The path to economic recovery will be difficult, requiring a lot of help from non-governmental organizations (NGOs) to shield the most vulnerable if Barbados is to avoid rising poverty levels, noted regional economist Marla Dukharan has suggested.
The uphill task of lowering the island’s massive debt of more than 157 per cent of gross domestic product, shrinking the large fiscal deficit of almost five per cent and growing the foreign reserves, will have a negative impact on everyone, requiring protection for the poorest and most vulnerable, she said.
Painting a picture of the current state of the economy in comparison to other countries that have experienced restructuring, including Greece, Grenada and Jamaica, Dukharan said Barbados ran the risk of seeing an increase in poverty while having to undergo a painful restructuring.
“You cannot say ‘I am addressing the economic and forget the social for now’. You have to address both in tandem,” Dukharan told Rotary Club of Barbados dinner at the Bagatelle Great House on Tuesday night.
“Basically, my view is, finally Barbados is on the way to recovery. It will not be a straight and upward road at all points. It will be a winding and undulating road. It will not be
one to say to you this will be easy and, of course, your Prime Minister doesn’t either,” she said.
NGOs “like the Rotary” and the church “will be key . . . to ensuring that the pain that will be felt that we insulate the most vulnerable from that because it will be painful”, Dukharan stressed.
“The thing is, it is going to be painful. Things that you didn’t have to pay for before you will probably be called on to pay for now and going forward,” she added.
Praising the Government for constant communication and engagement with Barbadians, Dukharan said the process would also require the full support of labour and the private sector, which is expected to lead the growth.
The regional economist said based on her observations so far she was “quite confident all the targets will be met simply because of the amount of support”.
“All hands are on deck it seems. You have a lot of support as well from the development banks, both financial and technical support. I believe it can happen. It will be miraculous but I believe in miracles,” said Dukharan.
Pointing out that an increase in investment and exports was critical to driving growth in the economy, Dukharan said it was possible that tourism, a key engine for growth, could remain stable or face negative impact based on the fees and charges imposed on the industry in the last Budget.
“Imports will go down because consumption and Government spending is going down. So what really is going to drive growth in this economy is investment and exports too. Tourism is our largest export. Those are the two things we have to emphasize in trying to achieve growth,” she explained.
While acknowledging that the possibility existed for the fixed exchange peg of BDS$2 to US$1 could come under increasing pressure, Dukharan said all Barbadians “seem to agree” that whatever the adjustment entails they would comply happily in order to protect that currency peg.
Noting that Government’s austerity plan was focused a lot on raising revenues through taxes and reform of the state entities with an aim to achieve greater efficiency, Dukharan warned that there was a negative correlation to the amount of taxes on a society and the amount collected from those taxes.
Given that “Barbados is the most heavily taxed jurisdiction in the Caribbean”, she said therefore, it simply could not manage any more taxes.
One of the risks to this recovery or transformation efforts, could include reform fatigue where people could get “fed up” if the reform was going on for too long with very little results, she said.
Without giving an extensive list, Dukharan said other risks that could harm the transformation efforts included the lack of ease in doing business and an increase in inflation.