There are ominous signs that key measures in the International Monetary Fund-approved economic restructuring programme are behind schedule, likely jeopardising any gains the Government has made so far, a leading economist has warned.
Jeremy Stephen has argued that Government’s failure thus far to fix its foreign debt problems and fully implement its strategy for sustained fiscal breathing room could spell trouble for the country.
And the clock is ticking to a deadline to find the money to pay huge debt bills in two years time.
Stephen said the Mottley administration’s apparent reluctance to make deeper cuts in public sector jobs made it necessary to ensure that the other revenue-saving measures are fully online sooner rather than later.
“Government has at best two years to really get things moving, to create that digital government, so that they could cut cost. It is clear that they don’t want to send home as many people as they really should. They are looking at other ways and means to cut cost.
“However, if they are not able to create that fiscal space and that same digitization programme, which should have been implemented last year stretches into 2020, then we are going to have a serious problem,” He told Barbados TODAY.
The University of the West Indies lecturer argued that in addition to the austerity measures, Government needed to put the pedal to the metal on a short-term growth plan.
The growth is needed to bolster foreign exchange reserves, which stand at just over a billion dollars after being propped up by a near $600 million drawdown from the IMF, but are in danger of running out, he added.
Stephen explained: “Government has two very big debts to fulfil. In 2021, there is near $500 million that Government needs to find to close out some debt and then the following year they need to find an additional amount.
“So, all of the reserves that we have now, which is over a billion, Government needs to find a way to grow exports in the near term so that we could have enough reserves left behind to pay off those debts comfortably in about two years.
“The onus is on Government to act quickly because it is not something that you can play around with.”
Another area of concern to the economist was the Government’s handling of its sovereign debt to international creditors.
He told Barbados TODAY that with almost a year having elapsed since Barbados defaulted on its foreign debt and a settlement yet to be announced, Government was essentially on borrowed time. He contended that anything less than a quick amicable debt restructuring could prove problematic for the country’s ability to borrow as well as investor confidence.
“If the global private sector sees that while we have good tax rates, but Government is taking a bit longer to properly restructure the debt of foreign investors, then they are not going to want to invest in the Government debt. This will also impact on those who want to invest in private interest in Barbados because they look at things like sovereign risk.
“If they [Government] don’t get that done and settle with these foreign investors in the near term then that has far-reaching consequences. You need to remember what happened to Argentina in the early 2000s, where those investors took that country to court and to this day Argentina has trouble borrowing.”
However, the economist did have high praise for other aspects of Government’s roll out of BERT, noting that Government has “been pretty good in keeping up with what the IMF expects.”
“They have been a little slow with certain things such as the retrenchment process but that is possibly politically motivated, as sending home too many people too quickly is never a good look from a public perception. So, Government has done other things such as local debt refinancing which has helpful for the Government. It is left to be seen still if they will get the desired result at the end of the day,” he stressed.