The International Monetary Fund (IMF) says Barbados is in a precarious economic situation with its international reserves having dwindled to US$220 million, while central government debt is unsustainable.

Bert van Selm, who headed an IMF delegation to the island, said at the end of the three day visit that the fiscal deficit has decreased over the last few years but remains large, at about four per cent of gross domestic product (GDP) in the fiscal year 2017/2018.

He said the Central Bank of Barbados is reporting a contraction of output of 0.7 per cent in the first quarter of 2018, over the same period last year.

The IMF representative pointed out that at this juncture the recommendations contained in the IMF’s 2017 Article IV Consultation remained “highly relevant to rebuilding confidence and addressing Barbados’ current challenges”.

He said substantial fiscal consolidation is needed to place debt on a clear downward trajectory in conjunction with the proposed debt restructuring, and to address balance of payments risks that cloud the country’s future.

And while acknowledging that the level of taxation in the island was already high, the IMF stressed that “the adjustment effort should focus on the expenditure side, including by improving the efficiency and effectiveness of public services, containing wages, and reforming Government pensions”.

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