LAST WEEK, I issued a statement in response to a posting of the Central Bank Governor Dr DeLisle Worrell on the current state of the Barbados economy.
It revealed some truths that should not have surprised any Barbadian who has been following commentary on the economy for the last eight years.
For the first time in plain language, the governor, and by extension the Freundel Stuart Government, is admitting failure of the fiscal measures that started in 2009/10. It was an obvious conclusion to be drawn from the sentiments expressed in his January economic letter.
He noted that Barbados had repeatedly failed to achieve thebalance between its foreign exchange outflows and inflows necessary for a stable economy. For this to be more meaningful, he would have to explain why the foreign reserves are no longer adequate. The decline in the reserves coincided with the heavy printing of money in 2013.
It is not so long ago that the Governor and Government were preaching about the adequacy of the foreign reserves. In fact, any mention of the word devaluation was met with outrage. Now it is unbelievable that the word is being used so freely by the government spokesmen on economics. This raises my eyebrows.
What is even more eyebrow-raising is his suggestion that there has to be further tightening of the belt in Barbados. This is asking much of a people who have experienced only belt-tightening for the last eight years.
Does this mean that the suffering Barbadians have been enduring for the last eight years has been in vain? If so, this needs to be explained.
Perhaps what needs the greatest explanation is why persistent fiscal policy has failed, since the economic advisers refused to acknowledge that they were on the wrong path. The proposal is not to change the path but rather to continue doing the wrong thing repeatedly and in the face of now accepted failure.
There is only one way out of this mess and it is through growth in the economy that is inspired by the right policies. It must be noted that in spite of some improvement in the tourism sector, the economy as a whole continues to sputter. This is because the tourism engine is too small to pull the entire economy out of its spending misery.
The recommendation of further restriction on spending is to protect the foreign exchange reserves. They ought to be growing given the performance of the tourism sector. This is nothappening, although spending on imports is down.
The persistent decline, occasioned by the fall in oil prices and cuts in local spending, has not resulted in the growth of foreign reserves at the Central Bank. This too, needs to be explained.
The governor has finally admitted that there is a debt problem some eight years late. He is also now admitting that there is printing of money at the Central Bank. Again, the admission has been too long in coming.
But one by one, Barbadians are seeing that the statements being made by others were accurate.
Unfortunately, Dr Worrell confirmed all that others have been warning about when he said that Barbados had repeatedly failed to achieve the balance between its foreign exchange outflows and inflows, necessary for a stable economy.
What is more unfortunate is that the Government’s policies have failed, as predicted, and the governor is using the threat of devaluation to sell the need for more taxation and/or cuts in Government expenditure.
This is clear from his statement: “The reserves are what protect us against the devaluation of our currency . . . . The future is exceptionally promising, but it will not happen unless we make it happen, and like all worthwhile objectives, realising the vision will not be painless.”
As is his wont, Dr Worrell sought to end his bitter New Year economic pillon an optimistic note. However, the decline in the foreign reserves, which persisted into the last quarter of 2016, is at odds with this positive talk about the tourism sector.
Government, not the governor, must say clearly what went wrongand explain to Barbadians how further fiscal measures will be implemented. Or, will we be again treated to a situation where the minister of finance comes out in disagreement with Dr Worrell’s position?
The governor should not be the one bringing this news on fiscal policy. Government has to come clean with the public and outline what is really going on in the economy.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: [email protected]