In his presentation of the Financial Statement and Budgetary Proposals in November 2010, the Minister of Finance said that a central part of Government’s plan to restore growth in the economy in the short term would rest on a strong resurgence in construction activity during the first part of 2011.
He said then that the effort was expected to be driven both by private investors and an active public sector capital works programme.
The out-turn for 2011 so far showed that actual growth in the economy is 0.9 per cent and not the 2.0 per cent to 2.5 per cent projected by the minister.
In short, the measures prescribed by the minister in his 2010 Budget were a dismal failure.
At the end of the first half of 2011 members of the public and the private sector were astonished when the minister remained almost silent on the need to implement budgetary measures to correct the continuing, growing weaknesses in the country’s economic fortunes.
During the presentation of his budgetary measures on August 16, 2011, the minister sought to counter his critics by suggesting that Government’s measures were working and the Opposition, for obvious reasons, wanted the country to fail.
He said then that things were not as bad as some would have you believe and that Barbados was no Greece, Ireland, Portugal or Spain.
He concluded by offering that working together as “Team Barbados”, we were seeing improvement in the economy and our finances.
But do the facts support the minister in his lofty pronouncements?
The International Monetary Fund (IMF) has just concluded its 2011 Article IV consultation on Barbados and it certainly does not make good or inspiring reading. Here are some of the comments offered.
The unemployment rate stood at 12.1 per cent at the end of June 2011, not the 11.1 per cent postulated by the Central Bank after reworking the figures of the Barbados Statistical Services department.
The country’s current account deficit has moved from 5.6 per cent of gross domestic product (GDP) in 2009 to 8.5 per cent in 2010 and to 10.5 per cent in 2011.
Growth as a percentage of GDP was 0.2 per cent in 2010, is estimated to be 0.9 per cent for 2011 and is projected to be 1.2 per cent for 2012.
Public sector debt as a percentage of GDP has moved from 90 per cent in 2009 and is now at 117 per cent. The Minister of Finance is anticipating that financing for 2011/2012 will require $271.2 million from foreign sources and $755.3 million from domestic sources, thereby putting further pressure on the public debt with its equally harmful attendant consequences.
Inflation was running at 10.6 per cent up to August 2011 due to high commodity prices and this seems likely to continue spiralling upward.
The IMF has added its voice to the call for a serious effort to be made to reduce Government expenditure – such as curbing the ballooning wage bill and reducing transfers to public enterprises.
But this would certainly affect the minister’s plans to fund University of the West Indies, The Transport Board and Needhams Holdings Ltd from the consolidated fund, hence the resort to the funds of the National Insurance Board.
What, then, are the options open to Government to turn the tide on the bad news of the last three years and at least ensure 2012 is the start of a new era for the minister and his beleaguered Government?
Fresh and imaginative initiatives have to be put in place to shore up the tourism sector if growth of two per cent or three per cent in the economy is to be achieved anytime soon.
The international business and financial services sector needs a minister with hands-on experience and there needs to be better and more decisive leadership at the top.
These are necessary to arrest the continuing slide of confidence in this administration and to put this country back on a sustained growth path.
