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Barbados and the IMF

Published: 
Sunday, June 24, 2018

When she unveiled her party’s manifesto on May 10 at Kingsland, Christchurch, BLP Leader Mia Mottley told the crowd as follows: “I said it before that we would do whatever is necessary, that is legal and moral, to rescue this country. Does that mean going to the IMF? It may, we don’t know. But when we get the results in the first few days, we will be able to make the judgment.”

That position gave Mia Mottley the political leverage that she now needs as Prime Minister to take the steps that she outlined in her press briefing two Saturdays ago when she and her delegation returned from meetings in Washington with managing director of the IMF, Christine Lagarde.

By contrast, that was not a position that could have been adopted by the Rowley administration in T&T after the 2015 general election. Back then, the PNM signed an MOU with the Joint Trade Union Movement (JTUM) on August 27, 2015, that clearly bound the PNM not to pursue any approach to the IMF if it were to be successful in the general election.

As a consequence, the PNM in government has chosen not to approach the IMF however, their relationship with JTUM has deteriorated badly based on last Tuesday’s events in Fyzabad where JTUM leader, Ancel Roget, used a scorecard approach to measure the performance of the Government and he was scathing in his assessment.

Meanwhile, back in Bridgetown, Prime Minister Mottley told the press briefing that Barbados had to suspend its debt payments because of how bad the situation was with a debt burden of BDS$1.8 billion, although she admitted that the burden was closer to BDS$1.9 billion as more and more obligations were being discovered since she came into office. What was most interesting is that she told Barbadians: “Relax. We got this one.”

She indicated that the delegation that went to the IMF had to ensure that they addressed what she called “mission-critical issues.” She revealed that Madame Lagarde responded positively and that an IMF team will come to Barbados from July 2 to 12 instant.

Mottley’s main priorities are fixing a broken infrastructure and protecting the most vulnerable. Quite interestingly, she spoke about a pay increase for public servants who had not had an increase for several years and that the last decade saw the largest exodus of senior public servants since independence.

Her argument was that by signing up with the IMF, Barbados would find that new capital would be released which was vitally necessary and that the interest rate was at one per cent, which she highlighted in the press briefing. Her argument was that successive downgrades had prevented Barbados from going into the international markets, but with clearance through the IMF that would all be set aside and new capital would be made available to Barbados.

This is a most interesting development because she has the political capital necessary to spend on the decision to go to the IMF, while unlocking financial capital in the process. Two other goals that she highlighted were (i) protecting the quality of life for Barbadians, and (ii) protecting the value of the Barbados dollar. She argued that Barbados had nothing to gain by devaluing its dollar as it does not have a large manufacturing sector and any devaluation would hurt its economy.

This latter point must be contrasted with T&T where the approach of the Government has been to let the value of the TT dollar slip gradually to where it is now. There is a debate among economists about the devaluation of the TT dollar, while in Barbados the Government there is resolute about defending the value of its dollar.

Another matter addressed by Prime Minister Mottley was the fact that she wanted to approach the international market place by going through the traditional route of the IMF, while she contended that the former DLP administration wanted to pursue debt restructuring through the United Arab Emirates (UAE).

Her argument is that the IMF borrowing will be at one per cent and that the IMF has changed its approach and is now willing to complete these negotiations in three months as opposed to the much longer periods than before with other countries. The process has started and we now wait to hear the outcome of the negotiations with the IMF

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