#BTColumn – Economic strategy rooted in borrowing

The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

by Dr Ronnie Yearwood

The current state of the economy appears to be similar to the state of the economy at the last general election. The concerns look just as, if not more, pressing. Professor Justin Robinson, financial and economic expert, noted last week that the Central Bank projections did not paint the full picture of the deep economic crisis Barbados is in, as Barbados was facing a $1 billion deficit.

Therefore, before I get on to other issues in my upcoming columns, I think we need to understand the deep hole we are in, otherwise solutions or reforms will fail to hit the mark.

In this column, I do a high-level comparative analysis of the Prime Minister’s general approach to debt, budgets and borrowing as the then Leader of the Opposition, which she reinforced in her first Budget as Prime Minister in June 2018 and the current strategy on debt, budgets and borrowing.

The Prime Minister said, “This mandate, Mr. Speaker, was to stop the haemorrhaging and decay, and return our beloved nation to a status of pride and enjoyment by residents.”

She stated that “…we have just emerged from a gruelling campaign in which all manner of things was said and from which the people of Barbados could be forgiven, were they to assume that a change of government, passage of time and a few cosmetic changes would together be the panacea to our nation’s problems.”

The Prime Minister stressed that, “I gave my word that a Barbados Labour Party Government under my leadership would respond courageously to the social and economic crises now facing the country, and that we would make the tough choices between what is essential, what is highly desirable and what is optional.

And I said, Sir, that at all relevant stages of the process we would keep the Parliament and the people of Barbados fully informed.” Finally, the Prime Minister emphasised that, “Unsustainable debt traps you into an eternal descent, with no room to move, unable to grasp any opportunities to go forward or to modernise our nation.”

I found her comments in 2018 ironic to say the least, as this is the same Prime Minister now running up debt to the tune of $1 billion, no budget delivered as yet, a high debt to GDP ratio and increased international borrowing if you have a look at the Central Bank or other reports.

Barbados is accustomed to recessions where the threat of devaluation and public sector layoffs are an ever and present danger. However, because of international borrowing, those problems do not appear eminent.

Therefore, people may not have a sense of the deep hole we are in, when the economy grew by 2.8 per cent in 2018 but by 2020, there was a decline of 17.9 per cent in GDP, with only a projected recovery of 3 per cent in 2021.

The recovery does not look like enough to catch up with the decline. Just because government can pay government salaries does not mean everything is fine. It We have an almost invisible economic crisis which has affected hotel workers, hairdressers, fishermen, small shops, single traders and others who earn below the income tax threshold.

The middle class, self-employed, and small to medium sized business continue to bear the brunt of this deep recession and weak recovery.

It seems as if there is no plan by the Government that does not involve more borrowing, even if at low interest rates, or asking for grant money.

To make matters worse, the Prime Minister does not seem to understand the basics of banking, and loan and financial risk as carefully and clearly explained in another section of the regional press. It is almost as if the Prime Minister did not learn anything from the 2008 global crisis.

This BLP government, interestingly, has transformed before our eyes to the party of borrow and spend as the economic competence of the Arthur years is frittered away, looking like a very distant memory.

Borrowed money is delayed taxation, unless the productive sectors can really kick in to make up the payments. If elected for a second term, the government will become the party of tax increases in order to keep spending. We are already living through a rise in costs of living, an effective devaluation of the dollar and a general lack of money in many households in Barbados.

Politicians feel that they can say one thing in opposition and then say something different or do something completely different once they get elected. We have enabled rather than punished this behaviour.

We usually give a Government or a member of parliament two terms regardless of what they do or not, as the case may be. However, voters elsewhere are now holding governments and elected representatives to account much quicker in the election cycle with the US, St. Lucia and the Bahamas as recent examples.

Dr Ronnie Yearwood is a lecturer, lawyer and social commentator (Email: yearwood.r.r.f@gmail.com)