Tuesday’s downgrade of our sovereign credit rating from BBB-/A-3 to BB+/B has triggered mixed responses from Government, the private sector and other key stakeholders.
In the context of the economic challenges that have confronted our country and the world over the past three years, and the concerns that have been repeatedly expressed by the ratings agencies and the International Monetary Fund, the recent downgrade should not be surprising.
It should be noted that while the rating places importance on the current economic scenario, its outlook is ultimately on the future prospects for Barbados based on the likelihood of the success of Government’s current fiscal and other initiatives to address what Standard & Poor’s (S&P) described as Barbados’ weakening economic fundamentals.
The Institute of Chartered Accountants of Barbados (ICAB) believes that in the midst of the lowering of our credit ratings by S&P, Government needs to address the areas of concern – including the fiscal deficit, debt levels and the sluggish performance and outlook for the main economic sectors.
There is a need for Government to remain clearly focused on its Revised Medium-Term Fiscal Strategy and monitor the results in a timely manner that would facilitate adjustments as required to ensure that the stated goals are attained.
ICAB is also of the view that special attention must be paid to the level of our current account deficit.
The recent budgetary proposals contained some measures to achieve a reduction, but the level of Government expenditure still needs to be brought under control.
ICAB encourages Government to consider the following:
(1) Full or partial privatization of state agencies in sectors where Central Government need not be involved, with due consideration to the social impact and importance to national development of the respective agencies;
(2) Fast-tracking the use of ICT in the delivery of services and collection of revenue as a means to increasing efficiency and productivity;
(3) Utilizing the social partnership, the Barbados Action Team and the Barbados Competitiveness Project to fuel a national drive (across private and public sectors) to increase productivity through the employment of more effective and efficient processes;
(4) Reassessing the level of transfers and subsidies to statutory bodies to determine where meaningful adjustments can be made;
(5) Continuing efforts to transform the tourism and international business sectors;
(6) Addressing business facilitation and other non-economic factors that will continue to make Barbados attractive to investors even in the midst of a weak economic environment.
As indicated by the Minister of Finance, many of the competitive and structural changes still required will have to be effected over the medium to long term and we support and encourage Government to formulate a plan to effect these changes in an expeditious manner.
• David Simpson is president of the Institute of Chartered Accountants of Barbados.