An International Monetary Fund (IMF) programme will not be the solution to the ailing Barbados economy, one senior University of the West Indies (UWI), Mona Campus lecturer has warned.
In addition, Pro Vice-Chancellor of Academic Industry Partnerships and Planning Professor Densil Williams is of the view that consumer spending and private sector investment will not be major drivers of economic growth given the current austerity measures.
He shared the assessment on Tuesday during a special consultation between the UWI and private and public sector players on entrepreneurship and industry partnership at the 3Ws Pavilion.
Williams said the strengthening of linkages between the university and the private and public sectors to drive innovation and economic growth was now urgent as the country goes through “a strong austerity programme”, adding that the anemic growth rate suggested that something significant had to happen.
“Most importantly, the question you need to have at the forefront of your mind is despite the austerity programme, how can you reverse the contraction of GDP [gross domestic product] and actually grow the economy in a sustainable way in the long run,” said Williams.
“Let us be clear, an IMF programme is not going to be the solution. The solution really lies in how the Barbadian economy, and for that matter, the wider Caribbean economy, will stimulate aggregate demand in the country,” he added.
The trained economist reasoned that the major drivers of economic activity including consumption, Government spending and private investment, were simply not enough at the moment to produce the growth needed, especially given the tough measures.
“They are not going to be the greatest forces that are going to drive that sort of stimulation in the economy because consumers are feeling the pinch from the austerity programme. Investors clearly will have to recalibrate their portfolio given the contraction in the economy, and logically, with a primary surplus [target] of six per cent Government just does not have the funding to spend,” he explained.
Barbados is currently engaged in a four-year austerity programme, the Barbados Economic Recovery and Transformation (BERT) programme, which is backed by an IMF US$290 million stand-by loan arrangement.
The major planks of the BERT plan are the introduction of revenue raising measures, retrenchment and enfranchisement of approximately 1,500 Government workers, retooling and retraining of civil servants, the merger of some Government departments and agencies and modernization of all Government processes.
Barbados received its first passing grade from the IMF for the first six months of the BERT programme, which was implementated in June last year through a number of revenue raising measures, immediately after the Barbados Labour Party (BLP) took up office.
Williams said the “real stimulation” in the Barbados economy, however, would have to now come from improvement in the competitiveness of enterprises that operate locally.
“The only other lever that the Barbadian economy has to pull at this moment to stimulate aggregate demand despite austerity is to improve the international competitiveness of the firms so that you can trade internationally and improve your net trade with the rest of the world. So international business becomes a key pillar for the growth and development of the Barbadian economy and most of the other Caribbean economies,” said Williams.
He stressed that in order to obtain the international competitiveness that is needed, Barbados must first improve its human capital.
“That is the most critical asset that you have that can drive the transformation at the enterprise level,” he said, as he welcomed the entrepreneurship and industry partnership consultation.
The one-day session saw officials of the UWI, Cave Hill Campus outlining a number of initiatives that the institution was currently undertaking in an effort to drive innovation and entrepreneurship in Barbados.
Officials also had the opportunity to identify gaps between the learning institution and the workforce and come up with possible solutions and identify new areas of training needed in order to satisfy private sector demands.