woefully lagging,” he argued.
Forte was asked what he saw as the way forward for the Barbados economy, particularly in terms of the need to diversify it away from heavy reliance
on tourism.
“Reduce the cost of doing business, including taxation – for example, abolish the foreign exchange fee and reduce the fuel tax. Substantially improve public services and reduce the time and costs of registering businesses, reduce the time and cost of land and property transactions, and the adjudication of commercial law,” he recommended.
“There’s also a dire need to attract much more foreign investment, increase exports of goods and services, actually get affordable housing built, and create the environment for entrepreneurship, creativity, technology and risk capital to thrive.”
Forte also posed the following questions: “What has become of the Government’s 2023 Budget? There were a lot of ambitious objectives to create new industries. Where is the floundering alternative energy industry? Where is the new medical marijuana industry?
“Where is the new life sciences industry? Where are the efforts to resuscitate the important international business sector? Where are the improvements in health care, water distribution and public transportation? Where are the high-quality public services being delivered to Barbadians daily? Where
is the education reform?”
With the climate crisis a major threat to the economy, Forte thinks that “Barbados’ efforts at climate resilience have been more bark than bite”.
“I would characterise the current climate policy as too narrowly focused on securing low-cost international loans, and ill-advised, unrealistic and costly alternative energy targets. I do not like the begging bowl diplomacy. More focus and effort need to be on attracting investment. On that score, the Government is failing,” he submitted.
“Where is the building code? Where are the enhanced emergency management systems?” he asked.
“Where is the policy mitigation of building coastal infrastructure – such as hotel and other hospitality construction? Where is the new policy to improve waste management, to improve drainage and reduce dumping and flooding?
“I am very concerned that the 2030 alternative energy targets are going to sharply increase the cost of electricity in Barbados and further reduce consumer welfare and increase the cost of production and transportation in Barbados – eroding Barbados’ competitiveness further,” he said.
Forte also shared that his current main concerns about the economy are “the high cost of living and doing business in Barbados, excessive taxation, and the lack of real sustainable growth, development and prosperity”.
