Government is already experiencing a disorderly adjustment process, says economist Ryan Straughn.
He gave this assessment in response to a statement from the International Monetary Fund (IMF) on the recently concluded Article IV consultation with Barbados.
The IMF said yesterday that recent fiscal measures, if fully implemented, should stabilize debt levels by 2016. However, downside risks are considerable and “failure to implement corrective policies could result in a disorder adjustment process”.
“Even with full implementation, fiscal financing pressures and external sector sustainability would remain challenging,” it said.
Straughn told Barbados TODAY the IMF was being “quite kind to the Government” in its report, but added that he agreed with the Washington-based institution that prompt implementation of the policy recommendations were “absolutely critical”.
“[The IMF] has listed . . . a number of things in here that I think are equally important . . . . They made mention of a disorderly adjustment process should the authorities not go ahead with what they have announced. I don’t think you would find somebody who would agree that the process so far has been orderly given that there have been clearly, after the budget, a lot of mixed signals coming not just from the Prime Minister and the Minister of Finance, but a number of other ministers regarding what tax rates are supposed to be or not,” he said.
“So we have witnessed a very disorderly process in the way the Government has gone about trying to adjust and make adjustments. Quite frankly a lot of the measures have not worked simply because there has been no clearly articulated process by how they are going to go about doing these things. That is something that certainly cannot be allowed to continue going forward,” he warned.
The IMF said it believed the Government recognized the need to urgently implement the measures. However, Straughn said he could not give the Government credit for only recognizing the need and not actually moving with the required “energy” and urgency.
“The fact that they recognize it does not get a feather in their cap. Having fully recognized that they needed to make adjustment then you have to do it and don’t dilly-dally around the cuts,” he said.
The economist said it was now unfortunate that the business community was operating in such an economic climate after “actively participating in a strategy of no layoffs which came through the Social Partnership with the understanding that Government would have put its house in order”.
“Even though at this late stage the Government has seemingly identified what needs to be done and acknowledge the problem, you really can’t take them at their word because they have not, up until now done anything. And even though they have belatedly started to address a part of the problem by the latest retrenchment, I think it is at a stage where at the end of December the current account deficit was $500 million so the few people you sent home now pale in comparison with that figure,” posited Straughn.