Barbadians have gone through the worst of the austerity period under the homegrown International Monetary Fund-backed economic restructuring programme, BERT, the Government’s chief economic adviser has declared.
Professor Avinash Persaud promised that this fiscal year, which ends next March 31, will have been the toughest under the IMF-funded Barbados Economic Recovery and Transformation programme.
He said that while the focus should be placed on technological developments, entrepreneurship and youth development, the most critical change required was to shift from being production-driven to a people-driven economy.
He suggested this transformation had to form a major part of Government’s growth strategy, fuelled by the private sector taking the lead through investing in opportunities.
Professor Persaud declared: “You are feeling pain this year. This is the toughest year in the programme.
“This year we go from an almost breaking even in Government’s accounts to a six per cent surplus.
“It is tough. It is very tough. However, it is only possible because its shared.”
Describing the BERT programme as “the most shared economic programme in the world in history”, the economist declared: “Never before in history have creditors shared as much as the borrowers, as tourists shared as much as the residents and as taxpayers paid as much as public sector employees.”
After suspending all debt payments immediately after coming to office at the end of May last year, the Mia Mottley-led Labour Party administration entered an IMF programme in October while implementing a range of austerity measures.
After a raft of steep public sector layoffs, Government has since embarked on digitising the public sector and retooling and retraining of ex-public workers.
Persaud, who was addressing one in a series of Musings at the Museum talks on Friday night at the Barbados Museum, told the audience that Government was forced into an austerity programme due mainly to its high debt, which stood at more than 150 per cent of gross domestic product, and left the country unable to borrow on the international market.
He said: “Our interest rates at the last point before we defaulted was around 16 per cent and they keep on lending to you until there is a sudden stop, everyone says look, there is no way we can continue, and everyone decides not lending to you at the same time and so straight away you have to adjust entirely.
“So that is why people go to the IMF, to avoid the sudden stop. To adjust over a long period of time rather than one day.
“Adjusting over one day we will have to let go every single person employed by Government. We would have no Government services.”
He explained that the “shared adjustment programme” had resulted in more money being spent on health care, education and pensions while maintaining social services.
He said a part of that was also due to Government cutting back on capital expenditure and leaving it up to the private sector to invest.
The economics advisor said: “So who is going to plug that hole of investment? Unless there is investment there is no growth.
“The private sector has to invest. We have to enable, facilitate, encourage, support the private sector in investment.”
But Professor Persaud added that Government was encouraging that investment “in a different way”.
He continued: “So we are moving away from a production-driven economy model to a people-driven economic model.
“We are investing not in sectors, not in buildings and plants, and not in particular initiatives.
“We are investing in people so that each individual can command higher incomes from the rest of the world and demand higher pay for what we do.
“That is the only way to sustainably grow.”
The acclaimed economist said while ensuring that the education system was tailored to supply skilled labour for the 21st-century workforce, Government was also in the process of making it easier to do business in the country to attract more investment.
But Persaud said a focus on entrepreneurship, technology use and youth development did not “excite” him too much, pointing out that “our population is not a young population and it is getting older”.
He told the museum audience: “The number of 20-year-olds today compared to 20 years ago is down by 30 per cent.
“So if you have a business model that depends on young people that is not a wise thing to do,” adding that while technology was “fantastic” Barbadians should start developing and owning the technology they use instead of becoming mere consumers.
On entrepreneurship, Persaud said while it was important to the economy, he believed there were a lot of them who “we do not let be entrepreneurs”.
He asserted: “We criminalize entrepreneurship in Barbados. We don’t make them sell stuff in particular places.
“We make it difficult for them to be a company – high VAT (Value Added Tax) registration, high corporation setting up – so do we need more entrepreneurs or do we need to allow entrepreneurs to be entrepreneurs?”
He said apart from a number of initiatives to train people, a part of the new growth strategy was to also encourage peer-to-peer lending, crowdfunding and bond investment.
Professor Persaud said: “Our problem is how we mobilise the savings we have for investments.
“All we know is what is going to be important 50 years’ time is you, is people and we need to invest in people.
“Invest in skills, invest in opportunities, invest in your ability to own.
“Enfranchisement is at the core of our development strategy.”