The Inter-American Development Bank has approved a US $120 million loan to Barbados to help the country deal with the COVID-19 crisis and its aftermath.
The Bank’s Board of Executive Directors approved the loan this week, as part of a larger initiative by a network of international financial institutions to assist Barbados with the fallout from the pandemic, which is projected to result in a loss of revenue of almost half a billion Barbados dollars.
The funds from the IDB will be disbursed shortly, but form part of a larger package being negotiated by Government with the International Monetary Fund, the European Investment Bank and the Development Bank of Latin America (CAF). The total package amounts to US $402 million.
According to the document considered by the IDB directors for the Programmatic Policy-based Loan, “… the negative external demand shock (to Barbados as a result of COVID-19) is expected to cause a deep recession and an increase in unemployment, with the economy projected to contract by about 11.6% in 2020. Poverty and inequality indicators are likely to deteriorate during this period. The economy is not expected to start its recovery until the end of 2020”.
In contrast, the bank noted that prior to the onset of the pandemic: “On the fiscal side, the country was making substantial progress before the health emergency, with the primary fiscal balance improving from 3.3% of GDP in FY2017/2018 to 6.3% in FY2019/2020.”
“The Government of Barbados responded swiftly to the pandemic, issuing an Emergency Management (COVID-19) Curfew Directive in March 2020. The directive introduced a series of economic and fiscal stabilisation measures to address the toll of the health crisis,” the IDB noted.
“The national response focused on the fast tracking of capital projects, the renovation of healthcare facilities, procurement of Personal Protective Equipment (PPE) and the completion of a new isolation hospital. The Government also announced additional funding to the health sector.”
On the fiscal front, the loss of fiscal revenue resulting from the economic contraction, combined with higher spending to contend with the health, economic, and social crisis, will put pressure on Barbados’ fiscal and public debt positions. The projected revenue loss for fiscal year 2020/2021 in Barbados is forecasted at BDS $498 million …, equivalent of one per cent of GDP.
“Given the severe impact of the COVID-19 health crisis on economic activity, the post pandemic period will require support policies to rebuild the economy and restore fiscal performance …,” the IDB document explained.
Funds from the loan will, among other things, go toward the Barbados Public Sector Modernisation Programme, the upgrading of Government’s ICT infrastructure, a digital document and records management system and common services for digital transactions and a new digital identification card system.
Press Secretary to the Prime Minister