15 December 2010.
Notices of public information (PIN) are part of the IMF's efforts to promote the transparency of the views of the IMF and the analysis of economic and political developments. With the consent of the country (or countries) concerned, PIN is issued after discussions of the Board of Directors of article IV consultations with the countries of its monitoring of the developments at the regional level, posterior monitoring and ex post evaluations of member countries with long-term commitments. RIP is also emitted after discussions of the Board of Directors of questions of general policy, unless otherwise decided by the Board of Directors in a particular case. Report of the staff (use the free Adobe Acrobat Reader to view this pdf file) 2010 article IV consultation with Barbados is also available.
On November 29, 2010, the Board of Directors of the international monetary Fund (IMF) has entered into consultation article IV with Barbados.1
Background
The global economic crisis struck particularly difficult in Barbados by negatively affect all activities economic key, including tourism, financial services and real estate investment. After the award of contracts by 5% in 2009, exit should continue its decline by 2010, although at a slower pace. Weakening economy has led to a steady increase in the rate of unemployment reaching 10.7% in the second quarter of 2010, an increase of 7.4% in 2007. While average inflation declined in 2009, it resumed in 2010 and expected at the end of the year at about 5 percent, driven by higher energy prices, before even decreased. More lower revenues and higher spending contribute to persistent large fiscal imbalances. Thus, the non-financial deficit public sector is expected to remain at around 7% of GDP in fiscal year 2010-2011 (April-March), only slightly less than two years. As a result, public debt continues to grow and may close to 115% of the GDP at the end of the current fiscal year.
External current deficit narrowed in 2009 to 5.5% of GDP, down 10% the previous year, due to contraction induced by the recession of imports and the decline in oil prices. Lower tourism revenues, the near-judgment in inflows of foreign direct investment in 2009 and a 100 million bond repayment in mid-2010 put reserves of the country under severe pressure. However, allowance of $ 85 million special drawing rights in 2009, more than two foreign liaison in 2009 and 2010 courses $ 220 million, stimulated international reserves, which are supposed to be late 2010 over $ 700 million.
Evaluation of Executive Board
Executive Directors noted that the global crisis has seriously affected Barbados economy, particularly its key - tourism, financial services sectors and real estate. The economy is expected to recover gradually, but the downside risks remain primarily the uncertain global economic environment.
Directors congratulated the authorities to adopt a financial strategy in the medium term to build a balanced budget and the high GDP public debt reduction. They welcomed the recent measures to increase the sales tax rate and transit rates while increasing spending targeting the vulnerable segments of society. Directors stressed that to place public debt on a sustainable path, additional measures will be necessary. They encouraged efforts to broaden the tax base, making it the increase in permanent VAT, raising business tax rates and rationalization of government operations, while continuing to rein in spending today. Prioritization of spending would also make room for moderate capital to support growth in the medium term expenditure increases.
Directors observed that the peg to the US dollar has provided a valuable anchor in Barbados. Noting that Barbados real exchange rate can have become somewhat overvalued, they called for decisive fiscal adjustment preserve the viability of the peg. Directors considered policy monetary current as largely appropriate position. They recommended to maintain gaps between policy rates in savings base rates consistent with prevailing market conditions and minimum levels.
Directors noted that Barbados banks remain in good health. While non-performing loans rose, robust capital bases provide effective cushions against future losses. They congratulated the authorities for the strengthening of the supervision of the Bank, including by creating a unit of the financial stability of the Central Bank. Implementation of the recommendations of the FSAP 2008 update and more detailed data collection on the Bank loan portfolio will further strengthen supervision and exercise stress tests.
Directors welcomed the efforts of the authorities to enhance surveillance of non-banking financial institutions an area of weakness highlighted by the recent disappearance of two insurance companies. They called to take timely measures strengthening the non-banking financial supervision in the financial services Commission and stressed the need to resolve insurance issues to uncertainties of the market and provide clarity on contingent tax expenditures.
Directors acknowledged the environment relatively good business in Barbados. However, in the light of the growth of the low country productivity, they saw merit further rationalization of the procedures and Government agencies and are looking for ways to expand the sources of growth.
No comments:
Post a Comment