The Barbados economy is at a crossroads and will require a multi-prong approach in order to get it back on track, say officials.
At the same time, Governor of the Central Bank of Barbados Cleviston Haynes is warning Government to learn from past experiences.
Addressing the November luncheon of the Barbados Chamber of Commerce and Industry (BCCI) at the Hilton resort today, Haynes said having gone through testing economic periods before, there were several lessons to be learned.
Highlighting the country’s high debt, diminished access to funding, Government’s cash flow difficulties and public sector arrears, which now requires major policy adjustments, Haynes said it was important for Barbados to “draw insights from this experience” since the current situation could very well present itself again in the future if not carefully addressed.
“The road to recovery is multi-faceted and cannot be achieved solely through fiscal policy, legislation or rules,” he said.
Addressing the business luncheon under the theme Barbados Economic Recovery: Adjustment, Adaptation and the Way Forward, Haynes said one of the important lessons was the need for Government to exercise fiscal discipline in order to foster confidence and protect the prized BDS$2 to US$1 currency peg.
He said it was also important to realize that central bank lending to Government was “not a substitute for fiscal prudence”.
“When the economic circumstances warrant, macro-economic adjustments were implemented and executed in a timely manner to reduce the severity of the fallout,” said Haynes, as he pointed to the experience of the 1991 economic crisis.
“Early action can reserve adequate fiscal and reserve buffers to enable the economy to absorb economic shocks. Delays in implementation on the other hand can facilitate a worsening of the situation and result in tougher corrective measures,” he warned.
Haynes said while Government had taken some tough measures and the country recently received a rating upgrade of its local currency debt by Standard & Poor’s which signaled that it was heading in the right direction, he said “more heavy lifting is still required”.
The Governor noted that achieving long-term growth sustainability would require the effective implementation of structural reforms including an overhaul of the tax system, an upgrade of public financial management, reform of state-owned enterprises and an adoption of fiscal rules.
The central banker said the recovery efforts also required the building of strong institutional capacity and support and coordination of all stakeholders.
“Investment is a critical factor in sustaining economic growth whether in the form of public sector capital expenditure or private foreign direct investment, or both. What matters is not just the total amount of investment, but the quality and the space between public and private,” he added.
Meanwhile, President of the BCCI Ezra Prescod said the current state of affairs required a change in mindset and improvements in several areas of Government operations.
The BCCI head also called for an improvement in the way business is done as well as greater access to information, which he said should be facilitated by the Barbados Statistical Service.
“Key points of concern are the bureaucracies involved in doing business here, the lack of a single payment window for Government activities, the relatively long time to set up companies, and the lack of ease in transacting business with the Customs and Excise department . . . If we are to survive we need to figure out quickly what do we do to mitigate the risk to ourselves,” he said.
“Barbados today, it is no surprise, is at a crossroads where our economic recovery is now mapped [with] the Barbados Economic Recovery and Transformation programme on the one hand, the people of Barbados and the stakeholders on the other,” said Prescod.
Pointing to the ongoing retrenchment of civil servants, adjustments in tax rates and other recent revenue raising measures, Prescod said the developments were affecting everyone.
“The key to all of this is no matter where you are in the value chain, that is, the Barbados economy, everyone is affected and the economic changes we are experiencing are all of our concern,” he said.
“We may not like the road to the future, some of us may prefer alternatives. However, for us all to get there we must agree on where it is we want to be, how fast we want to get there and work assiduously in our own way in getting there,” he said.