It seems, at long last, that the ailing Barbados economy is starting to recover from what easily has been the longest period of combined decline and stagnation in the island’s 50 year history as a sovereign, independent nation.
Verification by an independent, reputable and authoritative source of what the Government and Central Bank have been saying over the past several months, came yesterday in a cautiously upbeat statement from an International Monetary Fund (IMF) team as it concluded a ten day visit to the island.
“The economy appears to have turned the corner with activity picking up,” said the statement by Judith Gold, head of the team which was on island to conduct what is called an Article IV Consultation on the economy. This kind of consultation takes place annually in every country which is a member of the IMF.
During the visit, the IMF officials held meetings with Government officials overseeing portfolios related to economic activity, including Minister of Finance Chris Sinckler and Minister of Commerce Donville Inniss, the Opposition, representatives of academia and major national interests groups, including the private sector and trade union movement.
Citing evidence providing confirmation of a “nascent recovery” in the economy, the IMF then sounded a strong word of caution that Barbados is not yet out of the woods. “The economy faces serious challenges. Although growth has resumed and short-term prospects are positive, imbalances persist between available resources and Government programmes,” the statement said.
The IMF observed: “While favourable external developments have provided some room for manoeuvre, Barbados remains highly vulnerable and may not realize its potential without deep-seated reforms to align revenues and expenditures, and reduce debt.”
It went on: “Fiscal reforms have yielded less than expected. After significant consolidation in FY2014/15, the deficit in FY2015/16 remained broadly unchanged, short of Government’s objective, due to delayed implementation of June 2015 tax measures and slow progress with the reform of the state owned enterprises (SOE). Consequently, public sector debt rose to 105.5 per cent of GDP from 98 per cent at the end of FY2013/14.”
While the IMF assessment is undoubtedly welcome news and a morale booster for a heavily criticized Freundel Stuart administration, it speaks, nevertheless, to the underperformance of Government’s solution to the problem — the home-grown 19 month adjustment plan that introduced a Consolidation Tax on incomes, among other impositions.
The caution included in the statement should hopefully serve to damper any immediate temptation on the part of ruling Democratic Labour Party (DLP) supporters to celebrate and claim a victory. It is clear, from the policy prescriptions which the IMF is recommending, that the battle to put the economy right is far from over.
In fact, the IMF is recommending further fiscal adjustment of “at least 3.5 per cent of GDP over the next three years to reverse large increases in debt and place it on a downward trajectory”.
If accepted and implemented by Government, it raises the possibility of more austerity for a population which already is more than fatigued by the amount of belt-tightening it has had to endure over the last seven years.
The “nascent recovery”, of which the IMF speaks, is occurring at what is called the macro-level of the economy. However, at the micro level where the average Barbadian is found, the daily life experience continues, in many cases, to involve a struggle to make ends meet. The recovery occurring at the macro level has not yet come to this neck of the woods because there is not a lot as yet to trickle down.
With the ruling DLP facing a general election in less than 18 months, we caution the administration against taking this upbeat IMF assessment as a licence to engage in the kind of fiscal recklessness that happens around election time.
Ruling parties are known sometimes for upping Government spending to create a feel good factor within the population to bolster their re-election chances. The population later pays directly for this kind of recklessness.
If Government is serious about boosting economic activity, then it must engage the private sector more meaningfully. There are some private sector people who have made it clear that they are not inclined to invest their money in an unfriendly business climate. However, given that the private sector is the engine of economic growth, Government’s job is to be more facilitating, so that more investment can occur in support of the turnaround we all desire and desperately need.