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Barbados: Staff Report for The 2011 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund
Published Date:
January 2012
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ANNEX I. FUND RELATIONS

(As of September 30, 2011)

I. Membership status. Joined 12/29/1970; Article VIII.

II. General Resources Account

SDR MillionPercent

Quota
Quota67.50100.00
Fund holdings of currency61.7291.43
(Exchange Rate)
Reserve Tranche Position5.818.60

III. SDR Department

SDR MillionPercent

Allocation
Net cumulative allocation64.37100.00
Holdings56.3187.47

IV. Outstanding Purchases and Loans:

None

V. Financial Arrangements

In millions of SDR, (mm/dd/yyyy)
ApprovalExpirationAmountAmount
TypeDateDateApprovedDrawn
Stand-By02/07/199205/31/199323.8914.67
Stand-by10/01/198205/31/198431.8831.88

VI. Projected Obligations to Fund

(SDR million; based on existing use of resources and present holdings of SDRs):
Forthcoming
20112012201320142015
Principal8.28
Charges/interest0.010.020.020.020.02
Total0.010.020.020.020.02

VII. Exchange Rate Arrangements:

The Barbados dollar has been pegged to the U.S. dollar since mid-1975 at the rate of BDS$2.00 = US$1.00. There are no restrictions on the making of payments and transfers for current international transactions subject to approval under Article VIII. There are exchange controls on some invisibles, but bona fide transactions are approved. All capital outflows and certain capital inflows require approval. The authorities accepted the obligations of Article VIII, Sections 2, 3, and 4 on November 3, 1993.

VIII. Last Article IV Consultation:

The last Article IV consultation was concluded by the Executive Board on December 15, 2010; and the staff report was issued as IMF Country Report No. 10/363. Barbados is on the standard 12-month consultation cycle.

Technical Assistance (2005-11):
DepartmentDatesPurpose
CARTACOctober 2011Developing producer price index
CARTACSeptember 2011National accounts, develop values added by industry in constant prices
CARTACJanuary 2011National accounts, develop values added by industry in constant prices
MCMSeptember 2010Stress testing of banks
CARTACSeptember 2010BOP, and compilation of International Investment Position
CARTAC2006-2009National accounts, revising current GDP data
CARTACApril 2009Government finance statistics workshop
STAFebruary 2009Monetary and financial statistics
CARTACOngoingRebasing national accounts
FADMarch 2008Administration of indirect taxes and customs
CARTACJanuary 2008Revenue collection enforcement
STAJanuary 2008Monetary and financial statistics
STADecember 2006Monetary and financial statistics
Resident Representative: The resident representative post was closed in January 1999
Resident Representative: The resident representative post was closed in January 1999

ANNEX II. BARBADOS—RELATIONS WITH THE WORLD BANK GROUP

(As of October 31, 2011)

1. Barbados graduated from World Bank financing in 1993, but has continued to borrow on an exceptional basis. Two regional HIV/AIDS projects were approved in 2001 and 2008. The second HIV/AIDS Project (US$35 million), the only active loan which became effective in January 2009, is supporting the implementation of the 2008-2013 Barbados National HIV/AIDS Strategic Plan, specifically to promote: (i) adoption of safe behaviors, in particular amongst the most vulnerable groups; (ii) access to prevention, treatment and social care, in particular for the most vulnerable groups; (iii) capacity of organizational and institutional structures that govern the NAP; and (iv) use of quality data for problem identification, strategy definition and measuring results.

Statement of World Bank Loans(In millions of U.S. dollars)
Approval

Year
Approved

Amount
Undisbursed

Balance*
Disbursed and

OutstandingBalance*
Barbados Second HIV/AIDS Project200835.023.911.09

Amounts may not add up to Original Principal due to changes in the SDR/USD exchange rate since signing.

Amounts may not add up to Original Principal due to changes in the SDR/USD exchange rate since signing.

