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by Anthony Wood
Prime Minister Mia Mottley in one of her accustomed televised news conferences held on Friday, Septenber 9, 2022, predictably informed Barbadians that her administration will be entering a second programme with the International Monetary Fund (IMF) when the current Extended Fund Facility programme expires on September 30th. This new programme will enable Barbados to access a further US$340 million in loans from the IMF.
In providing justification for the new IMF programme, Prime Minister Mottley noted that: “We are living, as we all know, in very difficult and uncertain times, and in a world, where in excess of 40 countries are on the brink of debt difficulties and debt crises.” Indeed, we thank the Prime Minister for her implicit admission that Barbados ranks among those countries struggling with debt as was stated publicly in articles written by Professor Michael Howard and myself in June and July of this year.
In a Barbados Today published article entitled “stylised facts on dealing with debt”, I made the point that attempts by the Prime Minister and Government Senior Economic Adviser, Dr. Kevin Greenidge, to convince Barbadians that the country can comfortably repay 928 million dollars in IMF debt by 2029 was just preparation for the citizens to accept the news of the Mottley administration taking the country into a new programne with the IMF.
During the televised news conference the Prime Minister also stated that “we have been of the view that the cheapest money in town is still at the IMF. In addition to that, it also unlocks other development funds that may be available to us as a nation”. This statement cannot be refuted but it reinforces another point made by Professor Howard and myself that the continued failure of the Mottley administration to boost economic activity in the productive sectors and the economy generally, will have the administration relying heavily on BORROWED money to keep the economy afloat and service our external debts. The “tax and borrow, and spend indiscriminately” policy which characterizes the economic strategy of the administration is unsustainable and is a strategy for further social and economic disaster in the country.
During the televised press conference important information was not told to Barbadians. The unhealthy state of economy and a preview of the harsh measures coming in the new IMF programme were not revealed. However, what is certain is that the big-ticket items which were not addressed during the four-year Barbados Economic Recovery and Transformation (BERT) programme must be undertaken. These include the overhaul of the State-owned enterprises (SOEs) and reform of the public sector pension scheme. The more stringent dictates of the IMF in the new programme should mandate cuts in unnecessary spending within central government and increased fees for the provision of some government services. The reform measures to restore medium to long-term viability of the National Insurance Scheme must also be implemented with some alacrity.
The reality of the situation is that the new IMF programme is unavoidable and results in large measure from the failure of the economic and financial management of the economy by the Barbados Labour Party administration. While exogenous shocks like the coronavirus pandemic, price increases in strategic commodities and in more recent times the war in Ukraine, have had an adverse impact on the Barbadian economy, persistent inappropriate economic and financial policies have exacerbated the problem. The time for procrastination, expensive public relations and wastage by the Mottley administration is over and Barbadians must brace themselves for a heavy dose of austerity.
Anthony Wood is a senior economist, former lecturer in Economics, Banking and Finance at the University of the West Indies, Cave Hill Campus. He is also a former Barbados Labour Party Cabinet minister.
