by Shawn Cumberbatch
Government and the Central Bank of Barbados, one of its main monetary and fiscal policy advisors, are in talks to come up with an adapted strategy to fix a spending and revenue problem which is worse than anticipated.
But one day after saying via a first quarter review statement that “the fiscal consolation strategy must be brought back on track, and a new medium term adjustment strategy must be implemented, using the current deficit as a point of departure”, the institution’s Governor, Dr. DeLisle Worrell, played down the assertion, saying the Freundel Stuart Administration was on the right track with its fiscal policy.
The respected economist, while not ruling out the likelihood, also told reporters questioning him this morning at the Central Bank’s offices that it “doesn’t matter” if the local economy falls back into recession because measures were being put in place to “recession proof” the island.
Worrell found himself in the hot seat this morning following his unexpected statement yesterday that Government needed a new fiscal adjustment strategy, comments he sought to explain today.
The governor, speaking in the context of a higher than expected fiscal deficit in the just-ended 2012-2013 financial year, said what he was talking about was not “a new policy”, but “an adjustment of the policy that is already in place in light of what has happened in 2012-2013”.
“We work very closely with the Ministry of Finance and Economic Affairs and in that collaboration we revise our projections as we go. So those projections are currently under revision in light of the information we now have on the fiscal performance in 2012-2013,” he said.
“Those revisions imply that we need a new trajectory for the Medium Term Fiscal Strategy. If you thought that you were going to be at 4.6 per cent in 2013 and you are at seven per cent then obviously you have a new starting point and you have to have a new path.
“So what we are saying is that we are committed and we are working collaboratively with the Government to the strategy of fiscal consolidation. We have reflected that in everything that we have said and everything that the minister has said but that strategy is now going to be on a new track, which will eventually lead to the same destination.
“In life, as I am sure you appreciate, if you make a plan and circumstances turn out to be different from your plan, if you stick to your plan you are not going to reach your destination. You have to make a new plan, taking account of the new information that you have. That is what is happening, that is how we operate on an ongoing basis,” he added.
Worrell also said the Central Bank’s economic projections, including sustaining foreign exchange reserves at the current level, were “entirely consistent” with Government’s recently approved Estimates of Revenue and Expenditure.
He also said while his institution was advising government on the options available to it, the administration would have to determine whether it was going to seek to raise additional revenue or cut spending.
“I am saying that what Government has done is appropriate to the circumstance at the moment so that the Estimates of Expenditure represent the adjustment that Government feels is appropriate for the current fiscal year based on the current projections,” he said.
Worrell said Barbados was not in a “desperate” situation and urged Barbadians to see the silver lining instead of simply a dark cloud.
As for the possibility of another domestic economic recession, the governor said he was not unduly worried about this.
“It doesn’t matter because we have been preserving our quality of life, we have kept our reserves and we will continue to keep our reserves adequate, so it doesn’t really matters what happens in the next little while,” he said.
“What matters is are we getting the things done that will make us immune to what happens in the rest of the world, even though we are dependent on foreign exchange because we would have laid such a foundation and developed such a reputation that … we will always be able to find the clientele that finds us irresistible.” email@example.com