He has not yet been issued with any official instruments of appointment, but former Prime Minister Owen Arthur is already freely dishing out economic advice to the Freundel Stuart Government as if he were already its Chief Economic Advisor.
To start with, the respected economist and former Minister of Finance sees the need for urgent debt restructuring, given that 60 cents in every dollar that Government currently spends goes towards debt servicing.
However, Arthur is seriously recommending that the island takes a totally different route to the one presently being touted by Minister of Agriculture Dr David Estwick.
During a full and frank interview with Barbados TODAY this week in which he confirmed that he had been approached by Minister of Finance Chris Sinckler to lead his economic advisory team, the former prime minister warned that a debt solution was needed posthaste.
However, he said his preference was for a debt exchange arrangement, similar to the one recently implemented in Jamaica under the watchful eyes of the International Monetary Fund (IMF), as opposed to having Barbados go down the road of a US$5 billion sinking fund from the United Arab Emirates (UAE), as prescribed by Estwick as a way for the island to wipe out its entire debt and restore economic growth and sustainability.
“His approach would be different to mine. I would go the way of a debt exchange, which works well – as happened in Jamaica – where a lot of your debt is local debt, that you can get the local debt holders to surrender their existing debt instruments and bond instruments and replace them with a different maturity.
“So you spread out the repayment over a longer period on the understanding that you get an ease on the interest in the short term, so that you don’t have a foreign exchange servicing problem down the road. That would be my solution,” Arthur told Barbados TODAY.
He stressed that Estwick’s proposal would be a whole different matter entirely, since “it would take all of the debt – domestic and foreign – and make it foreign”.
Nonetheless, Arthur was careful not to rub salt in the wounds of Estwick, who has been publicly fuming over the past two years over the fact that his so called ‘alternative economic strategy’ has not taken flight.
In his latest episode just over a week ago, Estwick went as far as saying that Government’s homegrown fiscal consolidation programme had failed, while again hoisting his UAE proposal as a possible saving grace.
However, Arthur stopped just short of saying that Estwick’s plan was total rubbish, as the Opposition Barbados Labour Party’s Economic Advisor Clyde Mascoll suggested last weekend when he warned that “what [Estwick] proposed as a debt strategy would not work.
“You cannot convert all of your debt, which is local, to foreign. We only have four loans that are foreign, so why would you convert all of your local debt to foreign debt and then have to look for foreign exchange to service that debt?” asked Mascoll, who holds a doctorate in economics, and specializes in public finance.
While staying away from any personal attacks, Arthur has also raised a number of questions about the proposed UAE arrangement which, he suggested, would not only turn the Government’s whole financing system on its head, but could also affect the financial viability of entities, such as the National Insurance Scheme (NIS), which currently hold Government debt instruments.
“Presuming that you got the money from UAE, you would have now to pay [the NIS] off, so they would have cash balances that they can’t hold as cash balances, because they have to invest it somewhere. If the Government was to get a loan, pay out them, they would have a cash balance, and what are they going to do with it? Are they going to invest it at home or abroad? Those are some of the imponderables of Mr Estwick’s proposal,” Arthur said, while insisting that a debt exchange would be the better way to proceed.
“It would be the easiest thing to do and the professor who I think will be a member of the [Sinckler’s economic] advisory group would be happy to enable us to have a debt exchange with the NIS,” said Arthur, in disclosing that NIS chairman Dr Justin Robinson was also due to be named to the National Economic Council.
“I am sure that he could be easily persuaded to let us take the bonds that you have, surrender them and give them a different maturity,” he stressed.
Since 2008, the island has been grappling with a serious economic situation, brought on by the global recession that began that year, but has morphed into both fiscal and balance of payments problems that have been met with Government’s implementation of a homegrown fiscal consolidation programme.
Arthur said one of the critical failures of that programme to date has been its inability to raise the desired foreign capital needed to resolve the country’s balance of payments and growth challenges.
However, the former prime minister was confident that there was still a large enough project interest in Barbados that could turn around the economy, even though he was still not satisfied that enough had been done by the Stuart administration by way of business facilitation, which he said was critical to safeguarding future economic growth.