There is no magic bullert, but there is a silver lining only if the Government is willing to make decisions on the level of current expenditure.
The notion that economists have not made recommendations is one that suits the apologists for the current administration.
Economists who are not privy to the numbers on the inside are simply not in a position to make specific recommendations; however, this does not, in any way, negate their general recommendation.
It is misguided to compare a current account deficit of equal magnitude with a deficit caused by spending on the capital account. Of the four categories of current expenditure, only “interest payments” is beyond the discretion of the Government.
Furthermore, all other categories are classically recurring expenditure. On the other hand, capital expenditure is not recurring.
The apologists do not want any further discussion on why the Government is in a fiscal crisis, but they want solutions. The solutions are simple from the obvious diagnosis, but the Government does not have the political will to implement them.
Strangely enough, the same apologists are able to rationalize why the Government is not in a position to cut current expenditure but they do not want to understand why the current expenditure reached such levels.
It is unheard of in the context of fiscal management in Barbados since Independence, for any previous Government – Barbados Labour Party or Democratic Labour Party – not to follow the tradition of being able to pay its bills from current revenue. This principle is followed by all other economic agents including households.
So why would capable professionals not want to accept that this simple principle was ignored since 2008? The answer is that they are unwilling to be professional when it matters most.
Accountants, even more so than economists, observe the golden rule that all businesses need healthy working capital. This golden rule is equally true for governments. However the concept is slightly different in the two cases.
In business, working capital is current assets minus current liabilities. Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets. When the latter persists the company becomes bankrupt.
In Government, the concept of “working capital” is current revenue minus current expenditure. If the current Government were a business it would be classified as bankrupt, with negative working capital of over $500 million per year or over $41 million per month.
It is the Government’s ability to force others to lend that is responsible for its survival.
In recent times, the National Insurance Board is unable to lend at previous rates; commercial banks have refused to lend at previous rates and international lenders are not willing to lend, which is reflected in the country’s credit rating.
These are all facts!
The learned apologists have now gone so far as to ask why there is so much fuss over the proposed National Insurance Scheme investment in Four Seasons.
The fuss is now really over the process where the Minister of Finance wants to use political coercion to secure the investment.
On the basis of an accumulated 12 per cent dividend offered, there ought to be no good reason why the private sector would not rush to invest in Four Seasons.
Here the issue is that Four Seasons was to be a private sector venture which would have sent the right signals to the market; but it has become a public sector venture for the wrong reasons.
Furthermore, the current administration had so much to say about foreign investment on the West Coast that one has to wonder whether or not its appetite for the investment is based on genuine economic and financial principles or a desire to carry out its mandate of retrieving the coastline.
