Barbados announces stimulus package, braces for COVID-19 economic impact

The Barbados Government has announced a BDS$20 million (US$10 million) “survival stimulus package” even as it braces for significant loss in revenue and increased expenditure as a result of the Coronavirus (COVID-19) that has severely impacted the global economic situation.

Prime Minister Mia Mottley in a statement to parliament on Friday night on the economic impact of the virus that has so far killed thousands of people, globally, said that the stimulus package would provide critical assistance to Barbadians and businesses in light of the expected calamity from the COVID-19 crisis.

In a 3-hour speech wrapping up debate on the Estimates of Revenue and Expenditure that was eventually passed by legislators, Mottley announced the establishment of a Household Survival Program to help more 1,500 vulnerable families.

Under this stimulus package, the government would provide up to BDS$600 (US$300) per month to each family through the Welfare Department and there will also be a 40 percent increase in all rates and fees paid by the Welfare Department to individuals.

“These funds must be the subject of urgent action,” said Mottley, adding that her administration has asked the private sector to match that stimulus package through an Adopt-a-family program, where those who earn more than BDS$100,000 (US$50,000) annually, would also provide up to BDS$600 (US$300) per month to the fund for families in need.

The fund, which is to be in place for an initial 3 – 6 months period, was launched Friday at CIBC FirstCaribbean Bank and Mottley said that the details of how to access it would be released in the coming days.

In her statement, Mottley, who is also finance minister, said that the Government was expecting at least a 1.5 percent economic growth, but the COVID-19 pandemic and global economic downturn had changed that outlook

“We have gone back to the start line. This COVID-19 pandemic is expected to impact our economy through its impact on global travel. I have already seen it. We therefore believe that the effects of reduced tourism arrivals will in turn lead to a decline generally in economic activity,” she told legislators.

Mottley said that foreign reserves of just over BDS$1.563 billion (US$782 million) or about 5.5 months’ import cover have been boosted by BDS$360 million (US$180 million), or an extra month of import cover to help cushion the economic shocks and give government more flexibility.

“That reserve cover for the rainy day allows us to be able to plan out the phase one package, to help save the Barbadian people as we go into this woeful crisis,” she told parliament. She said the additional funds will constitute the BDS$160 million (US$80 million) approved by the Inter-American Development Bank (IDB) last week and a reinforcement of BDS$200 million (US$100 million) from the International Monetary Fund (IMF) under the Enhanced Structural Adjustment Facility, which is currently about BDS$440 million (US$220 million).

The IMF in October 2018, approved a US$290 million Extended Arrangement under the Extended Fund Facility (EFF) for Barbados, which the IMF said was to help the island-nation restore debt sustainability, strengthen the external position, and improve growth prospects.

“They have given us the flexibility of treating it first as reserves cover but use it also for budgetary support should we need to do so later,” Mottley said Friday night, adding that while her Administration remained committed to reducing the country’s debt to 60 percent of gross domestic product (GDP) by 2033, from its current 118.5 percent, it could not say the same about meeting the fiscal target.

“Today as I speak to you, with just 11 days to go to the end of this fiscal year, we are recording a primary surplus of 5.7 percent or BDS$597.5 million (US$298.75 million),” Mottley reported, noting however that “there is no glory in hitting targets and people are suffering”.

She said she expected about 60 percent of the country to “carry the weight” in the medium term as the island continues to feel the economic impact of COVID-19, and with the hurricane season around the corner, she has already informed the IMF that Barbados” “can no longer run a 6 percent primary surplus”. -(CMC)