Government’s fiscal policy is inflicting damage on the country and the time has arrived for the Freundel Stuart administration to implement tough measures to stem the current tide of economic decline, according to former Prime Minister Owen Arthur.
“Sometimes if you refrain from doing what you must do it inflicts more damage than doing the things that you have to do no matter how painful those things may be. That situation has been reached in Barbados,” Arthur said at an impromptu news conference Tuesday morning, breaking a lengthy silence on the state of the economy.
Arthur, who served as Prime Minister and Minister of Finance from 1994 to 2008, was particularly concerned about the downgrades by the international ratings agencies, saying the downgrades were signs that the patient was being prescribed the wrong medicine.
Back in September Standard & Poor’s downgraded the country from B to B-, following the April downgrade by Moody’s from to Caa1 from B3.
In a statement announcing the latest downgrade – the 17th overall by the two agencies since 2009 – S&P said it was concerned that the island’s fiscal adjustment programme had again fallen short of stemming another increase in an already high debt to GDP ratio.
Speaking before the start of the sitting of Parliament, Arthur said the downgrades were a wake up call, not only for Government but also for the entire country.
“The importance of the recent rating agencies’ verdict on Barbados is not that they have downgraded Barbados and that downgrade has come after many years of painful effort to change things around, it is the fact that the downgrade has come despite all of the measures; the outlook is still negative and that tells a very important story,” Arthur said.
In its review of Barbados’ economic performance between January and September 2016, the Central Bank of Barbados (CBB) lowered its forecast for the year to 1.4 per cent growth, down from 1.9 per cent projected at the start of the year and 1.6 per cent at the end of June.
In his report, the bank’s Governor Dr DeLisle Worrell said while the international business and financial services sector remained strong, information up to July indicated a 7.5 per cent decline in the number of licences granted to international business companies and a 16 per cent fall in assets held by international banks during a 12-month period ending in June 2016.
Arthur, who spoke before the release of the Central Bank report, said he was concerned about the direction the sector was travelling.
“This sector has been the major new sector since Independence that has added the greatest to Barbadian prosperity. It has been the fastest growing and encourages a lot of professionals in well paying jobs. Now this sector has been going through a lot of problems . . . . That is the big triple whammy that has hit Barbados,” the former Prime Minister said, stressing that the absence of growth and the loss of foreign exchange impacted negatively on the economy.
The Member of Parliament for St Peter also strongly criticized Government’s persistence with taxation as a means of pulling the country out of the economic mire.
“The Government has sought to make up for this significant adjustment by raising taxes. But the effort to continue to raise taxes on a shrinking economy is proving to be self-defeating. The Government has therefore run out of financial options and because of the downgrade certain people cannot lend to the Government. The financial sector is already loaned up to the Government and therefore the Government, now in absence of doing what needs to be done, the Government has resorted to the worst possible thing to do which is getting the Central Bank to print over $1.4 billion to finance Government’s activities,” stressed Arthur.
In Tuesday’s Central Bank report, Dr Worrell stated that the bank had printed $114 million between April and September to facilitate Government’s financing needs.