By the time this Editorial is published, most Barbadians will know what Prime Minister Mia Mottley has planned for the financing of this island’s affairs until March 2023, unless there are some dramatic changes in our economic fortunes in the interim.
We know that there is a near $400 million deficit hole to be filled and it appears we will continue to exist, primarily on borrowed money until we can have our economy operating at full capacity following two years of a pandemic induced recession.
Our economic bigwigs and our armchair counterparts have offered their opinions on what needs to be done, who needs a tax break and which areas of the economy require incentivising.
The Prime Minister carries a heavy burden on her shoulders as world events upended most plans to reboot the economy by cutting the debt servicing stranglehold that existed through restructuring the debt.
And now as life returns to some measure of normalcy, the Russian invasion of Ukraine threatens to derail the well-laid plans of government to meet the targets of the International Monetary Fund (IMF) programme which overshadows all our undertakings.
Finance expert and University of the West Indies and Dean of the Faculty of Social Sciences Professor Justin Robinson offered an interesting perspective prior to the release of the 2022 Budget.
Contextualizing the current environment, Professor Robinson said it was important to recognise that the Budget was being presented in the most challenging economic environment faced by an independent Barbados.
Having served on the Board of Directors of the Central Bank of Barbados for several years and over two different administrations, he is well placed to opine on the state of affairs.
“In addition to this most negative of global contexts, the Estimates of Revenue and Expenditure for 2022/2023 show a projected deficit of $386.8 million or 3.3 per cent of GDP and indicates that the Government does not have $250 million of the required financing confirmed yet. A deficit of 3.3 per cent of GDP appears to be greater than what would be consistent with the fiscal targets under the IMF programme and the target of 60 per cent Debt to GDP by 2033.
“I do not envy the Minister of Finance as she approaches this 2022 budget. The Minister of Finance faces a set of economic circumstances that are worse than those faced by any previous administration and the budget must be understood in this context. The Government is faced with the challenge of protecting the vulnerable, stimulating economic growth and closing the deficit in the context of a global economy about to relapse”.
With her overwhelming endorsement from Barbadians and her historic second clean sweep at the polls, the Prime Minister and Minister of Finance has the political capital required to make the kind of decisions required to manage the economy even during these particularly trying times.
Barbadians have not hidden their concerns about bread-and-butter issues. They are very vocal about the high cost of living. In plain words, things are hard in Barbados.
But there are matters that cannot be put off for later. They include pension reform, restructuring of state-owned enterprises, addressing the matter of energy imports and the shift to renewable energy, the funding of health care and education.
Mottley has taken comfort in the fact that she presides over a situation in which Barbados has more than $3 billion in foreign reserves. Admittedly, most of it is borrowed money that has to be repaid.
But it is a far cry from the situation a few years ago when the country had just three weeks of import cover and our ability to access financing came at a very high price.
At the same time, evidence exists that it will not be an easy road to recovery and stimulating growth. For investors, the climate is still in flux, and they may still decide to remain in a holding pattern until a greater level of certainty exists.
As Professor Robinson notes, “While stimulating growth is critical, the capacity of the Government to finance growth initiatives is clearly limited by the current and expected financial reality and the Government’s role is likely to be facilitatory.”
We are entering another period of great uncertainty, and despite the attempts at assuring the population, as politicians are expected to do, Barbadians are not oblivious to the global conditions. They are reading and following global affairs. They know that certainty and assurances are fleeting, especially when many decisions are completely out of our control.
