THE INTER-AMERICAN DEVELOPMENT Bank says the 3 000 public sector lay-offs in Barbados will push unemployment figures up by three per cent and put pressure on the National Insurance Scheme (NIS).
In its January 2014 Caribbean Region Quarterly Bulletin which looks at six regional territories – Barbados, Jamaica, The Bahamas, Trinidad and Tobago, Suriname and Guyana – the IDB noted that the reduction in the size of the public sector would result in an increase in the unemployment rate to about 14 per cent compared with 11.1 per cent last June.
It added that, “since the Government is the single largest contributor to GDP (16 per cent), reducing its expenditure will require other sectors to pick up the slack and create new growth.
“Foreign investment will be critical . . . . Also, the higher unemployment levels could present financial challenges for the National Insurance Scheme, which already has a substantial amount of investment in government securities – about 68 per cent of its total investment,” the report added.
The Washington-based bank also said the impact of the lay-offs and Government’s 19-month fiscal consolidation adjustment plan were “conditioned on whether economic growth, [which] will have to be led by private sector investment, can be achieved”.
Stating that “all countries except Barbados are showing signs of recovery”, the IDB pledged to help the island in supporting tourism.
It said the sector was “heavily concentrated on a few markets” and susceptible to external shocks, which had contributed to low growth in the last five years, and pledged assistance in diversifying the product.
“The bank will assist Barbados with the diversification of its tourism product through new source markets. The findings of the Brazil Tourism and Trade Promotion Technical Cooperation for the Caribbean region suggests great potential for Barbados in Brazil.
“This potential could also exist with other countries in Latin America and the world, but will require significant investment in marketing Barbados to these countries,” the 46-page report stated.
The bank said it could play a unique role in making negotiations with those markets successful, especially at a time when the Government was constrained by limited fiscal space.
Other possible areas of IDB support are guarantees of additional flights and backstop seat purchases, marketing campaigns, financing, and technical support to help expand source markets to other destinations in Latin America such as Panama and Chile.
“The IDB can also provide financing to support local financial institutions in extending investment credit to the country’s private sector, particularly to small and medium-sized enterprises in the tourism sector,” the report stated.
“It can provide technical support in areas of institutional strengthening and governance of the tourism entities. These factors, as well as supporting opportunities to upgrade and refurbish tourism infrastructure, are critical in increasing revenue from the sector,” it added.
Noting it was also committed to assisting Barbados’ energy sector, the bank highlighted Government’s legislation of the Electric Light And Power Act, adding that the development of this sector would help reduce the importation of fossil fuel and corresponding foreign exchange outflow.
