THERE IS A BELIEF that Barbadians have short memories. Prime Minister Freundel Stuart seems to be strongest in this belief, perhaps with good reason, given what he accomplished in 2013.
He said not one public servant would be sent home. Barbadians would not have to pay fees at the university. He rejected privatisation of public assets.
In a speech delivered to the members of the Barbados Chamber of Commerce and Industry (BCCI) on January 25, 2017, he said quite a few things. On the occasion, it was the weaknesses in his arguments that caught the eye, especially on the other topical issue of today – foreign exchange.
Stuart’s thesis was a familiar one that “in a small open economy, we must at all times protect our foreign exchange reserves”. In fact, the protection of the foreign reserves was the main objective of the failed home-grown Medium Term Fiscal Strategy (MTFS) introduced in 2009/2010. It was the justification given for the excessive taxation, which was used to reduce spending, especially on imports.
He noted that “. . . our foreign exchange earnings from tourism and international business declined by over $400 million a year while our tax revenues from the latter sector have declined by more than $150 million per year every year since the year 2010”. This could have been a Freudian slip, but I doubt it.
If the foreign exchange earnings had declined by over $400 million a year, in five years the country would not be earning any foreign exchange from the two sectors. In his attempt to put his strongest argument, perhaps Prime Minister Stuart spun out of control.
Tourism praise
Having observed the decline in foreign exchange earnings from the two sectors, Mr Stuart went on to praise Minister of Tourism Richard Sealy, when he said: “Now it is true that due to the foresight and hard work of Minister of Tourism Richard Sealy, his team at the ministry, the BTMI [Barbados Tourism Marketing Inc.] and other industry players, including the BHTA [Barbados Hotel and Tourism Association] and the small hotels group, we have been able to restore and even surpass all previous high points for the tourism sector in Barbados.”
The observation on the yearly decline in foreign exchange earnings is inconsistent with the restoration and even surpassing of all previous high points in the tourism sector. The decline of $400 million a year is not supported by the statistics from the official sources. It is also inconsistent with the adequacy of the foreign reserves preached by Central Bank Governor Dr DeLisle Worrell.
To strengthen his thesis of protecting the country’s foreign reserves, Prime Minister Stuart stated: “Barbados, under both administrations, has utilised the strategy of borrowing on the capital markets to shore up foreign exchange earnings shortages in our economy.”
He illustrated that between 1999 and 2005, the then administration borrowed more than $1 billion Barbados to boost the foreign reserves.
He then noted that “to be fair, my administration has had, over the past eight years . . . as well to borrow when necessary to shore up our reserves”. The reason his administration did not borrow more is because of the 17 downgrades, which substantially increased the cost of borrowing to Barbados, when interest rates were very low internationally.
The Prime Minister did not note that during the same eight-year period the stock of foreign reserves at the Central Bank declined from $1 447.4 million in 2009 to $681 million in 2016.
This happened, in spite of, the borrowing, the objective of the MTFS and the record numbers in the tourism sector in 2016. Not to mention that the economy grew between 1999 and 2005 compared with the persistent decline between 2009 and 2016.
It is accepted that fluctuations in the earning of foreign exchange are a part of the economic reality of all countries. But what matters most is the fact that while Mr Stuart was addressing the BCCI luncheon, information was available showing a significant dip in visitor spend during November and December, 2016.
In today’s Barbados, it is not uncommon to hear tourism officials reporting on the previous month’s performance in the first week of the following month. The recent news of a flat winter season is very critical, given that the policymakers pinned their hopes on the current winter season for some recovery in the foreign reserves. Yet, a list of projects, which have been around for years, was read out as the saviour by the Prime Minister in the same speech.
The time has truly come for better to be done for Barbados and Barbadians.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: clyde_mascoll@hotmail.com