I want to know what happened in Barbados during October, November and December of 2016 that caused the Central Bank’s foreign reserves to drop by $219 million from $900 million at the end of September 2016, to $681 at the end of December 2016. If anyone out there can answer my question, I would be very interested in hearing from you.
I’m asking this question because the Minister of Finance, in the Budget delivered on August 8, 2016, said to the country: “For example, we know right now, today, that even though reserve levels (are) below the $900 million mark, that in the next two months or so, the Central Bank’s reserves will be boosted by close to US$200 million of inflows. This should bring reserve levels to well over $1 billion in a relatively short space of time and the vast majority of this will not be from any borrowings in the market.”
In life, one must sometimes give persons the benefit of some doubt and so, even if something doesn’t happen within the exact time frame indicated, it ought to materialize soon thereafter if you’re going to take that person seriously going forward. In my view, if and when something doesn’t happen, the only decent thing to do is to provide an update highlighting the mitigating factors. Having said that, the minister’s forecast has left me scratching my head because the foreign reserves declined by almost the amount that he indicated it would increase by. Incredible!
The Central Bank Governor, in his September 2016 press release, stated: “The combined effect of the August fiscal measures and revenues from the sale of the Barbados National Oil Terminal Ltd. is expected to reduce the Government’s deficit to the end of the fiscal year slightly above 4 per cent of GDP.”
If one uses the figures from the latest economic press release published on Tuesday of this week, four per cent of GDP would be approximately $367 million. Yet, the Governor stated on Tuesday that the fiscal deficit was $665 million at the end of December 2016. Am I missing something here? The fiscal deficit is now almost $300 million more than the target indicated for the entire fiscal year 2016/2017.
I hope the reader has picked up something peculiar in the submissions above. The Minister of Finance has been forecasting foreign reserves whilst the Governor of the Central Bank has been forecasting the fiscal deficit. In short, this shows a complete reversal of roles because foreign reserves form part of monetary policy which is the mandate of the Central Bank whilst the fiscal deficit falls under public finance or fiscal policy which falls under the Ministry of Finance.
To make matters worse, the fact that both gentlemen have seemingly taken their eyes off their respective targets has had serious consequences for the economy. They have both gotten it so horribly wrong and by a magnitude so large that they should not really want to continue in their jobs facing such failure.
So this brings me back to my original question. What happened in Barbados in the last three months of 2016 that both of these economic indicators, the foreign reserves and the fiscal deficit, could deteriorate by such a magnitude? Further, why do the chief spokesmen keep getting their predictions wrong? In nine years, with the only exception being the introduction of new taxes, nothing these gentlemen have said would happen has materialized in this country.
Prior to the last election in 2013, the Prime Minister emphatically assured the country that not one single public servant would lose their job. Less than a year after the elections, over 3,000 persons were sent home from the public service. On Wednesday, whilst addressing the Chamber of Commerce, the Prime Minister assured the country that there would be no devaluation. A country must be able to depend on the word of its public officials. I am in no way comforted by the assurance of this Prime Minister given his recent history of assurances.
So again, what is it that I am missing in all this? As a professional economist, I review the same data and figures that the Central Bank of Barbados and Ministry of Finance are releasing. I read the press releases and Budget Speeches and listen to the government ministers and their pronouncements. Somehow, what they say never materializes. Yet they claim to be successful in achieving their respective targets. Everything that is supposed to be up, is down and what is supposed to be down, is up.
I digress in order to bring this article to a conclusion. I am sure that many of you have seen the photograph comparing the crowd size of the US presidential inauguration in 2009 versus that which took place last week and have perhaps followed the narrative over last weekend in the United States.
Whilst we all snicker and laugh in disbelief at the fact that despite all the available evidence that Mr Obama’s inauguration was the largest ever, the new Donald Trump administration is adamant that theirs was the largest. Whilst this phenomenon may be of recent vintage in the US, with all the available evidence, I conclude that Barbados over the past nine years has been administered on the use of alternative facts.
(Ryan Straughn is a UWI Cave Hill and Central Bank of Barbados-trained economist and endorsed Barbados Labour Party (BLP) candidate for Christ Church East Central. Email: firstname.lastname@example.org)