• . . . Lower the ratio of transfers to GDP to the level in the mid-2000s. This would require reducing the current ratio from 12 per cent of GDP to ten per cent.
• Raise tariffs in public enterprises and combine with efficiency improvements to limit losses. Consider privatization and outsourcing where feasible. – IMF’s Barbados 2011 Article IV Report, December 2011
Year after year, in its annual “consultations” with the Barbadian authorities, the staff team of the International Monetary Fund (IMF) has urged them to reduce the level of subsidies and transfers.
Year after year the plea has fallen on deaf ears. Successive governments have demurred as much as possible on such suggestions because it would mean, in real terms,
(a) raising bus fares,
(b) charging a tuition fee to Barbadians enrolled at the University of the West Indies (UWI) Cave Hill Campus, and
(c) billing (and expecting to be paid) for treatment at the Queen Elizabeth Hospital.
In other cases, such as the statutory corporations, from time to time the national debt inches up a few pegs when Government has to pay off some of their bills or finance upgrades to plant and machinery, the additional subventions often coming from funds we have borrowed.
In the election season, which has long started although no official election date has been set (at this writing), the need for the Government to reduce its expenditure significantly has become a major issue.
Our total national public debt is so high (117 per cent of gross domestic product in 2011, according the same IMF report), that there is overwhelming pressure on the Government of the day to cut spending.
That’s why the public stances taken so far by the two major political parties on transfers, subsidies for statutory corporations, and payments to Cave Hill Campus, are so important, because, it seems to me, the very future of Barbados depends on the decisions taken about them in the next few years.
The Barbados Labour Party (BLP), to its credit, has stated over and over again that (I’m paraphrasing here, not quoting) all options must be put on the table except for ensuring that the poor and vulnerable are protected.
At the first of what it calls a series of public fora, held last Saturday evening at the Springer Memorial School, the Bees took the unusual step, I think, of inviting the general public to come and share ideas on these highly sensitive subjects.
The party admitted it had not yet come up with its own definitive plans. Opposition Leader Owen Arthur said that while Barbados had built a better social safety net than many other countries, the question was how to take these accomplishments into the future. Looking after the poor and vulnerable as we did this was “non-negotiable”, he told the audience.
But, he added, Barbados faced a “crisis” in public finances that had assumed “calamity” status. Government was not paying its bills and also could not meet the needs of the Barbados Tourism Authority, the marketing agency responsible for the country’s largest foreign exchange earner.
“The breaking point is in sight,” he said, because it was too costly to maintain the current financial structure.
The BLP deserves kudos for going public with this risky move of taking the public into its deliberations and being willing to hear criticism and disagreement over some of its initial stances.
There may be no “right” way or “only” way to restructure major aspects of our economy, and the BLP was signalling that it wants to hear as many sides as possible before prioritizing its goals on reducing Government spending, including making various offers to privatize some of the Government’s operating entities in whole or in part. The Barbados Government, the party said, was asset-rich but cash-poor.
The Democratic Labour Party (DLP), on the other hand, seemed to see the retention of the country’s doomed economic status quo as the way forward. Dr David Estwick, in a speech the following day at a meeting in support of the Dems’ candidate for St Peter, Haynesley Benn, said that, according to THE NATION (Monday, November 12, page 4), that his Government was on the right path, while Arthur’s proposals were “dangerous”.
He said people should not be “hoodwinked” into buying into bankrupt companies, or into giving Mr Arthur the chance to privatize the country’s education and health sectors, THE?NATION reported.
Dr Estwick said the Caribbean Broadcasting Corporation, Transport Board and National Petroleum Corporation were “bankrupt,” requiring millions of dollars of subsidies every year.
I agree with Dr Estwick on that last point, and said as much in my contribution to the BLP forum. I added that the suggestions advanced thus far regarding getting citizens and institutions like credit unions to invest in some of the state-owned corporations were “woolly,” and at times sounded crazy to me.
I reminded the forum of the paltry public response to the then BLP administration’s offering of shares in both the then Barbados National Bank and the Insurance Corporation of Barbados.
In his closing remarks, Mr Arthur said the uphill task for any administration was how to get Barbadians to invest more in their country, and that it was not really about getting cash from privatization but the long-term empowerment of people. I agree with him on that last point.
But at least, to its credit, the BLP is opening up the debate on the way forward to the general public. There are no easy answers, and each entity will require its own special focus, but what is the alternative here?
The present scenario of continuing subsidies is helping to bring our economy to its knees. The economic status quo will come crashing down all around us if we don’t come up with solutions.
But even as the BLP embarks on this public process of looking for ideas and solutions, the DLP seems to be talking down privatization, and trying unsuccessfully to characterize Mr Arthur as a bogeyman and a figure not to be trusted. This is its approach even as it cannot find the money from the public purse to pay the UWI, the Transport Board and other commitments, and continues to eye the National Insurance Scheme surplus with envy.
Would it be too hard to do as the IMF suggests and “consider privatization and outsourcing where feasible”?
• Pat Hoyos is a long-standing journalist and publisher of the Broad Street Journal.
