Barbados could be under an International Monetary Fund (IMF) programme for the next 15 years, former Prime Minister Professor Owen Arthur has warned.
Stating that the country was facing the “perfect economic and financial storm”, Arthur said the Barbados Economic Recovery and Transformation (BERT) programme was neither a quick fix nor a sure one for the economy.
Arthur said while the BERT programme was designed to cut government spending and raise revenue, it would reduce economic growth as a result of its dampening effect on economic activities.
“The programme itself does not contain an explicit defined set of measures to spur growth in the short or medium term,” he said.
He explained that given Government’s target of a primary surplus of six per cent, this would have to be sustained for the next 15 years in order to achieve the proposed reduction of the debt to gross domestic product from 157 per cent to 60 per cent by 2033.
“The core provisions of the programme will continue to be operative for the next 15 years and will be difficult to implement successfully. As such, the BERT will not be a quick fix or a sure fix. It will be a supreme test of the capacity of our people to accept the austerity the programme brings and the potential decline in the general standard of living of people that may ensue,” said Arthur.
He was addressing the SALISES Policy Forum at the University of the West Indies (UWI), Cave Hill Campus on Wednesday night, where he examined the topic Barbados and the Frist Phase of the IMF/BERT Plan: of Recovery and Precarity.
Stating that the BERT programme contained anti-growth provisions that should be “amended as soon as is possible”, Arthur said the debt restructuring and primary surplus policy provisions were not far-reaching enough.
In fact, he said given the sheer magnitude and diversity of the number of challenges that had to be confronted, “the major error of the programme by its explicit statement, is to restrict policy interventions largely to fiscal policies”.
He said there were other policies that should be employed that could “assist greatly” in restoring stability and viability to the economy without inflicting more tax burdens on residents.
Arthur said while the programme insists that there must be significant structural reform, those proposed were “somewhat vague”, similar to those in IMF programmes elsewhere and were limited to measures to improve the island’s public finances.
He suggested that the BERT programme should consist of measures to focus on improving the country’s credit ratings so that Barbados could have preferential access to the international market once again.
Arthur, who led the country as Prime Minister for 14 years, said, a clear “pro-growth” programme should be devised outside of the IMF framework to encourage economic growth.
He said given the scale of problems facing the country, the basis for that growth agenda should consist of restrictions on importation by invoking the protection clause under the relevant sections of the World Trade Organization (WTO) and the Revised Treaty of Chaguaramas, and a major reform of the renewable energy sector to complement the BERT programme.
He also said there was a need for new ways of delivering social programmes, improvement in the conditions for doing business in Barbados, a larger role for the private sector in some areas, and greater focus on technology, innovation and entrepreneurship.
Citing Singapore as an example, Arthur also proposed that policymakers consider pegging the Barbados currency to “a basket of currencies”.
“We have in Barbados worshiped the exchange rate and said all of our economic policies must be based on protecting the exchange rate, when our economic policies should be designed to protect and enhance the standard of living of the people and everything that can contribute to the improvement of that standard,” he said.
The Barbados currency is pegged BDS$2 to U$1.
“I gave one to Parliament: 30 per cent to the US, 30 per cent linked to the Pound, some linked to the Euro and that would allow us to have a stable exchange rate that will boost exports,” said Arthur.
The economist said the most disappointing aspect of the BERT programme for him so far was the retrenchment aspect were Government indicated that it would lay off staff and would provide training in order to rehire them to offer services.
“I cannot conceive of a process by which the clerk typist in the Barbados public sector can be made responsible for the archiving of Government’s records dating back to 1956 as a serious programme. That is a work for archivist and those who have the skills,” said Arthur.
In fact, he accused the Mia Mottley-led administration of witch-hunting in its retrenchment exercise, adding that government should rethink its plan to provide $30 million a year to retrain people.
“It will neither, in my view, lead to
cost savings nor efficiency,” said Arthur, who described the move as “a leap in the dark”.
“I am not seeing rationalization. I am seeing a lot of political witch-hunting and replacement of appointees by political appointees that will lead to the same situation we have,” he said.
Senior Lecturer in the Department of Management at the Cave Hill Campus Dr Akhentoolove Corbin suggested that performance measurements be put in place for public sector workers to ensure increased productivity.
Adding that wage increases should not be automatic and promotion should not be based on length of service, Corbin also called for a review of the last in first out policy “because it is not working”.