Barbados should start negotiating an International Monetary Fund (IMF) programme sooner rather than later, says economist and past president of the Barbados Economic Society, Ryan Straughn.
He is of this view the Government has no chance of meeting its targets within the time frame it outlined.
The Freundel Stuart administration is hoping to slash about $35 million from its budget at the end of this financial year which ends March 31, and to achieve a further $143 million next fiscal year.
However, Straughn told Barbados TODAY, the Government had “dilly-dallied” too much with the measures for the past six months or so and therefore it was now too late to rescue the economy through the planned fiscal strategy.
“We still have a current account deficit of nearly $500 million on the fiscal side, at the end of December,” said Straughn.
“The truth is that we might as well just go to the IMF and start the negotiations, because the process takes a little time to conclude. So we are better off now just starting the negotiation so by the time, I don’t know, the next three to six months, we are in a position to not go any further.
“Because the one thing we cannot afford to do again is borrow another set of money because the reserves are running out. We need to restore some confidence in the market and the Government is quite frankly unable to do so,” he said.
“It will cost Barbados more if we end up turning to the IMF when we are pretty much down and out. We are almost down and out already but it will simply cost more. The noose around our neck right now is the current account deficit on the fiscal account, as well as and the fact that the Central Bank is a willing participant in allowing the Government to continue to spend by printing money,” added Straughn.
He said Government had no time to implement its measures to achieve the goals, adding that some “heavy lifting” would be required next financial year. However, Straughn theorized that given the current unsettlement among Cabinet members that could also make achieving the goals difficult.
“We cannot afford any instability on the political front because from here on in it has to be action . . . . We simply don’t have the luxury of time,” he said. “We absolutely need to go to the IMF and we should have done so a long time ago . . . .
“This is not a normal fiscal situation that Barbados has found itself in. To bring ourselves out of this we really do need to get some external intervention to bring some order to the public finances,” explained Straughn.
He said the Central Bank was perhaps “in a state of disarray as well” because “the management of that institution has faltered even to the extent where the central bank may also need to be recapitalized”.
“Really and truly when you look at the core of it there can’t be any confidence in the economy if both those institutions, and certainly if the central bank is not being managed in a prudent manner,” said Straughn, adding that although last year it was announced that Government needed to cut the deficit by about $400 million the Central Bank continued to print money “essentially to help the Government
“I think that clearly there is a mismatch in policy and obviously you can’t say one thing and then go ahead and do a next . . . and that is where the fundamental in the confidence in the market lies,” added Straughn.