Disbursements and Debt Service(Fiscal Year ending June 30th – in millions of U.S. dollars)
2002200320042005200620072008200920102011
Total Disbursements0.21.43.52.54.01.91.81.64.71.6
Repayments2.21.91.91.91.92.11.00.91.31.7
Net Disbursements−2.1−0.51.60.62.0−0.20.70.73.3−0.1
Interest and fees1.10.80.60.50.50.60.70.80.70.6

ANNEX III. BARBADOS—RELATIONS WITH THE INTER-AMERICAN DEVELOPMENT BANK

(As of October 31, 2011)

1. The Inter-American Development Bank (IADB) has a portfolio of twelve loans to Barbados totaling US$248 million of which US$18 million has been disbursed, leaving US$230 million remaining to be disbursed. This portfolio includes a recently approved policy-based loan of $70 million (Support for Sustainable Energy Framework for Barbados II) which is expected to be fully disbursed in the present fiscal year. The portfolio is relatively ‘young’ with nine operations, amounting to 93 percent of the portfolio in value terms, having been approved since 2008. Execution of this portfolio of operations is programmed to take until 2016.

Current Loan Portfolio
Amount in US$
NameApproval DateApprovedDisbursed
Administration of Justice20018,750,0006,878,309
Modernization of Customs, Excise and VAT20054,400,0004,387,024
Modernization of the Barbados National Standards SystemDecember 20075,000,000747,772
Housing and Neighbourhood Upgrading Program - Phase IJanuary 200830,000,0001,758,696
Modernization of the Barbados Statistical ServiceJuly 20085,000,000292,304
Modernization of the Barbados National Procurement SystemDecember 20085,000,000568,110
Water & Sanitation System UpgradeDecember 200950,000,000190,770
Agricultural Health & Food ControlDecember 200920,000,000813,238
Competitiveness ProgramDecember 200910,000,000500,000
Coastal Risk Assessment and Management ProgramDecember 201030,000,0000
Sustainable Energy Investment ProgramDecember 201010,000,0002,000,000
Support for Sustainable Energy Framework for Barbados IINovember 201170,000,0000
Total248,150,00018,136,223

In addition to the loan portfolio, the IADB has an active technical cooperation portfolio of sixteen operations totaling US$7.8 million, six of which are Multilateral Investment Fund grants amounting to US$2.2 million.

2012 Lending Program

Four loans for a total of US$70 million are scheduled to be approved and disbursed in 2012. These loans will provide support in the areas of Education and Energy.

2012 Lending Program
Amount
Lending Program 2012 (Public Sector)(in US$
millions)
Education Sector Reform20
Smart Energy Program for the Public Sector17
Support for Sustainable Energy Framework for
Barbados III33
Total70

Net Cash Flow

Barbados has experienced a negative net cash flow with respect to the IADB over much of the past decade, averaging negative US$13 million during 2003-08, and reaching a low point of negative US$20 million in 2006. Following a significant rise in disbursements in 2009, the net cash flow turned positive and is expected to reach US$53 million in 2011.

Cash Flow Indicators
(US$ million)2002200320042005200620072008200920102011e
Approvals17.00.00.04.40.75.041.149.085.070.0
Disbursements15.816.07.94.42.22.818.530.449.978.9
Repayments8.111.013.812.215.615.919.718.720.521.2
Interest and
Commissions7.28.27.47.16.56.36.26.26.34.3
Net cash flow0.5-3.2-13.3-14.9-19.9-19.4-7.45.523.153.4
Debt
outstanding151.6156.6150.7150.1140.6133149.1160190181
Note: The projections of disbursements and approvals for 2011 include a PBL of $70 million.
Note: The projections of disbursements and approvals for 2011 include a PBL of $70 million.

ANNEX IV. BARBADOS—RELATIONS WITH THE CARIBBEAN DEVELOPMENT BANK

(As of October 31, 2011)

The Caribbean Development Bank (CDB) approved US$351.7 million (net) in loans, contingent loans, equity and grants to Barbados over the period 1970 to October 31, 2011. This represents 9.2 percent of total approvals to CDB’s borrowing member countries.

Of the total funds approved, US$91.7 million (26.1 percent) were allocated to the productive sectors, which comprise agriculture, forestry & fishing; manufacturing; and tourism. A total of US$45.5 million (12.9 percent) was allocated to the manufacturing sector, while tourism accounted for US$41.8 million (11.9 percent).

Economic infrastructure accounted for US$180.8 million (51.4 percent of approved funds). Of these funds, US$88.1 million (25 percent) were allocated to the transportation and communication, US$50.2 million (14.3 percent) to the education, and US$37.4 million (10.6 percent) to the housing sectors.

