IN AN ARTICLE dated November 15, 2012, I wrote the following: “It is clear that the private sector, civil society and the media want an informed discussion on the way forward. The most partisan among us must recognise that Barbados is at a crossroads. It is unlike any other in the past.”
The media appears rather more willing now, given the continued failure of the Government to manage the economy effectively, to raise issues of accountability. The SUNDAY SUN editorial of October 2, 2016 noted: “A question which will arise is whether the several downgrades could have been avoided and at what point is the minister of finance likely to lose his portfolio if the situation continues. These questions may arise as part of the accountability of our governance because if the present situation could have been avoided, one is then forced to conclude that the policies pursued in the recent past may have been the wrong responses to the challenges presented by the recession.”
How long is it going to take to conclude that the policies pursued have been the wrong responses? The economic recession was in 2009, but the Government started to impose heavy taxation by the end of 2008, which deepened the recession.
The Government then immediately embarked on its home-grown Medium-Term Fiscal Strategy, which is still in place today. The strategy turned out to be about more and more taxation in an effort to restore economic growth. This is the essence of the Government’s failure, especially when it was boasting in 2009 and 2010, and rightly so, that the country’s foreign reserves were more than adequate.
Barbadians must be able to consume if the economy is to grow. But the consumption was unnecessarily stifled, in the face of adequate foreign reserves, by increasing taxation. It was being said that the taxation was to reduce the spending power of Barbadians to protect the foreign reserves that were adequate.
The Government diagnosed an expenditure problem but responded by increasing taxation. The key always was to encourage economic growth and let the growth generate the additional revenue, while managing expenditure more effectively. There was no overnight solution in 2010 and beyond.
The November 15, 2012 article also noted: “The task before this country is to put the truth to the people and engage them in the choices. This is no time to see the truth sitting down backwards on a trotting horse and still ignore it. Failure to deal with this matter in a mature and frontal way will lead this country in the hands of the International Monetary Fund (IMF).
It is pride, not industry, that is preventing the Government of Barbados from approaching the IMF for a structured stabilisation programme. The IMF has matured enough to allow countries to design their programmes. The greatest benefit is access to foreign exchange at a rate much better than having to borrow from the international market, with junk bond status.
The growth in tourist arrivals, without adequate analysis of the numbers, has been accompanied by ongoing haemorrhaging of the country’s foreign reserves. The current Government failed in its previous term to understand the importance of the international business sector (IBS) to the earning of foreign exchange for the country. It is never good to put all of your eggs in one basket. Furthermore, the taxes from the IBS were used to lower income taxes on Barbadian taxpayers and companies.
Apart from the obvious mistakes made with respect to economic policies, there was the hypocrisy surrounding the issue of privatisation.
The late Prime Minister David Thompson, at a press conference at Ilaro Court in late 2009, was the first to raise the issue of divestment of assets as one of the options available to the Government to deal with the growing fiscal crisis. The Government’s position was made clearer by the Minister of Finance, Chris Sinckler, in his speech delivered to the Chamber of Commerce on May 25, 2011.
In that speech, Sinckler identified the need to divest/privatise, of which there were several models, the operations of “the Barbados Port Authority Inc., the Transport Board, the Barbados Water Authority, the Sanitation Services Authority (SSA), CBC and the National Housing Corporation”.
Sinckler emphasised the Government’s position in his 2012 Budget Speech, having received the support of Prime Minister Freundel Stuart, Minister of Agriculture Dr David Estwick and the entire Cabinet, all of whom are “ad idem” on the issue of privatisation/divestment of Government assets.
Has it started with the SSA?
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: [email protected]
