Barbados currently exists beyond its means with an inefficient and still-too-large public sector the biggest drain on the public purse, says an unrepentant Governor of the Central Bank of Barbados Dr DeLisle Worrell.
The economist said Government was simply not earning enough to meet its obligations, forcing the Central Bank to finance the administration’s programmes.
Therefore, in order to “eliminate” the deficit the Freundel Stuart administration must either raise taxes or send home even more public servants, he advised.
“. . . our public sector is a break on our growth. It must be reduced in size to what our taxes can afford,” Worrell said during last night’s live television broadcast of the Central Bank’s economic forum, It Matters Fiscally.
The administration’s chief monetary adviser left little doubt that he would rather see an end to the printing of money by the bank to cover basic bills such as public servants’ wages.
However, in order not to “cause a disaster in the economy”, the Central Bank must come up with $50 million every month to pay public workers because the tax collection agency, the Barbados Revenue Authority (BRA) was not earning enough to cover the monthly bills, he said.
“On the week on which Government workers are paid, we always know that in addition to all the other expenses, we have to find $50 million approximately to pay Government wages. That is why the amount the Central Bank lends always go up on that week because BRA does not bring in enough money to meet Government salaries during salary weeks,” Worrell revealed.
“That is why the current account deficit has to be eliminated, not just reviewed. Government has to live within its means on an ongoing basis.”
This cannot be good news for the island’s 20,000-plus civil servants who have not had a pay rise in over six years, and for whom the labour unions have requested double-digit increases.
When it emerged last June that the ruling Democratic Labour Party administration would move to restore the ten per cent cut from the salaries of parliamentarians and senior public servants in 2014 at the height of austerity, the National Union of Public Workers said it would demand a 23 per cent hike, while the Barbados Workers Union said it would ask for a 15 per cent pay rise.
Stuart had responded that he would not rule out the possibility of an increase, but warned that his Government would not embark “on a carnival of spending”.
Just over a week ago, Parliament approved the pay restitution despite Opposition protests.
Worrell made no mention of any of these issues last night, but for the first time he appeared to have totally discarded of his practice of toeing the administration’s line as he exposed the country’s dire fiscal state.
Still, the senior economist maintained the local economy was improving, pointing to the strong performances of tourism, international business, rum exports and the solar energy sector.
However, he gave his frank assessment of the public sector, saying it was “completely out of sync” with the “dynamic economy”, too slow to act and “the running costs of public service exceeded tax and other revenues by a wide margin”.
“The majority of public servants are well trained and able and committed to the public good. They do an exceptional job, but too many in the service are inefficient and uninvolved and they treat citizens of this country and our visitors with disrespect,” he said during the 90-minute programme in which he assured that the Barbados dollar was “a long way” away from devaluation, but was not out of danger.
“If we don’t stop eroding the foreign exchange we will get there,” he warned.
“Having your own currency is better only if you are able to exercise the necessary fiscal discipline in order to maintain that value unchanged. If you are unable to do that you are better off with the US dollar.”
Earlier this month Worrell revealed that the foreign exchange reserves had reached a 14-year low of 10.3 weeks of import cover.
He also dismissed suggestions that the private sector was not doing enough to promote its products and services overseas, saying it was being held back by “the inefficient public sector” that was “hindering things the private sector wanted to do”.
Meanwhile, economist Winston Moore said besides cutting wages and salaries or reducing the size of the public service, Government must consider other areas of reform, including its electricity costs.
He also suggested that Barbadians must be allowed to invest in state entities as Government considers selling some assets.
“The issue of privatization is not a bad word. Privatization actually provides opportunity for innovation and competitiveness and it is something we need to consider in Barbados as well,” Moore said.
Panellists also called for greater emphasis on the expansion of the green and renewable energy sector, improved productivity and an end to Government bureaucracy.