It’s time to face up to reality and implement an International Monetary Fund – backed structural adjustment programme.
Prominent businessman and financial analyst Peter Boos made this strong recommendation this evening as he suggested that Government’s fiscal consolidation programme may not succeed due to lack of confidence in the outcome.
He told Barbados TODAY that the austerity programme will cause the economy to shrink further and lead to even more layoffs in the public and private sectors.
“We are in a very deep, troubling problem and unless we attack it in a very strategic way, which deals with all of the fundamental issues in a structured, organised way, with everybody understanding where we’re trying to head, then it seems to me that what we’re doing is making things worse rather than better,” he said.
“The IMF is not an ogre. What going to the IMF does for you is that it provides you with the level of finance and foreign currency loans at reasonable rates of interest. It provides expertise to help you with the transitions and the structural issues that we just have not dealt with.
“There is little confidence by investors in the economy so the IMF coming in would give certainty to investors about the programme that you are pursuing, there is transparency and openness in the management of public affairs,” the financial analyst said, citing as an example “staggering” findings in the Auditor General’s report and failure by the National Insurance Scheme to publish audited accounts over the years.
“We need to quickly accept and acknowledge the very serious condition that Barbados is in. We are fooling ourselves to believe otherwise and get on with adopting plans that are credible, credible in the eyes of investors and I think that’s important . . . I don’t think there’s anyway we can avoid asking the IMF for their financial as well as technical assistance. Clearly, we are having discussions with the IMF but I think it must go much deeper and much sooner. The faster we get there the better.”
Pointing to the seriousness of the situation, he said the gross national debt to GDP ratio needs to be cut in half, while pointing out that the fiscal deficit is nearly 13 per cent of GDP.
Additionally, he noted, Barbados can only access capital markets at very high borrowing costs due to its poor credit ratings by international agencies, unemployment on the rise, and foreign direct investments drying up.
He also pointed out that Barbados was the only Caribbean country projected to have negative growth this year.
“I think it is so because we are uncompetitive. We have lost our competitive edge. Our export industries are all weak. You can’t tax and shrink your economy into growth unless you address a lot of the fundamental issues that underlie competitive, which includes innovation, productivity, business facilitation and the legal justice system. There’s no end of issues that we have failed to address over many, many years,” Boos said.
“Barbados has to go the way of public sector shrinking, which means privatisation and reduction of entitlement spending. There is no other way alternative,” he warned.
Back in the 1990s, Barbados was forced to enter a structural adjustment programme with the IMF but just last month, former prime minister Owen Aurthr warned that the last thing the island should want to do is to go back to the Fund.