The Freundel Stuart administration is again being advised to rethink its obdurate position on International Monetary Fund (IMF) support for the stuttering economy.
Adamant that increased taxes were not the way to emerge from a recession, independent senators Professor Sir Henry Fraser and John Watson today insisted that Barbados had nothing to lose by turning to the Washington-based financial body for help.
Similar advice has been proffered by leading economists, including former Prime Minister Owen Arthur, but has been stoutly rejected by the administration.
Notwithstanding, the two senators repeated the recommendation while speaking during the post-lunch debate on a resolution to raises the overdraft limit to $4.75 billion.
Watson said Barbados urgently needed to consolidate its debt and the IMF had just the solution the country needed.
“If you consolidate debt, you need to consolidate debt with the lowest interest rate and wherever the lowest possible interest rate is you should go and in simple terms that place is the IMF,” he told the Upper Chamber.
During his contribution, Sir Henry said the perceived heavy-handed behaviour of the IMF some 30 years ago when it forced countries, including regional neighbours Guyana and Jamaica, to devalue their currency was no longer a concern.
Like his colleague, he said Barbados had nothing to fear.
“There is no possibility of any loans with any lower interest rates than the IMF, so it is better to practise prevention rather than to get into a desperate situation where we are forced to devalue,” Sir Henry cautioned.
During the 2017 Budget debate, Arthur accused Minister of Finance Chris Sinckler of inflicting unnecessary pain on Barbadians, warning that the half-billion dollar adjustment programme which the minister presented, including increases to the National Social Responsibility Levy and excise duties on petrol, as well as the imposition of a two per cent tax on foreign exchange transactions, amounted to a devaluation of the Barbados dollar.
Arthur argued then that Government had turned its back on a $310 million package of assistance over a three-year period from the IMF, while opting to make an adjustment of $542 million over nine months.
“The adjustment that the minister is bringing to the House is going to inflict about $250 million more pain on this economy than if the Government of Barbados had chosen to enter a programme with the International Monetary Fund,” he warned at the time.
However, Sinckler had brushed aside the IMF recommendation, reiterating that there was no need for a “panicky resort” to the lending institution.
He remains adamant that even if Government were to resort to the IMF it would take six to nine months to initiate and conclude the process for a programme tailored to suit the circumstances Barbados currently faces.
“There is way too much historical evidence to show that countries which have been unable or unwilling to do so have been left having to implement badly designed IMF programmes which only reflect the wish list of Washington technocrats but end up causing massive destruction in their wake,” he said.
Senators Watson and Fraser however made it clear that if Barbados were to go the IMF route, devaluation of the Barbados dollar and harsh measures on citizens must be off the table from the outset.
“We must not devalue our dollar as part of the negotiations, and another thing, we must not put unbearable burdens on the citizens of Barbados, especially the most vulnerable,” Watson said.
“It is a no-brainer. We must not devalue our dollar. Devaluing our dollar is as for Jamaica and Guyana, the beginning and the end. So this is something we must not do,” stressed Sir Henry.