Government’s decision to raise the domestic debt ceiling under the Domestic Loans Act by $1 billion to $7.5 billion has been met with grave concern from the private sector, as well as at least one local economist who said it was a worrying signal that the Freundel Stuart administration had lost control of the financial situation.
Economist Ryan Straughn, a political candidate for the Opposition Barbados Labour Party, told Barbados TODAY the move was “quite alarming” and reflected “the level of financial desperation that we are in”.
Straughn said his biggest fear now was that as a result of Government’s big appetite for borrowing, the population could soon be made to pay even more taxes.
“The reality is that, from my standpoint, any time they go to Parliament and borrow more money it seems as if the conditions in Barbados deteriorate and to the extent now that Barbadians will be expected to experience tax increases sometime in the future,” Straughn said.
“If you are going to borrow $1 billion it has to be repaid. And in that context, if Barbadians are not seeing the money deployed in the areas that are productive and will generate revenue, the reality comes back to us then having to pay more taxes because of this increase in borrowing. That is really my primary concern,” he stressed.
In June 2014, Government had increased its borrowing limit from $1.5 billion to $2.5 billion under the Special Loans Act, which was to make way for the building of the country’s productive capacity in such areas as tourism and sugar.
However, Straughn said he was yet to see any real benefit from the 2014 move, and he charged that the island was still fraught with challenges.
“Unless this new borrowing is going to significantly improve the deliveries of social services, particularly when it comes to water and sewage . . . then I suspect that based on past behaviour that we won’t see the situation improve significantly and it again demonstrates that the Government has lost control of its financial circumstances,” the economist said.
He said the latest increase of the domestic borrowing limit was also a signal that the economy was “heading in the wrong direction”, explaining that if the economy were growing, there would be no need to borrow more.
“Don’t forget this is on top of the printing of money. So this is not in isolation,” added Straughn, a former president of the Barbados Economic Society.
In piloting the amendment to the Local Loans Act in Parliament this week, Minister of Finance Chris Sinckler said it was a reality of governing small countries with resource constraints that Government would at times be unable to meet commitments for demands, provision of goods and services and the orderly management of the country based on the resources it brings in from taxes and impositions.
“So it is a necessary requirement that facilities be put in place to allow for borrowing for various purposes,” Sinckler said.
“In this case, this is entirely domestic,” he added.
However, the Chairman of the Barbados Private Sector Association Charles Herbert told Barbados TODAY he was concerned that the country’s debt seemed to be going up.
“We are exceedingly concerned about the debt levels of the country. We have expressed those concerns to the Government repeatedly over the last four years and we believe that there is not sufficient dialogue at the Social Partnership on the strategy,” Herbert said.
He said while he understood Government’s intention to minimize the social effects over a long period rather than inflicting harsher measures on the population over a shorter term, the private sector’s concern was that Government’s medicine for the economy was perhaps “a little too late”.
“An increase in the debt ceiling just makes us more afraid that our debt is going to continue to rise and we think that the only thing we should be accepting at this stage is a reduction and not a continued increase,” warned Herbert.