Thursday, April 18, 2024

THE HOYOS FILE: Rude awakening for a sleeping populace 


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It is as if no one knew it was coming. But everyone knew, from the Prime Minister on down. That is what makes it so tragic.
Instead of preparing the country practically for the austerity now to be imposed upon us – or better yet, averting most of it by prudent trimming of expenditure and other measures, notably privatization – the Government led by the sleeping giant consistently missed all of its deadlines and ignored its own timelines.
What can you say about an administration which three times in a row (the first Medium-Term Fiscal Strategy, its revised version, followed by the Medium Term Growth and Development Strategy) and then continues to blame the world economic downturn for its troubles?
While a country like Ireland – in far worse financial straits than Barbados – took an International Monetary Fund (IMF) bail-out and graduated out of it in a couple of years, this country continued to go downhill, its Government denying that it was addicted to spending money it was borrowing at levels unheard of in the the annals of Barbados’ public finances.
All it could say was that the country was stable, and this was based on one thing – its level of foreign reserves. I am not going to quote all the numbers to you again today – you have previously seen them here in summary form, and you can read them all in the quarterly Central Bank reports.
But soon after the Government was sworn in for its second term, the Central Bank reported that the foreign reserves had dropped sharply.
In its Press release of June 10, 2013, the bank reported that “the foreign reserve cover fell from 19 weeks of imports as at March to 16 weeks at the end of June”. And by the end of September it noted that up to the end of August, “the foreign exchange reserves declined to $1 billion, a fall of $447 million since December 2012.”
Back in June the bank had said we would need close to half a billion Barbados dollars worth of foreign exchange inflows to keep pace with the previous year, when over $600 million came in. But some people said it wasn’t only a matter of the investment not coming in, but a lot of money flowing out, too, due to lack of confidence in the returning administration.
Today, that administration, which announced that thousands of layoffs from the public service would begin in mid-January, finds itself in an almost impossible predicament. It is now being forced by its potential lenders to carry out the policies it has arrogantly shrugged off year after year, including scaling back the public sector it so generously increased over the years as it attempted to “hold hands” with as many voters in needs of jobs as it could, at the taxpayers’ expense.
It will not be allowed to stop there. With the possibility of a devaluation, in my humble opinion, now very real, the out-of-cash and out-of-ideas administration of Freundel Stuart will be forced to go into a deep restructuring of the public service institutions which cost so much to subsidize in one way or another.
All those statutory corporations and 100 per cent-owned Government companies which consume in outsize proportions all those borrowed dollars through transfers and subsidies.
Hiving these off to the private sector seems to be a pet project of the IMF, as it goes for them in every staff report I have read, in good times and bad. Now that times are so bad, Mr Stuart’s Government will have no choice.
He will therefore have to do everything he accused the Barbados Labour Party of wanting to do were it to have won the elections of 2013. It is an irony that won’t be lost on the electorate, when its turn to have a say in the matter finally comes round once again.
And that is why I think it it tragic, because had the Dems not cast the main issues of the election in a good versus evil light, we could have had a debate on just how far we needed to go and how best to achieve the basic goal of reviving the economy by getting the state out of commercial matters as much as possible, and replacing its direct participation with effective regulatory controls.
Instead they sang lullabies to the populace, encouraging them not to open their eyes. and warned them about the bogeymen of privatization and job losses comprising the terrible secret agenda of the Bees.
Half a billion dollars in lost foreign exchange reserves later, and now that the country has no choice but to implement some tougher and maybe heartless versions of these ideas, it is ironic that it will be the Dems who have to do the implementing. But it is also frightening because instead of a scalpel we are likely to be shown a sharp cutlass, as the real implementing agency will be the IMF.


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