The Governor of the Central Bank of Barbados, Dr DeLisle Worrell, confirmed my suspicion last week that the Medium Term Fiscal Strategy (MTFS) was in effect dead in the water.
Not worth the paper it was printed on.
At least, that’s my interpretation of a brief news item (oh, it was the top story but woefully brief) on our lone TV news channel last Wednesday night.
The guy was shown letting us know that if we can’t meet the targets required by the MTFS then we could simply change the criteria – downwards.
I was trying to watch the Press conference from which the clip was taken but was unable to download it (Mac vs. PC issue, sorry). So I am prepared to stand corrected, but I thought I heard him say he could “live” with 18 weeks of imports instead of 20. And if we can’t make the GDP deficit of 5.8 per cent or whatever, we can revise that too. Upward, of course.
You see, it works like this: if you can’t meet the criteria, then change them. Downward. Upward. Wherever your comfort zone needs to be.
Meantime, as Barbados’ debt continues its inexorable slide to junk-bond status, we are being told that we are not doing as badly as other countries.
There’s Greece, recipient of another bailout after accepting a really tough austerity package. There’s Ireland, whose debt was just last week downgraded to junk. There’s Spain, on the edge.
So the policy of the current administration, encouraged by the Central Bank, seems to be this: as long as we can find another country doing worse than us, then we are okay.
There’s always Nauru (Google it). Even after Greece, Ireland and Spain eventually (hopefully) recover, we can always find somebody else worse off.
I am heartily sick of, first, the mess this Government has driven us into by its policy of spending despite the sharp fall in its revenue, and second, the never-ending glossing over of our problems by the spin doctors in Bay Street and Church Village.
If, like me, you are not a trained economist or a trained public relations consultant, the disconnect between what the figures seem to show and how they are interpreted is, shall we say, a cause for discomfort. I am trying hard to be diplomatic.
And nowhere is this more plain than to hear the Central Bank Governor talk about revising the criteria for a medium-term fiscal policy which is already so out of whack with reality that it requires a sense of humour to find relevance in it.
The first MTFS report card came in at the end of March this year, but it was so bad the powers-that-be said nothing about it. If it had been the other way, you would have heard it being trumpeted from the rooftops. Here’s my summary of that outturn:
For fiscal 2010/11, which ended March 31, Expenditure (excluding principal repayments) was $3.06 billion, according to the Central Bank. Based on the bank’s figure for GDP of $8.21 billion, that gives us an Expenditure as a percentage of GDP of 37.3 per cent. – CBB, Page 5
However, the Medium Term Fiscal Strategy prediction for that ratio, based on a much lower GDP guesstimate of $6.89 billion, was 41.7 per cent. – MTFS document, Page 22
But the actual percentage, if we used the MTFS’ GDP number, would be higher, at 44.4 per cent.
Obvious note to readers: the MTFS wants to see expenditure ratios fall, not rise.
In terms of Revenue, Government brought in $2.35 billion for fiscal year 2010/11. Based on the new GDP, we get a Revenue as a percentage of GDP of 28.5 per cent. – CBB review, Page 5
The MTFS was looking for 36.5 per cent, based on its old GDP guess, but on that basis it would have gotten 34.1 per cent.
Note: the MTFS wants to see revenue ratios rise, not fall.
For the current fiscal year, the expenditure ratio is expected to be 35.2 per cent, using figures from the estimates, mainly because GDP is projected to be even higher, at $8.56 billion (thank you, oil prices). Using the MTFS guesstimate for GDP of $7.29 billion, that document predicted a ratio of 40.9 per cent but it would actually work out to 41.4 per cent. Again, higher instead of lower.
And revenue again is lower instead of higher, using the current year estimates. The revenue-to-GDP percentage, based on revenue of $2.49 billion and a GDP this year estimated at $8.56 billion, is coming in at 29.1 per cent. However, using its old guesstimate, the MTFS ratio would be 34.2 per cent, lower than its prediction of 36.9 per cent.
The figures are going the wrong way. No wonder the goalie wants to shift the goalposts.
Remember, there’s still Nauru to shoot for.
Pat Hoyos is a long-standing journalist and publisher of the Broad Street Journal.
