A numbers game

Not surprisingly, the Government  is all over the place on the economy; surprisingly, though, so too is the governor of the Central Bank.
In March of this year, during the Estimates Debate, the public heard of a $600 million stimulus from the Minister of Finance, which always sounded like economic madness. This stimulus was, however, endorsed by the governor and the chairman of the Economic Advisory Council, who had previously rejected  the idea of a $90 million package,  based predominantly on reducing  the Barbados National Oil Company’s profits by $40 million.
In May, the governor spoke to the Barbados Association of Insurance and Financial Advisors and the observations made then never suggested that just over a month later, the country  would be told about a $400 million  cut in expenditure. This is another  bout of exaggeration!
The fiscal crisis, resulting from excessive Government spending,  should have been addressed the right way since 2009 and for sure by 2010. Instead, Barbadians were forced  to pay more taxes to solve a problem  of overspending. It’s all history  and more so sad!
All kind of ignorant ways were employed – like forcing statutory boards to borrow, printing more money at the Central Bank and raising the local  loans limit every year – to assist the Government in its nonsense. More recently, credit unions are being forced to put money in commercial banks that are already flooded with cash,  for no other reason than to help finance Government’s spending.     
After the Ministry of Economic Affairs produced a document, in collaboration with the Central Bank for last week’s consultation which outlined the need  for a $295.3 million cut in expenditure,  Dr DeLisle Worrell turns up  and announces the need for  a $400 million haircut.
Unfortunately, managing the economy has become simply a numbers game!
The public ought to know that this sounds like the suggested stimulus in reverse; readers, do not become overly excited one way or the other. It makes no economic sense to cut current expenditure by $400 million in one year. Furthermore, there is need for some spending on capital projects to help spur economic growth. What a sordid mess that could have been avoided years ago!
The Government has treated the economy as though it only has a financial sector, completely abandoning the productive sectors. This is because the obsession was on finding ways to finance Government’s excessive spending, while stifling private spending. It was always an error  of ignorant proportions!
Now that it is obviously unsustainable, an attempt in words is finally being made to address the real problem. But it is impossible to solve  a problem that was allowed to fester  for five years by cutting Government expenditure so drastically.
Again, it is premised on the lack  of performance of the foreign reserves.  This continues to be an overrated premise since the banking system has reserves. Perhaps the banks have not sold enough US dollars to the Central Bank. The question is why!
If the Government borrows the very expensive money from overseas, it will provide some breathing space while suffocating the rest of the economy.  But it did not mind compromising the country’s international credit rating in its pursuit of the fatted calf philosophy. Barbadians have been betrayed and they are reputed to have short memories,  so this is a good time to address the issues that have been present for the last four years.   
The truth is that the public is tired of hearing what ought to be done and they want to know the further extent of the burden they are expected to carry. If things have turned around so seriously since the election, there is no need to wait until August to bring a budget.
Time has to be of the essence! There is no need to delay; the people already understand that they were betrayed during the election campaign when the Government refused to engage in any serious discussions on the real matters affecting Barbadians.
The most important thing said last week was that the foreign reserves are expected to decline by $450 million  in 2013. This was accompanied  by the forecast of real economic decline of 0.5 per cent for the year.
The two things are difficult to digest together since the former suggests major underperformance of the tourism sector. And if that is the prognosis for tourism, then the linkages with the other sectors would suggest more economic decline that is being projected.  
• Clyde Mascoll is an economist  and Opposition Barbados Labour Party spokesman on the economy. Email [email protected].