Table 1.CDB Loans, Equity and Grants Approved (Net) to Barbados 1970–31, October 2011
Total Value
Sector(US$ million)%
Agriculture, Forestry & Fishing4.41.3
Manufacturing45.512.9
Tourism41.811.9
Sub-total91.726.1
Power and Energy0.10.0
Water1.80.5
Transportation & Communication88.125.0
Housing37.410.6
Education50.214.3
Health and Sanitation3.20.9
Sub-total180.851.4
Multi-Sector79.222.5
Sub-total79.222.5
Total351.7100.0
Source: Caribbean Development Bank.
Source: Caribbean Development Bank.

In order to provide a strategic focus to guide CDB’s interventions in Barbados, CDB has prepared a Country Strategy Paper (CSP), outlining its overall intervention strategy for Barbados over the period 2010–13 to achieve the following outcomes: macroeconomic stability; renewed and improved physical and environmental infrastructure; a more competitive productive sector; and enhanced social development. The CSP is consistent with the Government’s own development objectives.

Table 2.Approvals of Loans, Contingent Loans, Equity and Grants (Net) 2002-11
Annual approvals
US$ Millions
200215.0
200313.5
20040.1
20050.1
200624.4
200732.7
20080.1
200912.9
201062.0
2011 (October 31)0.25
Source: Caribbean Development Bank.
Source: Caribbean Development Bank.
Table 3.CDB - Disbursements and Undisbursed Balances to Barbados 2002 - October 31, 2011(US$ millions)
DisbursementsUndisbursed Balance at
YearDuring the Yearthe End of the Year
20023.879.7
200317.276.0
200419.956.1
20058.647.5
20069.362.2
200723.671.3
200825.247.2
200916.846.1
201032.843.2
2011 (October 31)10.7
Source: Caribbean Development Bank
Source: Caribbean Development Bank

ANNEX V. BARBADOS—STATISTICAL ISSUES

1. While data provision has some shortcomings, it is broadly adequate for surveillance purposes. Barbados participates in the General Data Dissemination System, with metadata and the authorities’ plans for improving the statistical base posted on the Fund’s Dissemination Standards Bulletin Board.

Real Sector

2. The Barbados Statistical Services compiles national accounts statistics according to the 1968 SNA manual. A lack of current, reliable source data on nonsugar agriculture, private construction, and nontourism service activities affects production-based GDP estimates. To address some of the weaknesses in this area the authorities initiated a census of economic activity in June 2005. The census covered tourism, financial businesses, and transport and communications. Expenditure-based GDP estimates are derived from selected surveys; the household survey yields a reliable estimate of aggregate consumption, but the external trade and investment surveys suffer from certain weaknesses. Constant price GDP estimates, compiled by the Central Bank of Barbados (CBB), have an outdated 1974 base year; the authorities are currently updating the base year to 2000 in order to facilitate comparison within the Caribbean Community area. The authorities, with the assistance of CARTAC, recently completed a revision of the national accounts data. They published the revised GDP series in current prices, which revealed that current GDP had been underestimated in 2008 by about 10 percent. However, the revised current price GDP data are not consistent with the constant price GDP data, which rely on 1974 as the base year, and there are no meaningful GDP deflator data linking both series. These data shortcomings add some uncertainty to GDP analyses and projections, as presented in the staff report. An early rebasing of the constant price GDP data should be a high priority.

3. Starting in 2011, the BSS is responsible for compiling value added (VA) by industry at constant prices on an annual basis, previously being the responsibility of BCB. The BSS, with the assistance of CARTAC in 2011, improved methodology of computing VA by industry with 2006 as a base year replacing the dated base years used by the BCB and BSS. Recently, preliminary constant price estimates by industry were completed; however, a continuous improvement of the current and constant price estimates is needed. Work is underway on the compilation of import/export price index and producer’s price index (PPI) which when completed would improve the quality of VA of goods producing industries. The estimates can also be fine tuned by improving the survey response rate and instituting proper editing of the data. The BSS should create a section responsible for editing the data and classification of administrative data (VAT and data from Inland Revenue) supplementing the survey data collected by the BSS. The BSS should develop quarterly constant price estimates in constant prices to be followed by both current and constant price estimates of VA by industry. The quarterly estimates should be anchored to the annual estimates.

