Economist Jeremy Stephen has publicly revealed that he was one of the major architects behind Cabinet minister Dr David Estwick’s controversial United Arab Emirates (UAE) alternative financing proposal.
“I was one of the people that worked on that UAE proposal. I kinda fed it to Dr Estwick [as] they [members of the Freundel Stuart Cabinet] were looking for new sources of finance, looking into new markets,” he disclosed during a panel discussion held last night at the Grand Salle of the Central Bank.
While strongly lamenting that the US$5 billion sinking fund proposal for wiping out the country’s entire debt and restoring economic growth and sustainability was never allowed to see the light of day, Stephen argued that at the time of conceptualization back in 2012/2013, interest rates were low, which means by now “we would have been recovering on the debts profile side, despite how people feel”.
“It’s all about accessing opportunities wherever it lies,” he told participants in the forum hosted by the Barbados International Business Association under the theme, Thriving in Crisis.
The noted lecturer in banking and finance at the Cave Hill campus of the University of the West Indies contended that the rescheduling of debt, as envisaged under the proposal, would have bought the country some much needed fiscal space. However, he acknowledged that it was met with strong resistance from senior members of the Stuart administration.
“The push back in Cabinet is that it would have caused downgrades . . . [even though] it was as clear as day that you couldn’t deal with the expenditure issue.
“Of course there is a political issue if you continue to cut expenditure too rapidly . . . [so] you had to balance the politics with the actual economics, unfortunately and possibly,” said Stephen, who specifically recalled having a conversation with Minister of Finance Chris Sinckler back in 2012/2013 “about how could you stop the [economic] backsliding”.
However, he complained of “reluctance to change”, while suggesting that Sinckler “has always been right at the wrong time” and that “we’re in a situation now because of being late with the right remedies”.
“That reluctance to change would have been stymied further by the fact that it would have been tougher perceivably in 2012 thereabouts for international business to thrive in such an environment, mainly because the butter and bread of Canada [international businesses] would have signalled that it is time to open up all the goods that it had before for Barbados,” the economist said, adding that the economic decline had reached a point “where drastic remedies would have to be taken on both the onshore and offshore sides of the economy.
“Onshore side we’re seeing it right now with the effects of the NSRL [National Social Responsibility Levy] on local businesses,” Stephen said, warning that while the levy, which was increased on July 1 from two to ten per cent on the customs value of imported and locally produced goods, might not necessarily impact international businesses, “it will have an impact in the foreseeable future, particularly given the implied cost, the devalued cost of the Barbados dollar which is two per cent higher than it was a couple months ago”.
In this context, Stephen further warned that downgrade number 21 could soon be coming for the island on the heels of last month’s Standard & Poor’s lowering of its long-term local currency sovereign credit rating on the island to ‘CCC’ from ‘CCC+’.
“Look out for one more before the year is out,” the economist said, pointing out that “I said it earlier this year that two will come, another one will definitely come just given the environment we are in”.