Where does the Barbados economy really stand at this point in time? Are we still seeing light at the end of the funnel, as key Government officials told the country last year, or has that light now been snuffed out? Can we also still say that the economy has turned the curve, to use another official description, or has it gone into reverse?
In the almost two weeks since Central Bank Governor Dr Delisle Worrell’s latest monthly economic newsletter set off alarm bells, all sorts of questions about the state of the economy have been going through the minds of Barbadians. Citizens generally seem confused as to what is really happening and, more worryingly, whose word to believe.
Thus far, we have heard the reactions of the private sector, parliamentary Opposition, representatives of the economics profession and other commentators. Their comments generally suggest that the economy, even though it has started growing again, has reached a critical point where far-reaching decisions have to be made, especially in relation to the high level of public debt.
However, up to the time of writing, the country had not yet heard, by way of a definitive statement, either from Minister of Finance Chris Sinckler or Prime Minister Freundel Stuart, the two elected officials most responsible for the management of the economy and accountable to the populace in the traditions of democratic governance.
Dr Worrell spoke specifically of an imbalance in the balance of payments where outflows of foreign exchange to pay for imports, etc. since 2013 have outstripped inflows from exports and investments, etc. He pointed to the pressure being placed on the foreign reserves which are critical to maintaining the two to one exchange rate.
“The foundation for growth is a stable economy and in Barbados that means a balance between foreign exchange inflows and outflows,” Dr Worrell said. “We know when we have achieved that balance because in that case we do not have to dip into the Central Bank’s reserves of foreign currency to make up the difference.”
Even though the Central Bank governor assured there were adequate reserves to “meet all legitimate needs”, the comments have reignited fears about devaluation, especially in the light of the latest sovereign credit downgrade by Caribbean Information and Credit Rating Services Limited (CariCRIS), the Trinidad-based regional ratings agency.
Given the sensitivity of the issue, what is urgently required from Government to address the concerns of Barbadians, is a comprehensive report on the state of the economy from the Minister of Finance that, ideally, should be the focus of a special parliamentary debate. The statement should be designed to provide clear answers to the most common questions which Barbadians have about the economy so that they can have a better and realistic picture and, most importantly, understand what they can contribute to help improve the situation.
Last October, former Prime Minister Owen Arthur said Government’s fiscal policy was inflicting damage on the country and the time had come for tough measures to stem the decline.
“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.
The former Prime Minister, whose views on the economy command respect, expressed particular concern about the debt situation, suggesting rescheduling should be seriously explored to give the Government some breathing space. Interestingly, Sir Frank Alleyne, former chairman of the Government’s Council of Economic Advisors, put this option on the table this weekend.
The pertinent question, though, is whether Government at this stage can pursue debt rescheduling without entering a formal programme with the International Monetary Fund (IMF) which the Stuart administration seemed determined all along to avoid. A formal IMF programme is likely to mean more austerity which naturally would increase the unpopularity of the ruling Democratic Labour Party (DLP).
With an approaching general election, such a move would be tantamount to political suicide. The administration, therefore, finds itself between a rock and a hard place where it has to make a choice between introducing unpopular measures in the national interest and being the sacrificial lamb in political terms. As the administration has always seemed reluctant to fully bite the bullet, it is debatable whether it will willingly choose to so at this time.
This dilemma effectively leaves one option which is calling an early election. Senator Maxine McClean said late last year that an early poll was highly unlikely. However, given the significant change in the political landscape where the Dems are up against the wall, an early election is increasingly becoming a possibility that should certainly not be ruled out. Time, of course, will tell.