Former minister predicts economic danger on Barbados’ horizon

A former Minister of Economic Affairs in Barbados is forecasting that this country’s debt service and debt stock will continue to rise “dangerously,” and could become an “albatross” around taxpayers’ necks.

Dr David Estwick, who held the ministerial portfolio during the administration of the Democratic Labour Party (DLP), said he came to that conclusion following a comprehensive analysis of the overall economic situation here and the 2023/2024 Estimates of Revenue and Expenditure and the Budget presentation.

He said his evaluation found a profound disconnect between the Estimates and Budget exercises which he contended will lead to poor public finance management.

“Recall that the 2023/24 Estimates document stated that the deficit of $844 million was to be financed from foreign borrowing of over $400 million and the remaining $400 plus million would be financed by domestic sources. But notice that the Leader of Government Business in the Senate [Senator Lisa Cummins] is telling you that the foreign borrowing for financial year 2023/24 will now be over $1 billion for budget support,” said the former chairman of the Council of Economic Advisors to late Prime Minister David Thompson’s government.

In his 29-page assessment which was shared with Barbados TODAY on Monday, he added: “The Estimates document is indicating one thing and (Senator) Lisa Cummins another. This is precisely the result of the disconnect [with] introducing a budget directly after an Estimates of Expenditure and Revenue when you have no data to determine whether you will meet or not meet the revenue expectations in the Estimates… a colossal error.

“Furthermore, the disconnect is even more obvious, when additional annual expenditure is introduced in a Budgetary Statement directly after the Estimates that is not accounted for in the Estimates of that year,” Estwick asserted.

The former Member of Parliament for St Philip West who also headed the Infrastructure Committee of Cabinet under then Prime Minister Freundel Stuart said the confusion goes further in relation to the accrual accounting system.

He explained that expenditure is booked when it is incurred, and therefore all the additional debt that was incurred in 2023/24 must be accounted for in that financial year.

“The additional $1 billion in project funding has to be booked as well and recorded as public sector debt when incurred. If these projects are not revenue-generating, then the debt must be repaid by the Consolidated Fund. This is why I said that the country’s debt service and debt stock will continue to rise dangerously,” Dr Estwick added.

“The debt service outlined in the Estimates for 2021/22 was $780 million, and in 2022/23 it was $980 million and now in 2023/24 is projected to be a massive $1.3 billion.”

The former cabinet minister warned of the consequences of this increasing debt.

“This debt service in Barbados will be much greater than $1.3 billion and without doubt be an albatross around the neck of the economy and the people in this country,” he declared.

Dr Estwick suggested that the Barbados Economic Recovery and Transformation (BERT) programme which is financed by the International Monetary Fund (IMF) has failed to achieve critical objectives in rescuing this country’s economy.

He cited, for example, the restoration of fiscal and debt sustainability which he maintained have both worsened.

The DLP stalwart also argued that while BERT was to address falling foreign reserves, the programme had instead facilitated the borrowing of money from the IMF, China, the Inter American Development Bank (IDB) and the World Bank.

The former MP pointed out that the external current account deficit is worse and the aim to increase economic growth has turned out to be poor real economic growth. He added that the agreement to protect vulnerable groups through strengthening the social safety net is not happening. emmanueljoseph@barbadostoday.bb

Estwick recalled that Minister of People Empowerment and Elder Affairs Kirk Humphrey stated in March this year, that the number of welfare recipients had doubled from 3,000 plus to over 6,000 and that the Welfare Department’s budget for paying rent for Barbadians went from $1 mill to $2 million.

“However, in spite of the agreement of the Government with the IMF, by the end of financial year 2021/22, the Barbados economy was saddled with a current account fiscal deficit of $981 million, which means that the government was spending $981 million more than it was collecting in revenue; an external current account deficit on the balance of payments of $1.2 billion, that is government was spending $1.2 billion more on foreign goods and services than it was collecting in foreign exchange; a debt stock of $13 billion, a debt service of $770 million annually and an unemployment rate of over 10.4 per cent,” the ex-cabinet minister pointed out.

Estwick said this data presented a picture of deep macroeconomic challenges and instability in the year 2021/22 which was compounded in 2022 by the ongoing war in Ukraine.

“The above macroeconomic picture should have clearly guided the Estimates and the Budgetary Statement and Financial Proposals of 2022/23 given that we had ‘Mission Critical, Mission Survival’ and we were now heading into ‘Mission Transformation’. The Prime Minister is watching too many war movies. In war it is operation this or operation that or mission this or that,” the former government member added.

Dr Estwick said that in financial year 2023/24, the overall fiscal deficit is $884 million, interest debt service is now $652 million, which is higher than between 2019-2023.

He has also predicted that the debt stock in 2023 will balloon to over $16 billion.

“The government can attempt to kick the decision to take the difficult and critical steps required to put Barbados on a sustained economic path down the road, but the day of reckoning will come regarding compliance with the IMF dictates in the BERT 2 programme. Very soon the can will be too large for you to kick. Barbados will face very difficult social and economic challenges in the near term. Our children and grandchildren will inherit a Barbados that has mortgaged its future revenues and one that will lose the capacity to manage its own fiscal and monetary affairs,” Estwick cautioned.

emmanueljoseph@barbadostoday.bb ]]>