4. The BSS, with support from CARTAC, has continued work on developing producer price indexes (PPI). The BSS has refined the sample frame, modified the list of establishments in the sample, redesigned the initial collection form, and selected representative products and transactions to include in the sample. The BSS has been following the action plan but there has been a slippage in the timing of the activities. By the time of the CARTAC mission on October 3-7, 2011, the plan called for the sample selection to be completed, the establishment initiation largely completed, and the compilation system in the testing process. Only the sample was finalized, with 27 industries and 68 establishments selected that represent 90 percent of manufacturing output. The initiation process was still underway with only 12 of 68 establishments completed. The BSS needs to to take the following actions: complete the initiation process by selecting the representative products and transactions in the remaining sample of establishments; finalize the PPI compilation spreadsheet; collect back prices from the PPI sample of establishments for the June-October period; and begin monthly price collection for the PPI sample of establishments with reference to prices on the fifteenth of the month. The BSS will try to complete the PPI by January 2012.

5. Despite recent initiatives to update the consumer price index and the index of industrial production, potential misalignments in real estate prices are not addressed due to the absence of a systematic index of property prices. The consumer price index uses an expenditure basket for 1998-99 for its July 2001 = 100 series introduced in January 2002. The index of industrial production is based on the sectoral weights from 1982; the authorities are currently working towards rebasing the series to 1994. Since these outdated base years do not necessarily reflect the current structure of consumption and production, they possibly distort the derived price data.

Government finance statistics

6. Fairly comprehensive and up-to-date above-the-line data are available for the general government, but government transfers are reported with a lag. As a result of the incomplete coverage of off-budget transactions, a discrepancy exists between the overall balance and financing data in some years. Public enterprise data are not systematically and promptly reported to the Ministry of Finance. Financial sector data on public sector net domestic borrowing usually cannot be fully reconciled with above-the-line fiscal data, partly because of limited availability of nonbank financial sector information. This reduces the degree of certainty about the actual fiscal position. The authorities introduced accrual accounting of public finance in April 2007.

Monetary and financial statistics

7. While some weaknesses remain with respect to the overall quality, coverage, and timeliness of the monetary and financial statistics, they do not hinder Fund surveillance. The 2007 and 2008 STA missions found that the quality of monetary and financial statistics was compromised by various methodological problems, misclassifications, and the inconsistent application of residency criterion. The technical assistance missions recommended correcting a number of misclassifications of accounting data and assisted the CBB in compiling the standardized report forms (SRFs). The CBB has recently started compiling monetary statistics based on the SRFs, which include comprehensive detailed depository corporations’ data.

External sector statistics

8. Lags in the compilation of merchandise trade data, and infrequent and incomplete information on the activities of the offshore sector, limit the timeliness of the external current account balance estimates. Estimates of the components of the external financial account need to be improved. The authorities, with assistance from CARTAC, are working on compiling data on the net international investment position of Barbados.

Barbados: Table of Common Indicators Required for Surveillance

As of October 31, 2011

Date of

latest

observation
Date

received
Frequency

of

Data7
Frequency of

Reporting7
Frequency

of

publication7
Exchange RatesFixed
International Reserve Assets and Reserve Liabilities of the Monetary Authorities17/31/119/19/11MMW
Reserve/Base Money7/31/119/19/11MMM
Broad Money7/31/119/19/11MMM
Central Bank Balance Sheet7/31/119/19/11MMM
Consolidated Balance Sheet of the Banking System6/30/119/19/11MMM
Interest Rates29/30/1110/31/11MMM
Consumer Price Index7/31/1110/10/11MMM
Revenue, Expenditure, Balance and Composition of Financing3 -9/30/1110/10/11QQQ
General Government4
Revenue, Expenditure, Balance and Composition of Financing3-Central Government9/30/1110/10/11QQQ
Stocks of Central Government and Central Government-Guaranteed9/30/1110/10/11QQQ
Debt5
External Current Account Balance6/30/119/19/11AAQ
Exports and Imports of Goods and Services6/30/119/19/11QQQ
GDP/GNP20109/19/11AAQ
Gross External Debt3/31/1110/10/11AAM
International Investment Position6

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis a vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis a vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

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