A top University of the West Indies (UWI) economist is warning that an International Monetary Fund (IMF) solution may be just as painful for Barbadians to bear as the austerity measures announced in Government’s recent Budget.
“I do not think we should have any illusions because I think the homegrown programme is a very tough package and it has a lot of pain. However, I think an IMF programme would have been equally painful,” warned Justin Robinson, who is the dean of the Faculty of Social Sciences at the UWI’s Cave Hill Campus.
In response to recent calls for Government to go the IMF route, Robinson further suggested that the $542 million austerity package announced by Minister of Finance Chris Sinckler on May 30, would be just as hard to swallow as any IMF package.
“I think the two packages would be about the same size. What might differ is the mix of measures,” said Robinson, who was speaking on state-run CBC Radio today.
His view is totally at odds with that presented by former Prime Minister Owen Arthur and other leading economists who have suggested that the IMF solution may be the best one for Barbados right now and may actually be easier for Barbadians to bear.
In fact, Arthur has gone as far as to suggest that what Sinckler plans to subject Barbadians to in nine months by way of increased taxation, could have been achieved over the course of a three year IMF programme that would have given Government access to the equivalent of $310 million annually.
“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,” Arthur said during the recent Budget debate, while warning that Government’s alternative of seeking a homegrown remedy did not match up to the IMF solution based on the country’s “seven-fold problems”.
However, Robinson, who is the chairman of the National Insurance Scheme and also a member of the board of the Central Bank of Barbados, argued today that while an IMF programme would have its benefits, Government might have been forced to make a number of major cuts to social services.
He also suggested that significant cuts would have to be made in terms of transfers to the institutions, such as the Queen Elizabeth Hospital, the UWI, the Barbados Tourism Marketing Inc, the Barbados Tourism Product Authority, the Sanitation Service Authority and Solid Waste Management and the Barbados Agricultural Development and Marketing Corporation.
The respected academic also pointed out that there were many unfunded pensions in the public sector which were escalating.
Just last week the IMF said it stood ready and willing to come to Barbados’ rescue, while warning that economic growth in 2017 would slow to less than one per cent, down from 1.6 per cent last year, reflecting the fiscal consolidation efforts introduced in the 2017/18 Budget.
Following its recent visit to the island, the IMF also cautioned last week that domestic inflation, which stood at 3.2 per at the end of last year, was likely to accelerate to 6.7 per cent by the end of 2017 as a direct result of the austerity measures in the May 30 Budget, in which Sinckler announced that the National Social Responsibility Levy would be increased from two per cent to ten per cent and that a two per cent levy would be introduced on all foreign exchange transactions.
Without passing judgment on the Budget itself or getting into the recent national discussion over whether or not the island should enter into a formal IMF arrangement, the lending institution made it clear the island’s economic problems were not over by any measure.
In this context, it said it “stands ready to assist the Government of Barbados, including through continued policy dialogue and technical assistance”.
However, responding to the latest assessment, Robinson said while he took comfort in the IMF’s suggestion that Government had finally started to confront the country’s financial problems head-on, its prediction that inflation will more than double was concerning.