By A.T. Freeman
On 3 June 2020, the IMF Executive Board received and approved the third review report and recommendations of its team responsible for managing the Barbados structural adjustment programme. The current Barbados Labour Party government placed the country in the hands of the IMF, claiming that it did this in order to address the disarray in government finances. This had seen the ‘government debt to GDP ratio’ reach around 170%, making it one of the most indebted countries in the world. The IMF programme, which was agreed on 1 October 2018, is intended to last for 4 years and the IMF describes its main aims as being to establish the government’s fiscal and debt sustainability, while increasing its reserves and promoting growth in the economy. However, behind these innocent sounding aims lie harsh anti-people measures which are consistent with the IMF’s neo-liberal economic dogma.
With the approval of the report, the IMF immediately made available to the Barbadian government loans totalling US$139 million, bringing the total amount available over the 4-year life of the programme to US$377 million. This sum includes a special additional US$91 million loan which is intended to help cover the cost of the government’s response to the Covid19 crisis which has seen the main tourism sector of the economy collapse and unemployment rise to over 30%. However, in addition to repaying these loans with interest, currently estimated at around 1.1%, the government also has to pay a 0.5% service charge on any money it actually draws down from the IMF. This amounts to 1.6% interest rate at a time when the Bank of England base rate is 0.1% and the US Federal Reserve rate is 0.25%. There are additional fees which the IMF, operating as a loan shark, levies on the Barbadian government. There is a commitment fee of 0.15% which is applicable to Barbados. This fee is levied at the beginning of each 12-month period on amounts that could be drawn down in that period and will be applied to Barbados should it fail to borrow all the money made available to it for the period in question. Finally, there are the surcharges that the IMF applies if the outstanding credit is more than 187.5% of a country’s quota within the IMF system. In such a case, the IMF imposes an additional 2% surcharge on that part of the credit in excess of 187.5% and this surcharge rises to 3% should this situation continue for more than 51 months.
These stringent IMF lending conditions take place against a backdrop in which, according to the Central Bank of Barbados (CBB), net deposits in the local banking system amount to some BD$9.7 billion (US$4.85 billion). Remarking on this state of affairs, the IMF report declares that the local financial system is “very liquid” and that there are “system-wide excess reserves with the CBB”. The report further states that, “Despite commercial banks’ large excess liquidity, credit to the private sector was flat in 2019 with banks indicating limited lending opportunities”. With this statement, the representatives of the IMF admit that the problem that has caused the disarray in the Barbados government’s finances is not primarily due to the “incompetence of the previous government” but rather to the anti-people aim of the Barbadian economy. This economy, which was developed as the first slave economy within Britain’s global empire, has seen its aim unchanged, even as the country has gained formal political independence. The goal of the economy to serve local and foreign private interests at the expense of the working people has remained intact. Hence a situation obtains where the country is one of the most highly indebted in the world, while private interests hoard wealth equivalent to 50% of its annual GDP, refuse to deploy it for the all-round development of the economy because they can see no money making opportunities in doing so and the government fails in its social responsibility to take action to remedy the situation. In fact, it is in order to protect this anti-people aim that the government has delivered the country into the hands of the IMF. By doing so, it will gain access to loans totalling no more than 8% of the wealth currently sitting inactively in the local banking system. However, this engagement with the IMF comes at a high price.
In its interaction with the government, the IMF team – led by a Dutchman, Bert van Selm and contains not a single Barbadian citizen – adopts a straightforward colonialist position and dictates to the government the measures that it must take. For example, the IMF has demanded that the government pass a new central bank law and a new public pension law by December 2020. The CBB law would limit the extent to which future governments can draw on central bank financing and would even limit the circumstances in which the central bank governor can be dismissed. In this way, the IMF encroaches on the country’s sovereignty and dictates matters which are strictly the responsibility of the people of Barbados. Although the government has not yet outlined its proposed changes to public sector pensions, the fact that it has hired external consultants to “cost different pension reform options for new entrants into the public service” is indicative of further attacks on public sector pensions, since such moves are consistent with the neo-liberal approach that underpins the current austerity programme.
Targetting State Owned enterprises
The other major area that the IMF sets its sights on is the over 30 state owned enterprises. These include entities like the public hospital, the water authority, the transport board, the sanitation authority and others. Praising the measures that have already been taken as part of the austerity programme, and which have seen nearly 2000 public sector workers lose their jobs, increases in bus fares and water rates and the introduction of new sanitation and health charges, the IMF calls for more measures in this direction. Using innocent sounding phrases to present its anti-people demands, it calls for “cost reduction, including reduction of the wage bill” meaning sacking more workers or cutting workers’ wages; “revenue enhancement, including an increase in user fees” meaning further increasing the cost of those services that people rely on and thereby reducing their standard of living and “mergers and divestment” meaning restructuring with more job losses and privatisation.
With regard to its commitment to promote ‘growth’ of the Barbadian economy, the IMF pushes the idea that this is dependent on attracting foreign direct investment and for this the government will need to take further steps to “improve the business climate”. In response to this demand from the IMF, the government has stated that it has “begun reviewing public sector labour laws with a view to enhancing flexibility”. This drive for ‘labour flexibility’ is intended to erode the rights of workers in the workplace and leave them more vulnerable to exploitation and abuse at work.
Bajans Can Resist, Unite, Organise
The working class and people of Barbados can secure their interests by resisting the government’s IMF backed austerity programme and its anti-people measures, by uniting to defend their rights and by organising to become the decision makers in the country so that they can decide the direction of the economy.
[Mia Mottley, Prime Minister of Barbados and Bert van Selm, head of the IMF team
Photo credit: Barbados Today]