Barbadians are being warned to prepare for ‘tough times’ ahead as commodity prices continue to soar, even as measures are implemented to avoid any further major fallout.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva issued the sober reminder on Thursday, saying Barbadians must weather this difficult time to see better days.
She advised that to help overcome the current challenges, Barbados and the rest of the region should act urgently to enhance food and energy security.
“We are going to live through difficult times this year. [and] next year,” warned Georgieva.
His comments came during a conversation with the Chairman of the Barbados Economic Society (BES), Dr Simon Naitram, and students from the University of the West Indies at the Lloyd Erskine Sandiford Centre.
Responding to a question regarding the dramatic slowdown in foreign direct investment in developing countries due to the COVID-19 pandemic, Georgieva said that although the flow of private capital was now quite stable, “where we are today”. today”. [globally] is a very dangerous area due to multiple factors such as supply chain disruptions [and] the war in Ukraine, [which] put pressure on prices and, as a result, inflation becomes the most pressing concern in many countries”.
“We need inflation under control because price stability is essential for growth, but getting inflation under control means tightening financial conditions, and when that happens we usually see capital outflows. .
“So at the IMF, we are working hard to anticipate which of our members might face balance of payments constraints, and I can tell you that we are ready to step up. We have a lending capacity of $700 billion and we will deploy as much as needed,” the IMF chief said.
She said she warned heavily indebted countries not to wait for things to deteriorate further before moving on to programs that would help protect their economies.
“When capital leaves and nothing comes to guarantee stability, countries can find themselves in a very difficult situation,” warned Georgieva.
“I want to be honest with you all – we’re going through some tough times this year. [and] next year because of this tightening of financial conditions and its consequences.
However, the economist, who is in Barbados on his first trip to the eastern Caribbean, told locals not to “take it so badly”, explaining that the fiscal tightening measures in which some countries are embarked on were aimed at ensuring financial and price stability. , which, in turn, would boost investor confidence.
“Investors would be comfortable investing, there would be jobs, there would be growth. So we have to get through these tougher times,” she said.
Georgieva said locals will also have to play their part by changing their consumption habits and doing what they can to protect the environment.
“We all have to adapt to this more difficult time,” she said.
The senior IMF official said now is the time for Barbados and other countries in the region to increase investment in the agriculture and renewable energy sectors and “rethink supply chains and rethink security of supply, especially for food”.
She also agreed that while governments should seek to protect the most vulnerable, those just above the poverty line may also need help.
“In this environment, we also see the middle class quite affected. Measures must therefore target the most vulnerable. There must also be some appreciation for those who are above the poverty line but not by much,” Georgieva explained.
“What we recommend and what we see being put in place is the recognition that inequalities have increased during the pandemic. . . . This cannot continue because it undermines the social foundation and, in this sense, the measures aimed at more progressive taxation [are required]so those who can afford to help more do so.
At the same time, she said the IMF was “working hard” to identify ways in which it could better help member countries achieve their sustainable development goals.
The chief executive pointed out that the Washington-based international financial institution has “stepped up significantly since the very beginning of the COVID crisis” to provide financing to nearly 100 of its 190 member states.
Responding to a question from one of the students about the IMF’s plans to help member countries recover from the setback caused by the COVID-19 pandemic and how it planned to help them in the future, she said. recalled that in addition to the emergency financing which was also extended to Barbados, the IMF also enabled countries to access loans through the Special Drawing Rights (SDR) facility.
Georgieva is on a four-day official visit here. [email protected]