The 2023 Budget proposals outlined by the prime minister on Monday contain an impressive array of initiatives aimed at unlocking higher economic growth, facilitating investment, and transitioning Barbados into a digitally advanced and sustainable economy. From regulatory reforms to renewable energy integration, and economic diversification to business facilitation—the scope and ambition are worthy of praise.
But, as Barbadians—consumers and producers—evaluate these policies, we must be wary of two potential pitfalls: the Nirvana Fallacy of judging proposals against an idealised, impractical benchmark; as well as valid concerns around these policies’ affordability and implementation risks.
The Nirvana Fallacy manifests when critics dismiss good policies because they fall short of some conceived idea of perfection or utopia. Many positive elements deserve to be acknowledged: ongoing debt restructuring, a focus on growth, digitalisation thrust, and renewable energy transition being notable examples that also align with our nation’s sustainable development needs.
That said, the prime minister’s proposals are not exempt from scrutiny. Legitimate questions arise around costs and funding sources for a spending bill of $2 091 251 364 for the next fiscal year. We are concerned that new tax incentives and spending, such as refundable public-private sector partnership credits, could strain public finances without commensurate revenue-raising measures outlined. Despite highlighting debt reduction, the proposals involve several new tax incentives, credits and expenditures–50 per cent PPP credits, 100 per cent digitalisation credits, and financing renewable energy storage—which could strain public finances.
And once again, cometh another Budget cometh the risk of overambition. Growth targets of four to five per cent in our permanently open, fragile economy are optimistic. This rosy forecast belies our dependence on tourism and big-ticket items like the Cricket World Cup to lay the proverbial golden egg. In the longer term, the goals for developing renewable energy still require a clear roadmap—particularly as the 2030 ‘year of green energy’ looms. The government’s proposed timelines appear to be overambitious given the requirements of integrating large-scale storage infrastructure, regulatory reforms, procurement processes and investment flows needed to facilitate this energy transition. And, as always, global headwinds and uncertainties could derail such lofty goals. What, then, is our Plan B?
But above all, an agenda this wide-ranging brings implementation challenges—and the risk of implementation deficits. From regulatory reforms across sectors to digitising government processes and supporting economic diversification, the administration is more than aware of the strained capacity of central government; after all, the introduction of multiple consultants suggests a skill and expertise deficit, as the administration keeps pointing out. These reforms may not deliver the anticipated results if not prioritised and introduced in an optimal sequence.
Barbadian economic transformation is an incremental process requiring pragmatic steps, not radical disruption. The government must strive to balance the scale and pace of reforms with fiscal sustainability and our capacity to absorb these sea changes.
The growth strategies’ heavy reliance on private investments and lending could disappoint while economic confidence remains tepid—sweeping regulatory changes, while well-intentioned, risk creating uncertainties that could deter the very investments being courted.
Here is a paragraph from a Barbadian newspaper editorial praising the government’s plans to smooth the mortgage process, while also seeking more details: We welcome the government’s announcement of measures to ease the notoriously slow and cumbersome process of obtaining a mortgage in Barbados. As a people deeply invested in home ownership, delays in excess of four to six months are unacceptable drags on our economic development and personal dreams of securing a piece of the rock. It took the government’s own frustrations as it sought to get the HOPE housing project off the ground; nonetheless, the government is now fully aware that too many prospective homeowners have had real estate transactions needlessly held up by rigid banking requirements, inefficient systems across agencies, and antiquated land tenure processes.
However, the lack of specific details leaves some questions unanswered. While amending the Crown Lands Act to provide indefeasible titles for state land transfers is a start, more clarity is needed on how the government intends to encourage our private commercial banks to modernise their mortgage lending practices and develop new products to facilitate affordable home ownership. With over $2 billion in investments already stalled, mere exhortations may prove insufficient in inspiring the financial industry’s cooperation.
The devil is in the details. We eagerly await a deeper and more thorough explanation of the policies and incentive structures to unclog this mortgage bottleneck. We contend that the rot began with the government getting out of the mortgage market with the sale of the Barbados Mortgage Finance Company. Perhaps it is time for a mortgage finance guarantee corporation to help put more Barbadians into more homes at a faster pace.
Barbadians ought to thoughtfully, maturely and soberly analyse and discuss the Budget proposals—neither dismissing them outright as imperfect nor blindly endorsing an agenda that could overextend our capabilities and resources. Nuanced policies that learn from global best practices while adapting to our unique realities would serve us better.
We suggest the administration should return to Parliament in the third quarter of the year with a progress report and propose tweaks to this ambitious agenda. On business facilitation, for example, the government is to create Business Barbados Inc. to grease the wheels of commerce; we need to know whether this and other projects on the administration’s laundry list have begun to work.
Economic transformation is a journey, not a destination. A measured approach implementing demonstrated solutions, while allowing room to course-correct, may yield more sustainable progress than attempting an overambitious overhaul. Yet, we are satisfied that the Prime Minister of Barbados—a woman in a hurry—appears willing to change tack when required. Nirvana? No. But we cannot dismiss the steps that are being taken to create a mission economy.
Striking balance is crucial as we build capacity, harness opportunities, manage weaknesses, and combat threats to secure broad-based prosperity for all Barbadians, current and yet unborn. Reasoned policies, together with our famed pragmatism, will steer us towards that cherished goal.
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