With the continued decline in government revenue and public debt continuing to soar, a private sector economist on Tuesday added his voice to growing calls for the Mia Mottley administration to avoid any further coronavirus lockdowns.
Kemar Stuart, Director of Business Development, Finance and Investment at Stuart & Perkins Caribbean, made the suggestion in the wake of the latest Central Bank of Barbados economic review, in which Governor Cleviston Haynes also warned that the already fragile economy was unable to withstand such a disruption as another national lockdown.
In his first-quarter review, Haynes said the economy declined some 19.8 per cent, the international reserves decreased by $86 million, government revenue fell and spending climbed.
While predicting that the economy could experience growth of between one and three per cent this year, Haynes said a lot will depend on recovery in international air travel, a resurgence in tourism and a robust COVID-19 vaccination process in key source markets.
Stuart, charging that the economy had been in recession even before the COVID-19 pandemic based on consecutive quarters of economic decline, said he agreed that a rebound in economic growth was dependent on tourism activity.
But he expressed concern about the government’s continued reliance on borrowing from multilateral institutions for budget support, though pointing out that “the positive highlight of these loans [is] that they are being used as domestic financing and channelled directly into the economy”.
Stuart said: “The main concern is an absence of earned revenue in an environment where expenses continue to be at unsustainable levels and as noted by the governor, more support from international financial banks will be needed this year to maintain the high level of expenses.
“The second concern is the continued elevation of foreign debt when the decimation of our main foreign earner has no end in sight; rising oil prices; weak export earnings, and an inability to create new ways to earn foreign exchange.
“It is inevitable that a perpetual borrowing relationship with the international financial institutions will engulf Barbados where it has to be constantly borrowing to repay international debt once these factors start to take their toll.”
The economist also pointed out that Government will have a “large” loan payment due in October.
At the end of March, gross public sector debt stood at 152 per cent of gross domestic product (GDP), compared to 117 per cent of GDP a year ago.
While the government’s thrust into the digital economy would provide some savings it will simply not be enough “to impact the major cuts that are needed to bring balance back to the economy”, said Stuart.
He warned that a reduction in wages and salaries, grants to state-owned enterprises and the delivery of some goods and services should be expected as reforms under the Barbados Economic Recovery and Transformation (BERT) programme continued.
Stuart added: “With public servant pension reform due in June 2021 and the reform of the National Insurance Scheme also due, further dislocations will occur.
“It is incumbent that the government moves ahead with planned capital works projects, eases most restrictions as vaccination numbers are high enough to do so, avoid future lockdowns at all cost and use the jobs and investment council to provide the structure and details of the much needed 20,000 jobs the Prime Minister intended to create to drive economic activity.”
Business executive Daniel DeSouza said he believed it will take the private sector to bring the Barbados economy back from the brink.
DeSouza, the owner of the online Caribbean freelance marketplace, www.freelanceforall.net, said the troubling economic indicators, coupled with higher unemployment claims and the continued effects of the COVID-19 pandemic called for a workable solution.
He said: “If a solution can be found, it will be found by members of the private sector, entrepreneurs, and technology innovators across the Caribbean, not from Government”.
DeSouza said the role of governments should be “in the form of support, funding and providing exposure”.
The technology entrepreneur, who said he was also negatively affected by the pandemic, launched his online platform over a year ago declaring he saw a need as thousands of skilled individuals were losing their jobs due to the slowdown the pandemic triggered.
He said he believed companies such as his that link jobseekers with potential employers could help to lower the unemployment rate, leading to more economic activity. He said he expects “great success” as workers start to attract gigs from regional and international firms.