The Opposition Barbados Labour Party (BLP) Thursday stopped short of saying “we told you so”.
However, with Governor of the Central Bank of Barbados Dr Delisle Worrell currently using the dreaded ‘d’ word –– devaluation –– amid a worrying decline in this country’s foreign reserves, the Opposition’s lead spokesman on economic matters Clyde Mascoll has warned of more belt-tightening measures to come.
“Now that Government’s policies have failed as predicted, the Governor is using the threat of devaluation to sell the need for more taxation and/or cuts in Government expenditure,” Mascoll said.
The warning came on the heels of a now seven-year-old homegrown fiscal consolidation programme, which the BLP describes as an abysmal failure.
It has been highlighted by over 3,000 public sector layoffs, as well as increased taxation. Within the last two years alone, Government has introduced a number of levies –– the latest being a two per cent National Social Responsibility levy which aims to raise in excess of $100 million in revenue per year.
That levy followed two other taxes that were announced in June 2015.
As of January last year Barbadians started paying an additional 4.5 per cent Value Added Tax (VAT) on their cellphone use, bringing that VAT to 22 per cent. That measure was expected to rake in approximately $32.7 million annually.
This was coupled with the ten per cent tax on sweetened beverages that was also announced in June 2015, and started that same year. In addition, the bank asset tax was increased from 0.2 per cent to 0.35 per cent retroactive to April 1.
However, this has done very little to ameliorate this country’s deficit position as economic growth remains in order of one per cent while Government’s overall debt has ballooned to about 108 per cent of gross domestic product as at September 2016.
In his January 2017 economic newsletter, Dr Worrell admitted that Barbados had repeatedly failed to achieve the balance between its foreign exchange outflows and inflows necessary for a stable economy. He therefore called for further restrictions on public spending in order to protect the country’s foreign exchange reserves, while cautioning “the reserves are what protect us against the devaluation of our currency”.
And though suggesting the island’s future was still exceptionally promising, the Governor further warned that “it will not happen unless we make it happen, and like all worthwhile objectives, realizing the vision will not be painless”.
In response, Mascoll, a respected economist, said “this means that the suffering Barbadians have been enduring for the last eight years has been in vain”.
He also suggested that Government had been lying all along to the people of Barbados about the country’s economic health.
“Not so long ago, the Government and Dr Worrell were preaching about the adequacy of the country’s foreign reserves. They said there was no debt problem. At one point the Central Bank also denied the printing of money. But one after one, Barbadians have lived to see that these statements were inaccurate,” the BLP spokesman said in a statement today.
However, he suggested that Dr Worrell had finally come around to the position taken by the Opposition, as well as regional and international economists, about the state of the economy.
“Dr Worrell confirmed all that we have been warning about when he said that Barbados had repeatedly failed to achieve the balance between its foreign exchange outflows and inflows, necessary for a stable economy,” Mascoll said.
Describing the overall message as “a bitter New Year economic pill” for Barbadians to swallow, he warned the country not to be fooled into thinking otherwise.
“The decline in the country’s foreign reserves, which persisted into the last quarter of 2016, is at odds with this positive talk about the tourism sector,” he said, while arguing that “Government, not the Governor, needs to say clearly what went wrong and explain to Barbadians how further fiscal measures will be implemented.
“Or, will we be again treated to a situation where the Minister of Finance comes out in disagreement to Dr Worrell’s position?” Mascoll asked, while stressing that “we simply cannot go on like this.
“The Governor should not be the one bringing this news on fiscal policy. Government needs to come clean with the public and outline what is really going on in the economy,” he maintained.