The opposition Barbados Labour Party (BLP) has said the latest downgrade of Barbados’ government bond rating by Moody’s Investor Service highlights the flaws in government’s fiscal policy as well as the monetary policy of the Central Bank of Barbados by way of its direct financing of government.
In a statement released this afternoon on the heels of the Moody’s downgrade, economist Ryan Straughn said the downgrade to Caa1 “clearly demonstrates that the Freundel Stuart administration has successfully fooled itself into thinking that the Home Grown Fiscal Stabilisation and Economic Revitalization Programme is working”.
“Barbadians should be aware that Moody’s basis for its ratings action was predicated on their estimate of the fiscal deficit of 5.5% of GDP.
“This is quite significant since the Minister of Finance presented a figure of 6.3% of GDP for 2015/2016 during the debate but further rather than fiscal consolidation, the Freundel Stuart administration approved an Appropriations bill for a deficit of 7.8% of GDP for 2016-2017,” Straughn said, adding that based on Moody’s analysis this will set the country up for a further downgrade “over the next 12 months or so”.
Straughn, who is also the BLP candidate for Christ Church East Central, contended that the island’s fiscal situation is much worse than the basis on which Moody’s predicated their action, “and by the government’s own admission they intend to widen the deficit further rather than to reduce it”.
He noted that although the country enjoyed low oil prices and record tourist arrivals over the past years, the foreign exchange reserves are still under pressure, putting the peg at risk. This, he said, is due to government’s continued reliance on financing from the Central Bank of Barbados.
He pointed out that this is the sixth ratings downgrade by Moody’s since 2009 when the rating at the time was A3.
“However one must remember that in June 2014 under the stewardship of the Minister of Finance Barbados received a triple notch downgrade in the middle of the Home Grown Fiscal Stabilization and Economic Revitalization Programme.
“Despite evidence to the contrary, the Minister of Finance and his colleagues persist in pursuing a path that takes Barbados closer to economic ruin,” Straughn charged.