Political leaders almost always underestimate what Peter Hennessy calls the ‘trial’ of their inheritance. Mia Mottley, overjoyed by the extent of the BLP’s May 24, 2018 victory, might also have been a bit overawed by the quantum of the challenges Barbados faced.
To understand our present predicament and the imperative of austerity, we must first appreciate the ‘trial’ of the BLP’s inheritance. Much of it was a consequence of a decade of misrule by a leadership observably lacking in command and a finance minister profoundly out of his depth.
Instead of tackling the problems of debt and deficits head-on, the resort was to posturing for political survival. The preferred choice was to kick the proverbial can down the road with so-called home-grown recovery plan after recovery plan, right up to the eve of the 2018 elections.
The result was downgrade after downgrade. By then, the debt to GDP ratio stood at above 140 per cent. It is advisable that the debt to GDP ratio should not go above 60 per cent. On May 24, 2018, the DLP pantomime ended, revealing a tragedy of Greek proportions. Having said that, let me note, in the interest of objectivity, that indebtedness did not start in 2008. Barbados was incurring tremendous debt in the 14 years of BLP rule, mitigated in part by the selling off of national assets and borrowing to ‘prop up’ the reserves. The global financial crisis after 2007-2008 aggravated a problem which the DLP delayed and blundered in facing.
Ms Mottley inherited care of a patient on the brink of an acute myocardial infarction from a group of doctors who had been, over the last ten years, prescribing Nexium as a remedy for what they had diagnosed as chronic heartburn. Having correctly diagnosed the problem, Miss Mottley has come up with a severe remedy. This, needless to say, has not gone down well with some who have had to undergo surgical invasion and swallow the admittedly bad-tasting medicine.
The political operatives in the opposition know full well that there was no more road along which the can could be kicked. The road had come to a precipice. There are a few in the ‘commentariat’ who believe that it was not necessary to go to the IMF in the first place. One resort they claim, was to a Chinese loan supposedly with no conditionalities attached. We must be wary of the Chinese imperialist outreach.
Dr Don Marshall has consistently opposed the IMF agreement. His contention has been that it robs Barbados of what he terms ‘policy space,’ or ‘the broad conceptual and investment capacity and opportunity.’ As Gladstone Holder would say, ‘these are fine words, but what precisely do they mean?’ His consistency may be admirable. However, he never states exactly what the ‘policy space’ would have been used to do. One suspects that like most cloistered academics, beyond the theoretical postulates, he does not have the answer.
Most critics, however, reflect on the present austerity that has resulted from the IMF agreement. These include the number of civil service employees already sent home, the increase in bus fares and the increased incidence of garbage and sewerage taxation. What else was there to do? Do we keep running up debt and deficits, just keep printing money to guarantee a recognisably bloated and questionably productive civil establishment?
Ms Mottley has proven more than up to the task. There are areas on which she can be critiqued, including the size of the Cabinet and the incidence of the bus fare increase on the working class. Hopefully, more buses will be soon pressed into service and the private transport system regularised. One could also be critical of the number of expensive consultants. People will be waiting to see if they are worth their salt.
Notwithstanding the inevitable hiccups in the roll-out of the BERT initiative, Ms Mottley has brought an energy not recently seen in the leadership and a determination to face the task of restoring what columnist Ezra Alleyne calls ‘fiscal pragmatism.’ With reserves depressingly low and its foreign credit rating ruined, Barbados has taken the unprecedented step of defaulting on its debt. It has entered a four-year agreement with the International Monetary Fund under an Extended Fund Facility (EFF). The recourse to the fund was an action advocated by many local and international economists for some time. We cannot have growth before we have stabilisation, which always involves some degree of austerity. But Barbadians seem to have come to believe that they are promised a rose garden of perpetual ease.
Barbados is a long way from recovery. Some indicators reflect favourably on the Mottley administration. The first positive indication came from the IMF mission leader Dr Bert Van Selm in early February. He noted that Barbados “continues to make progress in implementing its ambitious and comprehensive economic reform programme.” It is a gross overstatement to suggest that ‘nothing of substance is happening.’
The south coast sewerage problem is not solved, but appears to have been brought under some measure of control. Barbados has a long way to go in dealing with its sewerage and sanitation issues. If reports are to be believed, the backlog of claims at the NIS is being cleared with some 11, 027 or 41 per cent of outstanding claims being settled in the last three months. A Sanka Price report notes that some BBD $12.7 million was paid to 453 claimants since July 2018.
There are, of course, serious outstanding concerns; one such is that the country’s external debt remains unresolved. Speaking at a recent Domestic Financial Institutions Conference, Acting Deputy Central Bank Governor Michelle Doyle-Lowe admitted that it was unclear when Barbados would conclude restructuring negotiations with its foreign commercial creditors who have not been paid since June 2018. This, she confessed, had the effect of ‘creating unnecessary and additional uncertainty.’
Another problem is the IMF stipulation that the Government move from a primary surplus of three per cent to one of six per cent or, according to some, a surplus of about $700 million. That level of fiscal tightening will unquestionably hurt. These cuts will hurt both individually and collectively, particularly as they relate to proposed reduced spending on education, health, housing, community amenities, environmental protection and public order and safety. No amount of spin is going to change a reality that has to be confronted. As economist Marla Dukharan once stated, austerity is a reality which Barbados cannot escape.
Ralph Jemmott is a respected retired educator.