Economist Michael Howard has given the thumbs up to the Democratic Labour Party’s (DLP) manifesto, which he says attempts to address the critical issues facing the economy, such as the high fiscal deficit and dwindling foreign reserves.
Commenting on the 56-page document launched in Oistins, Christ Church on Thursday night, along with a single-page economic policies addendum, Howard told Barbados TODAY he was also satisfied that it clearly identified the fundamental economic challenges.
However, of particular interest to him was the section of the document which states that failure by Government to raise at least $500 million from the sale of several state assets will require alternative sources of foreign exchange, such as an International Monetary Fund (IMF) loan, with the conditionalities that come with such a loan.
“This approach seems to suggest that the DLP is prepared to go the IMF if necessary,” Howard pointed out to Barbados TODAY this afternoon.
“It seem to me the DLP will continue the fiscal austerity programme and go to the IMF if absolutely necessary,” he stressed, adding that it was “an appropriate strategy in the context of a high fiscal deficit and low and falling foreign reserves”.
The IMF position articulated in the DLP manifesto is the clearest statement yet from the incumbent party, which has been reluctant to turn to the Washington-headquartered Fund for financial assistance, based on past history with its bitter economic remedies, that it was prepared to do so if it had to.
“The DLP’s plan is to raise at least $500 million in foreign exchange without incurring any new borrowing. The initiatives to raise these funds have already been announced and are already in train,” the election document states, while pointing to the planned sale of the Barbados National Terminal Company Limited, the Hilton Barbados Resort and the development of a Hyatt Centric Resort for $200 million each.
“Failure to complete these transactions will require alternative sources of foreign exchange, such as an IMF loan with the conditionalities that come with such loans,” it added.
On the last occasion that the island turned to the Fund, the DLP was also in power, but not for very long after it implemented an IMF-approved structural adjustment programme in the early 1990s that called for an across-the-board eight per cent pay cut and other bitter remedies.
Cognizant of the likely political fallout from another IMF austerity programme, the DLP has identified the loss of approximately $200 million in tax revenues from the offshore sector; the need to reduce the high fiscal deficit by at least another $200 million annually; and the boosting of the foreign exchange reserves by at least another $500 million as “the most urgent challenges” facing the economy.
And just as the Barbados Labour Party (BLP) did when it launched its manifesto last week, it indicated that it would be seeking to have the country’s debt reprofiled.
In fact, the DLP document said “Government has already hired an international firm to prepare debt reprofiling proposals for Barbados”, adding that “this is expected to provide annual savings of between $70 million and $100 million”.
Additional plans for tackling the country’s deficit, which stood at about 4.2 per cent of gross domestic product at the end of March this year, include the introduction of a national health insurance scheme that would see the annual transfers to the state-run Queen Elizabeth Hospital reduced by between $70 million and $100 million annually.
Without providing details, the DLP also proposed to introduce a national recycling programme, which it said once fully implemented would reduce the transfers to the Sanitation Service Authority by between $20 million and $30 million annually.
If granted its wish of a third straight term in office in the May 24 election, it also plans to restructure the sugar industry, with a view to reducing by $20 million to $30 million Government’s annual transfers to the Barbados Agricultural Management Company.
Based on two recent studies by PricewaterhouseCoopers and the IMF on state owned enterprises, the DLP also promised that “on full implementation of selected proposals within both reports, transfers and subsidies will be reduced by between $25 million and $35 million annually”.