Former Governor of the Central Bank of Barbados Dr DeLisle Worrell has reiterated that cutting the public service and reducing subsidies to Government-owned entitles are necessary steps towards fixing the island’s ailing economy.
In a brief statement sent to Barbados TODAY, Worrell noted that the most precious assets the Government of Barbados possess in facing the current foreign exchange crisis are its long-term exchange rate peg, and its unblemished record of servicing its debt in full, and on time.
“Government must preserve these assets at all cost. The key to doing so, as I have publicly advocated, is to cut the public service by approximately 1,500 jobs and to reduce subsidies to Government-owned entities by 10 percent, in the first instance,” Dr Worrell said.
“If this is done, I calculate that Government will be able to meet its debt obligations in full, relieve pressure on the foreign exchange market, and balance the fiscal current account.”
He added that there will be no further need for borrowing from the Central Bank.
“It is on the basis of this commitment that the Government should open negotiations with the IMF,” Dr Worrell said.
Prime Minister Mia Mottley announced on Friday that the island’s economic situation was currently so dire that her Government was really left with no choice but the approach the IMF for help.
The Prime Minister also announced the immediate suspension of payments due on debts owed to external commercial creditors. She also said her Government would endeavour to make scheduled domestic interest payments, but domestic creditors would be asked to roll over principal maturities until restructuring agreements were concluded.
In fact, she said a major economic restructuring was now necessary in the face of an out-of-control debt of 175 per cent of gross domestic product, an estimated $15 billion which is said to be $9 billion more than what the previous Democratic Labour Party administration inherited in 2008 when it took office.
Mottley’s Barbados Labour Party (BLP) had said at the launch of its election manifesto it was not afraid of turning to the IMF as a last resort.