Thread: IMPROVE BANKING SYSTEM

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IMPROVE BANKING SYSTEM

Web Posted - Mon Aug 29 2005
THE International Monetary Fund (IMF) has welcomed the recent implementation of steps to slow the growth of credit, and recommended further tightening measures to help arrest the decline in foreign reserves in Barbados.

Furthermore, authorities in Barbados have been encouraged to make greater use of indirect monetary policy instruments and enhance competition in the banking system. These and other recommendations were made following the conclusion of Article IV consultation held earlier this month and placed as a public information notice on the IMF website dated August 15, 2005.

The directors noted that this move would facilitate the gradual phasing out of the minimum deposit rate and improve the efficiency of financial intermediation.

It was also revealed that while the banking sector appears well poised to absorb shocks, risks related to the large share of public debt held by domestic financial institutions will need to be monitored carefully. The executive directors were, however, encouraged by the progress made in addressing the outstanding issues from the Financial Sector Assessment Programme report of 2002 and called for strengthened efforts to curb money laundering and the financing of terrorism.

The importance of structural reforms to encourage foreign direct investment, improve competitiveness and enhance Barbados long-term growth potential was also underlined and the significant progress that has already been made in some areas, including the reduction in corporate tax rates, telecommunications reform, and the corporatisation of the airport were lauded.

The IMF directors welcomed the authorities focus on reforms relating to tax policy and privatisation, as well as their continued commitment to further trade and capital account liberalisation within the context of the Caribbean Single Market and Economy initiative and the envisaged Free Trade Area of the Americas.

Key areas for further reforms include the removal of import and export licenses; reform of the sugar sector; restructuring or privatisation of the public enterprises that do not meet public policy objectives; and enhanced labour market flexibility. Directors also urged the authorities to rationalise costly fiscal incentives to investment.

Directors also observed that statistical information provided by Barbados is broadly adequate for surveillance purposes, but noted the need to strengthen the quality, coverage, and timeliness of data for the public enterprises and the capital account of the balance of payments.

Barbados has an illegal alien problem composed of Guyanese laborers. The Guyanese in turn have their problem with illegal homesteaders from Brazil. The Brazilians have illegal aliens composed of laborers from Bolivia and Paraguay and skilled workers from Uruguay.