The implementation of the Barbados Economic Recovery and Transformation (BERT) programme is a step towards correcting years of Barbados living beyond its means.
“It is a sound programme. I think it is a significant adjustment to the economy. Unfortunately there is no other way around,” said Moisés Schwartz, Regional Economic Advisor for the Caribbean Country Department of the Inter-American Development Bank (IDB).
“Once you face a crisis and once you start moving in the right direction there are some costs and it is difficult. Now the Government is going to spend less, taxes are increasing and people have to adjust to the new situation. That is a difficult environment. But that happens when you start living beyond your means so at some point you have to adjust. You can’t go on forever just issuing debt and expecting others to finance your expenses,” he said.
The bank official noted that his institution’s support for the BERT programme, as evident by its approval of a US$100 million loan this week, is an indication that the country is on the right track.
“The country has the support of international organizations so there is now a programme with the IMF (International Monetary Fund), and there is now a loan that has been approved by the IDB. So the country is moving in the right direction and in our view it is time to solidify things that support macro-economic development not only in the short-term but also in the medium- and long-term,” he said.
He told Barbados TODAY the economic programme, which included a slash in government spending, increased tax measures, a restructuring of state enterprises and retraining of civil servants, would come at a cost that would set the stage for Barbados to move towards economic recovery.
Pointing to the island’s extremely high debt of more than 150 per cent of Gross Domestic Product (GDP) the economist said instead of using revenue gained from taxes to carry out infrastructure work and deliver social programmes over the years, that money was used to service debt.
“So one of the main elements of this economic programme, BERT, as we call it, is to reduce the amount of debt,” he acknowledged.
In relation to the reform of state enterprises, Schwartz said it was a difficult measure that had to be undertaken, adding that Government would have to carefully examine which entities the country did not see as necessary for the state to carry.
In addition, he said it was important for government to ensure state-owned enterprises exercised greater fiscal prudence.