The news that Moody’s, the international rating agency, has followed the path of Standard & Poor’s and downgraded the credit rating of this island may not have taken the Ministry of Finance by surprise, as the minister says, but it is nevertheless a worrisome development and one that we suspect will be a talking point during the Christmas season.
We cannot fool ourselves about the importance and impact of these kinds of judgments by rating agencies, for in the real world sovereign states, like corporate entities, must go to the market to borrow money for the overall benefit of the community. If funds cannot be obtained or if they can only be obtained at a higher rate of interest, then the community of all of us pays the price in higher costs of such capital outflows to repay these loans.
At the same time, no government worth its salt will wish to be in a cap-and-hand position to these international rating agencies and so from time to time, sovereign states have to stand firm against the judgment of these agencies. They have to assert to the world at large that statistics and figures are cold-blooded, mathematical calculations, but we are concerned in politics with the lives of real flesh-and-blood people who are doing their best to make ends meet and who are adversely affected by the slightest fluctuations in the policies pursued by the government.
We note the position of the minister of finance that at this stage it would be counter-productive to the Government’s policies to implement stimulus packages of the kind being suggested, namely, what he called “pro-cyclical policies”. He explained that these policies, which involve easing the tax burden, would make matters worse fiscally and economically.
We have every respect for the minister and his views on the Barbadian economy, but in the light of the serious warnings given by Mr Lalu Vaswani, president of the Barbados Chamber of Commerce & Industry, something may have to be done to alleviate the problems which business people face daily while the recession continues its slow and meandering way across our land.
Perhaps the most encouraging aspect of Moody’s review of the local economy is that it seems that the worst of the economic and fiscal deterioration is behind the island, and we are all grateful for that knowledge. But the clamant problem of growth remains and the minister’s Press release recognizes this concern when it is pointed out that the island’s prospects for short-term high growth levels will remain a challenge, given what is going on in our main trading partners.
Whatever policy options are contemplated, the technocrats and the Government will have their work cut out since any turning back from the declared policy paths which have been pursued by Government will raise serious questions and the run-up to a general election mere weeks away is not the best time for policy changes even if one realizes that on the present course, it seems to be steady as she goes until the recession breaks.
The administration has held to the view that its business is to protect the jobs in the civil service and to an extent that policy has been successful at some cost to the fiscal landscape.
Yet it is also wise to turn a discerning eye to making the task of the private sector a little less difficult. Business is problematic enough without recessions and the lessening of demand. The cost of creating employment through taking the risk and putting one’s money on the line is an important social contribution made by private persons placing their private capital to what is public use. The Government, having secured civil service employment, should recognize that the plight of the corporate sector cries out for help!
