Barbados calls on IMF to back debt rescue plan

6 Jun 18

The new government of Barbados has launched emergency plans to deal with the country’s economic crisis and restructure public debt in the hope of achieving financial stability.

Prime minister Mia Mottley said her government had discovered that the country’s liabilities were much worse than thought, reaching 175% of gross domestic product – the fourth-highest debt-to-GDP ratio in the world after Japan, Greece and Sudan.

The International Monetary Fund estimated that the ratio was 137% at the end of last year.

Mottley’s Barbados Labour Party won a landslide victory in elections on 24 May, making her the country’s first female prime minister.

In a public statement, the prime minister said: “My government and all parts of the social partnership agree that there is no avoidance in delay in treating the economic and financial irresponsibility of the recent past.

“Our national reconstruction starts today. We set course, not on the easy or quick path but the right path. We will protect the most vulnerable, but we will all have to make sacrifices for our country.”

The government is finalising its economic reform programme, which seeks to stabilise the public finances after years of mismanagement and to boost economic growth.

It will also to attract payment support from the IMF, the government said.

On Friday, the Caribbean island’s finance ministry said that following a review of the government’s finances, it had discovered “substantial arrears that were not previously included in headline public debt figures”.

The finance ministry also revealed that international reserves had shrunk to just $220m at the end of May. The IMF last put the reserves at about $275m in September.

Mottley has insisted that she “had no choice” but to call in the IMF and pursue debt restructuring. She said in her first interview with international media: “We needed to stabilise the country and stop the bleeding.”

IMF chief Christine Lagarde said in a statement: “Our ultimate goal is to Barbados achieve higher living standards and more inclusive growth for the years ahead.”

She also said that an IMF team would visit Bridgetown to start discussions on how the IMF can support the government’s economic plan.

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