The Caribbean Development Bank (CDB) has a chilling message for the Freundel Stuart administration: delay further action to breathe life into the ailing economy and face possible disaster.
With Government’s austerity programme yet to produce the desired results, CDB President Dr Warren Smith is warning there is “no painless way” to rein in the fiscal deficit and ballooning debt.
“There is no question that there are some very tough decisions that need to be made in this country. I think the situation has reached the point where it appears to me there is no painless way out of this problem and I think there is an important lesson to be learnt there,” Smith told journalists on the sidelines of the CDB’s annual news conference at its Wildey, St Michael headquarters this morning.
“In economic matters, delay is never a good strategy because the problems that we now find ourselves in, the challenge that we now are faced with, has been made more difficult as a consequence of the accumulation of the problem, so that is an important lesson to learn. But I think it is also important to appreciate that we need action now. The Government of Barbados knows what to do.”
Troublingly, Smith said the island, once held up in the region as a shining example of social and economic development, could come under scrutiny as a result of the deteriorating conditions, sure to be made worse by the public row between Minister of Finance Christ Sinckler and Governor of the Central Bank of Barbados Dr DeLisle Worrell.
The head of the regional financial institution said the CDB stood ready to lend assistance to the Stuart administration. However, he said the bank had to tread carefully.
“There will be no rejoicing to see the situation where Barbados is today, and what we are committed to doing is, without being too intrusive, to let the Government of Barbados understand as we have done in the past, in the very recent past, we have indicated that we are here to help, not only from the stand point of sharing our views and our experience, but also we are standing ready to provide the resources that the Government of Barbados will need in order to achieve the recovery that we all expect will take place,” Smith said.
Even in the absence of any formal aid, the bank is offering some advice, which it believes will help drag the country back from the brink.
Director of Economics Dr Justin Ram suggested urgent action to stabilize the macro economic environment, including consolidation of expenditure on transfers and subsidies, salaries and wages and interest payments on its debts.
With the debt standing at 145 per cent of gross domestic product and “going in the wrong direction”, Ram said Government should also explore ways to make it easier to do business here, thus improving the country’s competitiveness in order to attract much needed investment.
Smith made it clear there was no need for the bank to lecture the administration on what it needs to do to bring the economy back to life.
However, he reiterated that there was much to lose by delaying the necessary action.
“What we would like to do is to urge them to take the decisions in an inclusive manner which has always been the method of Barbados – engage with all the social partners. The people of Barbados are a very enlightened and educated population. It should not be too difficult to sit down and be open and frank with them as to the nature of the challenge that they face and the tough decisions that will have to be implemented,” the CDB president said.
Smith said not only was he confident Government would choose this path, but that the economy would emerge from its current malaise.
“Let me just repeat that we are ready to help but there are certain things that need to be done before the assistance of the multi-lateral institutions like ourselves can become
available in a fulsome way. I think that the debt situation is one that needs to be addressed urgently.
“I believe if certain tough decisions are made here in Barbados possibilities will be opened up, which will enable the infusion of nicely priced resources, which can be used to replaced more expensive debt financing that is currently being accessed by the Government of Barbados. So that is a discussion we would like to have with the Government and a discussion we have been having,” the CDB boss affirmed.