Minister of Finance and Economic Affairs Chris Sinckler has dismissed the latest Moody’s report on Barbados, saying it is not very important.
However, noted economist Ryan Straughn said he agreed with the latest report, and has questioned the Government’s ability to maintain the reserves and attract private sector investment.
Yesterday, international ratings agency Moody’s rejected the Central Bank’s growth projection of 0.3 per cent for this year, saying instead the local economy was expected to contract by 1.0 per cent.
Moody’s also expressed concern over the state of the country’s foreign reserves, while cautioning that any further erosion in the reserves could likely put added pressure on the Barbados currency.
However, in his response Sinckler told Barbados TODAY “that is Moody’s view”, adding that the agency did not have access to all the information that the Central bank did.
“Therefore, the thing that they do as much as anybody else is estimate. This thing about the growth this year and whether it is going to be 0.3 per cent or down one per cent, it is all just guess work,” added Sinckler.
In defending the Central Bank’s prediction, Sinckler said it was a given that the economy would not experience any robust growth, adding that there was always a margin of error and no one was debating that.
In response to concerns about the reserves, the Minister of Finance explained that last year the reserves started to decline around the end of April to the beginning of May and therefore when compared to this year it was indisputable that the the reserves had stabilized for the first half of this year.
“Yes, the pace of fiscal consolidation can be quicker, and will gather pace as you go on through the year. But nobody can say that that process has not in fact started,” he said.
Dismissing the Moody’s report, Sinckler said: “It is not that really important. What is important is achieving the targets that we have set and that is what we intend to do and that is what we are working towards. That is what the municipal tax and all that is a part of. So we either want to achieve our tax or we don’t, and I think that most Barbadians want to and [we] will do so.”
In a separate interview, Straughn told Barbados TODAY the Moody’s report was “confirming what everybody knows”.
He said it would be difficult for the Barbados economy to experience any growth this year since the correct conditions were simply not there.
Straughn explained: “Given the domestic situation, there is the continued impact on VAT, the continued impact on consolidation tax and household spending and now the introduction of this new tax [ the Municipal Solid Waste Tax] although it is delayed somewhat, it is not conducive to doing business domestically. So I really don’t see, based on those things, growth in the absence of some foreign injected project.”
He insisted that the current fiscal and monetary policies being pursued by the Freundel Stuart administration were hindrances to economic growth and attracting private sector investment.
“The ability to attract foreign investment is a critical part of the puzzle, because unless we are attracting and earning foreign exchange then we are going to be forever in this problem and borrowing currency to pay public servants is not a strategy I would say is a workable one,” added Straughn.
Suggesting that the recent announcement of capital injection into property projects was not enough, Straughn added: “Given that the financing seems to have gone astray, it is difficult to see where you can get genuine growth opportunities in this type of environment.”
The past president of the Barbados Economic Society (BES) said the deficit was only a little less than it was for the first quarter of last year, adding that it demonstrated that the fiscal consolidation measures put in place by Government was not significant enough and it was “a serious situation” that needed to be addressed.
On the issue of the reserves, Struaghn said the reason it was at the levels reported by the Central Bank was due to government’s borrowing last December and March this year, and he questioned “what are they going to do December this year [ if the government continues to spend like it is]?
“So the question is are we then going to continue to go into the market to borrow, on what can only be concluded as onerous terms, just so we can say that we have reserves up there?” questioned Straughn.