IMF recommends $5 fare hike


The International Monetary Fund (IMF) has recommended an overhaul of the operations of the state-owned Transport Board (TB), including an increase in current bus fares from $2 to $5 per passenger.

Barbados TODAY has obtained a copy of the 58-page technical assistance report, which was prepared last December by a five-member team from the IMF’s Fiscal Affairs Department following an assessment carried out last October at the request of the then Minister of Finance Chris Sinckler.

While complaining that the Board’s business model was too “restricted”, the IMF warned that the existing bus fare must change in order to ensure the future viability of the loss-making entity, which is currently faced with a shortage of buses.

“A recent cost of service study by the EU [European Union] calculated that $5 would be more adequate for cost recovery purposes. This restriction on revenue collection has adversely affected investment in the fleet, which has not been updated since 2011,” the document entitled Promoting Fiscal Sustainability and Transparency of State-Owned Enterprises (SOE), specifically states.

However, the IMF acknowledged the need for a differential bus fare to protect vulnerable groups, such as the elderly, but suggested that the $5 charge should apply to all other users with a view to ensuring partial cost recovery by the Board.

The five-member technical team also recommended that smart cards be introduced on buses as a means of tracking the use of the state-run service by domestic commuters.

With this method, the Fund said it was possible to determine which segments of the population needed the greatest level of state support due to social vulnerabilities, even as it pointed to the Barbados Country Assessment of Living Conditions 2010 that put 14 per cent of Barbadians below the poverty line.

“Other users of public services outside of this group would face a differentiated fee structure depending on means testing.”

The IMF also recommended that the fare hike be phased in to allow for public consultations. However, it suggested that “as seen in the case of the UWI  [University of the West Indies tuition fees] notwithstanding the transitional difficulties, the public has been able to bear fee increases and would likely do so in other sectors”.

The mission also suggested that the Transport Board could generate substantial cost savings through better management of its fleet repairs and maintenance.

“Taking into account the high cost of repairs and that other entities face similar challenges, it may be worth consolidating the repairs and maintenance function under a common set of contractual arrangements to get a better price from private service providers based on economies of scale and standardized contracts,” the report states, while emphasizing that the cost-recovery ratio of the Board for fiscal years 2015-2016 and 2016-2017 implies that the business model of the Board does not bring in sufficient revenue to cover expenses.

Apart from raising bus fares, the IMF suggested that Government’s partnership with private operators on selected routes under the Transport Authority Service Integration project could be expanded on high traffic routes and that regulations should be enforced to ensure that preferred operators are well incentivized.

“When tendering the profitable routes to private operators, require them to serve marginal routes. Introduce reliable scheduling of services, particularly on routes with low volumes and review contracts for outsourced repairs and maintenance to private garages,” the IMF recommends.

Government’s transfers to the Transport Board were also of concern to the Washington-based technical experts, who visited the island from October 16-30 and examined the fiscal impact of the Board on the state.

“The Government transfers cover the debt repayments of the TB. These have accounted for over 40 per cent of total revenue [of the Board] over the past two years,” the report notes.

It also points out that transfers accounted for 42 per cent or $4.2 million of the Board’s total revenue in fiscal year 2015-2016, compared to $3.7 million or 41 per cent the following year.

The technical experts also identified the major factors driving up the costs at the Transport Board. These include staff costs of between 40 and 45 per cent over the past two years, as well as operating costs which they said were the other major cost drivers between fiscal years 2016 and 2017, but ten percentage points higher in the previous year.

The IMF also highlighted a hike in the wage and pensions bill at the Board from $2.5 million in 2016 to $2.6 million last year.

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