‘Radical, practical economic change needed’

A former central banker has put forward five suggestions, including a retirement of the Barbados dollar and a comprehensive makeover of the public sector, which he says are crucial to the recovery of the ailing Barbados economy.

Pointing out that the deadly COVID-19 pandemic has disrupted economic activities, economist Dr DeLisle Worrell said a return to health called for a “radical and practical” change in economic strategy.

Worrell said the first and most urgent task was restarting the tourism industry in collaboration with local, regional and international stakeholders.

“The systems and guidelines needed must be developed, agreed and implemented by a worldwide coalition of governments, international agencies, international hotels, airlines, travel companies and all other tourism players. The most effective way for Barbados to engage in this global effort might be via the agency of the Caribbean Tourism Organisation (CTO) and the Caribbean Hotel and Tourism Association (CHTA). These discussions should be conducted at the highest level by all parties, including the Prime Ministers of Caribbean tourist destinations,” suggested Worrell.

“The importance of the earliest possible revival of tourism cannot be overestimated. The Barbadian economy is fuelled by foreign exchange, and tourism provides two-thirds of our foreign exchange. Nothing can make up for that loss in the near term,” he said.

Worrell said a complete makeover of the public services remained the “key to sustainable future growth”.

He said the pandemic has highlighted the need for a public service that is led by executives of proven ability and manned by highly-skilled staff.

“A change of the scope and magnitude required is beyond the capacity of our Government and the agencies providing finance and advice to the Government. The skills of a world-leading firm of management consultants is required,” suggested Worrell.

He said: “A 21st century public sector is needed in order to reverse the decline in Barbados’ competitiveness. The things that have attracted investment to Barbados in the past are the good quality of roads and infrastructure, efficient up-to-date public utilities, good health and educational facilities, a highly-skilled and trainable labour force, and macroeconomic stability. The country’s performance in every one of those areas has been compromised because of the continuing decline in public sector performance, over decades.”

Worrell said it was also time to say “a fond farewell” to the Barbados dollar.

“Our dollar, like the other currencies of the Caribbean, is on its way to extinction. The currency is of value only within our 166 square miles, and of limited value even at home, because most of what we buy and sell comes from abroad anyway,” he said.

He pointed out that a changeover to the US dollar would need to be carefully planned, fully advertised and explained and skillfully implemented by the Central Bank.

“It would be advisable to begin the makeover of the public sector with the Central Bank, and task the renewed Central Bank with this as its first assignment,” said Worrell.

The former central banker said: “With most transactions now done by cheque, credit or debit card and online and with a good supply of US dollars from visitors, it makes sense for the Central Bank to redeem all the outstanding Barbados dollar notes and coins, and to abolish the Barbados dollar once and for all.”

He added: “This would immediately relieve all Barbadians of fears that their savings will be worthless when they come to retire, and assure foreign investors of the value of their investment and the expected returns from that investment.”

According to Dr Worrell while the Central Bank would still be able to provide an overdraft to Government using the reserves which commercial banks are obliged to hold with the monetary authority, it would not be able to “create new money to lend to Government”.

Worrell also reiterated his call for Government to produce a document with a practical strategy, action plan, deadlines, monitoring and reporting, for replacing fossil fuels with renewables.

Stating that Barbados was squandering an opportunity to gain energy independence by its failure to devise and put in place an actionable 15-year strategy for renewable energy, Worrell said to ensure the success of the sector, the strategy should be co-ordinated by a high-level committee led by the Prime Minister.

“The strategy would have five three-year benchmark progress evaluations, involving all stakeholders, to make course corrections when and where necessary, to ensure the 15-year goal is achieved,” he said, though pointing out that the island’s 100 per cent renewable target could go well beyond 2035.

Another suggestion put forward by the former Central Bank head to grow the ailing economy is to attract investment for major infrastructure projects.

Worrell argued that Government was now entirely dependent on lending agencies and “friendly foreign Government agencies” to fund its capital works and purchases of capital goods, given the “severe blow” to the confidence of foreign investors in Government paper since the declaration of a debt restructuring in June 2018.

“The heavy restructuring losses suffered by banks, insurance companies, credit unions, companies and individual bondholders have evaporated the appetite for Government debt,” he added.

“In these circumstances the sensible alternative for upgrading the port and the airport is to secure long-term lease agreements with carefully-selected major global players, who might have an interest in developing the capacity of the port and airport to a high international standard as part of their global network. Such companies would bring their own sources of funding, as well as a large increase in traffic,” said Worrell.
marlonmadden@barbadostoday.bb