Outspoken economist Jeremy Stephen is urging political parties contesting the next general election, constitutionally due by the middle of this year, to level with the public about the bitter pill that has to be immediately administered if the country is to stave off imminent economic collapse.
In the face of dwindling foreign reserves which the Central Bank said were only $550 million in September last year, over $100 million in foreign debt and interest payments due in the final quarter of this year, as well as a low credit rating that could affect any future foreign market borrowing, the University of the West Indies lecturer told Barbados TODAY he was concerned about some of the lofty promises being made on the campaign trail, while warning that the island could not afford to continue on its current economic trajectory.
In this regard, he zeroed in on the promise made by Opposition Leader Mia Mottley during the Barbados Labour Party’s (BLP) 79th Annual Conference last October to repeal the controversial National Social Responsibility Levy (NSRL), should her party win the election.
While describing as “ill timed” the recent hike in the NSRL, which was raised from two per cent to ten per cent of the customs value of locally manufactured and imported goods, Stephen further cautioned that a sudden repeal would be equally detrimental.
“Although I would have rightly predicted that the NSRL would have failed, the problem is that repealing a tax is so structural and it is extra revenue,” he said, adding that while it was true that earnings from the dreaded NSRL had not kept up with the rate of Government expenditure, “repealing it would essentially be creating a big hole too soon.
“It is my personal view that a sober campaign does not speak of largess, and the general public might not understand when you put a new tax to replace the other one,” Stephen said in an interview with Barbados TODAY.
However, the former head of the Barbados Economic Society stressed that even though unrealistic campaign promises had become part and parcel of the political landscape, it was especially dangerous to raise the expectations of the public during times of dire economic hardship.
He suggested that while the incumbent Democratic Labour Party (DLP) and the main Opposition BLP both had “the skills to get the job done . . . the problem now are mandates.
“While I understand it is politics, one must consider how it is reflected and impresses upon people. This could end up being a serious problem if you don’t manage the expectation of the citizens properly. It could result in an undermining of your policies. In these very harsh economic times you have to be very upfront with people because it is only then you are going to have the room to very radical and try new growth measures,” Stephen said, adding that neither the BLP nor the ruling DLP had displayed the type of resolve necessary to speak the harsh truth.
“There is a dire need for fiscal reform on the accounts of expenditure and it is going to come down to having a very sober Government,” Stephen said in echoing a warning issued by former Central Bank Governor Dr DeLisle Worrell earlier this month.
“The sole objective of the next Government must be to steady the ship and to be strong and aggressive in their ideas in terms of growth,” he added.
However, he said, “given our history I don’t see either side as being terribly sober. I don’t see either side being overly sober given the dialogue I have been getting from the main political parties.
“I really hope I am wrong about the things I see; as a matter of fact I want to be wrong,” Stephen said, while also criticizing the behaviour of the present Government.