GOVERNOR OF THE Central Bank of Barbados Dr DeLisle Worrell is a brilliant economist whose communication skills, including his down-to-earth, folksy style, always helped a non-economist like me to understand some of the key elements of how an economy works.
But I have to admit, I have not been able to follow his strategy for the economy for some time. It seems that all of the gains made by the Government’s ongoing policy of economic belt-tightening on the part of the taxpayer, both private and corporate, have been undermined by its almost laissez-faire approach to its own promised belt-tightening and reforms in the public sector.
This point has been made over and over again by probably every financial institution reporting on Barbados in the past seven years since Worrell took up the post and was re-stated in his own way by Institute of Chartered Accountants of Barbados executive director Reginald Farrell last week.
This column has been through it so many times that it is not necessary to do so again, so here is someone else’s brief summary of our rising debt profile caused by recurring high deficits.
In its latest edition, the RBC Caribbean Economic Report notes that the Central Bank had put Barbados’ gross domestic Government debt at $6.85 billion up to the end of September. But it also noted the Government’s recent decision just before Christmas to raise its borrowing limit to $7.5 billion or roughly 110 per cent of GDP. It cited a recent International Monetary Fund (IMF) report that total public sector debt, including holdings by the National Insurance Scheme, had reached 156.6 per cent of GDP during the previous financial year, 2015-16, and added that the IMF had estimated Government arrears at 11.4 per cent, thus bringing the total financial obligations of Barbados to 168 per cent of GDP.
Now how we got there may not have been via a path of Worrell’s choosing, but he has done his best to make the trip possible.
In its November issue the RBC Economic Report, which is written and edited by RBC Group Economist Marla Dukharan, notes just how much money the Central Bank has been printing at the behest of the Government.
The report noted that the fiscal deficit had widened by 60 per cent year-on-year to $242 million in the first half of fiscal 2016-17 – that is, from April to October. It added that, according to the Central Bank, the latter had financed 234 per cent of the Government’s fiscal deficit, “to the tune of $566.3 million in just six months – the same level of CBB financing for the entire [financial year] 2015/16.”
For the past three years, no reporters have been able to directly question Worrell about this policy of fiscal accommodation of a sitting administration and where he thought the line should be drawn between the Central Bank’s responsibility to the Government (or as a former governor once famously said, as a “creature of the ministry of finance”) and sound economic policy.
What should a central bank governor do if he or she thought the carrying out of the first was becoming a detriment to the second? Should that governor make it publicly known that the line had been crossed? That the printing of currency needed to stop – on the grounds that it was helping to consume the very foreign exchange the bank was trying to preserve – and stick to that position? And if such advice were to be taken as throwing down the gauntlet, should a governor in such a bind do the only honourable thing left and stick to their guns but (metaphorically) fall on their own swords?
Does Worrell think he has crossed such a line yet?
Perhaps he does not, and perhaps he has excellent reasons to offer as to why he has allowed the Central Bank to lead the country into so much self-created debt.
But we have not heard them up until now, and according to a story in the last WEEKEND NATION on Friday, we are unlikely to in the near future, as the governor apparently does not plan to invite the press back into his chambers to discuss his review of the economy in 2016 or his outlook for 2017, both of which he will deliver later this month.
Instead, we will no doubt be treated to the usual paid ads taken out by the governor in the press to put his own spin on the economy.
But, in his refusing to engage the press, the governor is not diffusing the tension felt by the public about the economy. Not when the evidence of a country that has no cash flow or financial wiggle room becomes painfully clear every time a motorist hits a pothole, or a sewer system erupts into someone’s backyard.
Or when they can’t get their tax refunds.
So I have to admit, Worrell has lost me on this one. His strategy may turn out to be right in the end and once more prove his economic brilliance, but how much pain and suffering will we have to endure in the process before we reach those bright, sunlit uplands of peace and prosperity for all?
