Barbados must make difficult decisions with the help of the Social Partnership and stick to those decisions if the country is to pull itself out of the dire economic circumstances, two top economists have said.
Acting Central Bank Governor Cleviston Haynes and Director of Economics at the Caribbean Development Bank Dr Justin Ram shared this view in light of a recommendation by the International Monetary Fund (IMF) that struggling Caribbean economies should look no further than Grenada, Jamaica and St Kitts Nevis for examples of the fiscal rules and fiscal councils necessary to bring about sustained growth.
Haynes would not recommend that the Freundel Stuart administration enters into a formal structural adjustment programme with the IMF, but said Barbados should learn from Grenada and Jamaica in the manner in which the two Caribbean Community countries worked with the private sector, trade union and civil society to find solutions to their economic problems.
“I think the experience of Jamaica and Grenada in terms of co-opting their private sector and other partners has obviously worked for them and based on our 1991 experience it actually worked for us also. So I think that is one lesson that can be taken from this meeting that where difficult choices have to be made, it is important to be able to involve the wider community in the crafting and design of such policies,” Haynes told Barbados TODAY following the IMF’s 2017 High Level Caribbean Forum in Kingston, Jamaica on Thursday.
“I think [Thursday’s] session was a useful session. It focused on some of the key issues. Particularly of interest was the whole issue of fiscal policy, fiscal rules and the need for us to be collaborative in how we design policies,” he added.
During the opening of the event, which attracted a wide cross section of present and former regional leaders, banking officials and other top ranking officials from the region, IMF Managing Director Christine Lagarde took some Caribbean governments to task for failing to adhere to their fiscal policies.
She pointed to Grenada, Jamaica and St Kitts and Nevis as prime examples of countries that successfully implemented “well-designed fiscal rules” while building resilience and tackling social issues.
“Apart from the fiscal rules, fiscal councils are also increasingly recognized as tools to promote sound fiscal policies by providing independent information and analysis, and by monitoring compliance with fiscal rules,” she said, without naming countries that were failing in that regard.
Ram told Barbados TODAY he agreed with Lagarde, but insisted that Barbados already knew what needed to be done.
“All of the policies that the government has already announced, if implemented, can get Barbados back onto the right course,” Ram argued.
“What we have learned [on Thursday] is that in order for there to be success, the implementation is what is critical. And how you go about that implementation by having a social partnership, which includes the government, the private sector, the trade unions, these lessons that we heard from Grenada and Jamaica are useful for us to bear in mind if we want to . . . get Barbados on to the right path.”
And with calls being made for Government to quickly establish oversight committees to ensure transparency and accountability of its pending Barbados Sustainable Recovery Plan 2017, the CDB official said this was critical to the process of any fiscal programme.
“It is a critical component. You see, policies that are being announced now, the population wants to know that these policies are credible, and will be implemented. A greater level of accountability is what the oversight committees will actually do for Barbados. I think that will bring a greater level of accountability and ensure that we are on the right track and are doing what is required in Barbados, just as what has happened in Grenada and Jamaica,” he explained.
Adding that Barbados had always been a leader when it came to such policies, Ram said it was now just a matter of “going back to those basics and doing what Barbados did previously”.
Maintaining that any decision to go to the IMF for assistance would have to be a decision for Government and Barbadians to make, Ram said there were “certain policy measures that dictate whether or not you have to go towards an IMF programme”, including dwindling foreign exchange reserves, which fell to 8.6 weeks of import cover as at the end of September .
However, steering clear of presenting any recommendations, Ram said: “I think the Government really needs to have a proper policy in place to ensure that reserves get back to sustainable levels, that is to say at least three months of import cover.”
Once this is achieved, he said, any fiscal reform or structural programme would help to grow the economy.
“I think we have to admit to ourselves that [fiscal programmes] will have some pain, but you need to alleviate pain by having growth in some other aspect of the economy. So the private sector now needs to play a much greater role in economic growth in Barbados and what the Government’s role needs to be now is a facilitator of that growth. Those are key areas for us to pay attention to,” Ram added.
He also highlighted the need for Barbados to build resilience to climate change and natural disasters while paying close attention to social issues.