Former Prime Minister Owen Arthur today warned of the need for immediate rationalization of Government, suggesting the General Post Office (GPO) may be a good place to start.
However, given the urgency to bring down the national deficit, he again called on the Freundel Stuart administration to revisit its spending on all 63 statutory agencies.
Pointing out that transfers and subsidies to these entities were originally $1.2 billion, Arthur said it was a luxury Government could no longer afford.
Therefore, he said immediate expenditure cuts would have to be made.
“It is going to be a difficult adjustment, but it is less difficult than having devaluation,” he told Barbados TODAY following the latest report from the Central Bank which showed the island’s foreign reserves had fallen below the benchmark 12 weeks of import, to less than $700 million at the end of December.
Since then there has been every indication that the situation has worsened, with transfers to state-owned enterprises having fallen by $17 million, although interest payments rose by $53 million.
As at January 2017, capital expenditure had also fallen by $36 million and the overall fiscal deficit, estimated at $665 million, was said to $5 million smaller.
With the situation as it stands, Arthur cautioned that “to refrain from doing what you need to do is going to cause more pain than doing that which you need to do”.
Zeroing in on the operations of the GPO, he suggested that amid technological change, the island’s postal services were now ripe for rationalization.
“I am not saying to sell it, but I can’t tell the last day I sent out a post card . . . .Yet every year you have to transfer into that,” he said, while pointing out that “Trinidad addressed theirs, New Zealand addressed theirs [but] we in Barbados continue to bury our heads under the sand.
“We have to rationalize the operations of a post office to make it compatible with living in a world where people are no longer sending to you through the post, but sending messages and post cards by WhatsApp,” the former prime minister and minister of finance said, while emphasizing that adjustments had to be made.
Arthur also acknowledged that state rationalization had been recommended by the International Monetary Fund. However, he said even though the process was now past due it had apparently been halted following the controversial early retrenchments at the Barbados Investment and Development Corporation in 2015.
To get the process going again, he suggested that Government would have to move quickly to try to forge a “national consensus” similar that which existed in 1991/1992 when the then Erskine Sandiford administration was faced with a possible currency devaluation.
However, with a worrying deficit, he emphasized that there could no longer be any sidestepping of the matter, neither that of privatization, which he said must be dealt with “in an enlightened way given that Government is asset rich and cash poor.
“All that privatization means is that the [entity] is now owned by the private sector rather than the Government but it has nowhere to go,” Arthur said in defence of divestment.
He also suggested that it could be an option for the state-run Transport Board, since the national transport system was already largely private. However, he said where possible Government’s divestment strategy should enable workers to have rights of ownership too.
To date, the Freundel Stuart administration has shied away from privatization, except that it recently announced the proposed sale of the Barbados National Terminal Company Limited to energy giant Sol. Today Arthur described the proposed sale as only a “stop gap” by Government which he said still needs to address its “excessive expenditures” that have created too large a deficit.
“We are fully loaned up to local banks . . . we have utilized the National Insurance to the hilt and because of the downgrades you cannot go and borrow from institutions [or] investors abroad who have a duty of care not to put pension funds and other investments in junk bonds,” he explained.
And with the Central Bank now refusing to print money, he stressed that the only other option was to cut the size of Government even though it may be an unpopular option politically.
With the Stuart administration currently banking on the delivery of several capital works projects, including the US$100 million Hyatt hotel, Arthur further cautioned that the dollar value would not be delivered in one fell swoop.
“They [the developers] will bring in enough [money] to meet wages and local purchases and hold the rest in a foreign account to pay imports,” he said.