Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.
by George Connolly
The COVID-19 pandemic has precipitated an economic fallout that can only be managed with borrowing, or for large economies quantitative easing. Social services and increases in spending on vaccines, tests, health care facilities and health talent is an absolute priority.
There is no option around having the extraordinary expenditure that comes with this new dynamic.
With suspended trade and travel – national economies will contract. It’s not a matter of if, but by what percentage. There is nothing normal about what is happening and the only action a government can take is to borrow and spend to support social programs to mitigate the impact on its citizens.
To criticise the actions of the Economic team and the current borrowing either reflects an ignorance of the realities of the situation or is mere political opportunism.
No one can put forward a reasonable alternative with the circumstances as they are; a contracting national GDP, reduced tax income (esp while adjusting to global tax rates with the OECD led movement) and the ongoing health pandemic. .
The real discussion is not about how we navigate the current period but how we avoid the kind of national fiscal management that would have allowed for the reserves to fall to $440 million in April of 2018.
The concern is that political leaders will mismanage things and bring the country to the brink of default, once again. Thus, I advocate that Barbados should enact a Fiscal Rules Law that puts sensible limits on the action that can be taken by any administration to avoid having the national economy totter once again on the verge of collapse.
Reopening restaurants and hotels is one thing. Fixing extraordinary backups in shipping networks and shortages of everything, among the most vivid examples of supply shortages holding back many parts of the economy, is harder. And a range of risks, including the hard-to-predict dynamics of COVID variants, could throw this transition to a healthy post-pandemic economy off course.
The IMF is helping Barbados and 86 other countries with $167.9B USD to address the economic effects of COVID with emergency financing, catastrophe containment, capacity development, and augment existing programs.
The role of the administration is to manage this situation well. This is par for the course when running a national economy.
This is not a crisis given the aforementioned dynamics.