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Barbados is battling to avoid becoming the latest Caribbean country to fall into the cool embrace of the International Monetary Fund after a failed $500m bond sale triggered political confrontation and exacerbated concerns over the nation’s solvency.
The opposition has forced a vote of no-confidence in Christopher Sinckler, the finance minister, and it is expected this week. Some officials at multinational lenders say privately it could be only a matter of time before Barbados is forced to seek international assistance.
“We have reached a point where every week matters,” Mia Mottley, the leader of the opposition Barbados Labour party (BLP), thundered at a rally in the capital of Bridgetown on Sunday. “We are not yet at rock bottom, but we are fast approaching that point.”
A number of Caribbean states are struggling to cope with anaemic or non-existent growth at a time when budget deficits and government debts are swelling. Jamaica, one of the region’s bigger economies, was forced to seek a joint $2bn IMF, World Bank and Inter-American Development Bank bailout this year, but more countries are expected to follow.
Barbados’ problems have been mounting for years but last month’s shelving of a $500m, 10-year bond issue to buy back existing debt and finance the budget deficit has compounded concerns over declining central bank reserves, a worry in a country with a pegged exchange rate and current account deficit.
The Barbadian government in August unveiled an austerity programme designed to avert an international bailout by contracting domestic demand and increasing exports to reduce economic imbalances.
“I am not a fortune teller, I cannot say for certain that the package we put in place will achieve all of the objectives we want it to achieve,” Freundel Stuart, the prime minister of Barbados, told the Financial Times. “The success of the package will depend on us sticking rather rigidly to the script, and ensure that those mechanisms that we have put in place to encourage economic growth are implemented.”
Barbados is one of the more prosperous of the Caribbean’s island states. But tourism — which accounts for more than half of economic output – has struggled since the financial crisis. As a result, government debts and unemployment are rising and even crime is becoming a concern in the normally peaceful island.
“Things are festering,” said Edwin Warner, the burly owner of the ‘Fast Eddie’ food shack at Barbados’ traditional Friday fish festival at Oistins and a BLP supporter. “You can see the number of tourists dwindling every day.”
The fact that even Barbados, one of the more developed countries in the Caribbean, is struggling highlighted the extent and depth of the regional downturn, which has led to Jamaica, St Kitts and Nevis, Belize and Grenada to restructure their debts in the past few years.
DeLisle Worrell, the governor of the central bank of Barbados, said that the decision to delay the bond sale was only caused by rocky market conditions triggered by the US government shutdown at the time, and was not necessary for the country.
“It would just have added a bit of extra insurance, it wasn’t the anchor of our strategy,” he said. “We don’t actually need the money, we are adjusting our way to economic equilibrium.”