The jury is still out on whether any of the fiscal and economic measures recommended by Minister of Agriculture Dr David Estwick will be implemented.
Ever since the senior Government official broke ranks with his Cabinet colleagues and openly criticised the fiscal strategy enunciated by Minister of Finance Chris Sinckler – a programme publicly supported by others including Prime Minister Freundel Stuart – debate has persisted.
Much of the discussion has been about the political implications, but there has also been some talk about the overall merits of Estwick’s alternative plan, including a shift in focus from public sector lay-offs in favour of an historic debt restructuring programme supported by billions of dollars from the United Arab Emirates (UAE).
Among the early supporters of the plan was principal of the University of the West Indies (UWI) Cave Hill Campus, Professor Sir Hilary Beckles, who said during a recent UWI lecture on reparations: “Barbados has found itself in great debt because 70 per cent of the Barbados budget goes into education and health just to educate people who were denied education for 300 years; just to educate citizens and take care of their health, the budget bust.
“We have got in our budget, to clean up this mess that the British have left behind; they need to cancel all the debts of the Caribbean,” he said.
“Minister Estwick is right; he is absolutely correct. We have been locked into a banking system with the Canadian banks who monopolise the Barbadian market, the Canadian banks who control the Caribbean money system, and through their control of the financial system, our Government has very little room to manoeuvre . . . .”
On the other hand, one major sceptic was chartered accountant Douglas Skeete, who said the repayment terms of the billions of dollars Barbados would source from UAE would be largely prohibitive.
“Estwick is saying that when you pay off the debt you do not have to borrow for another 30 years. That is not true because we are still going to run deficits. Our revenues still do not cover our expenditure. Then when you factor in capital expenditure, we are still paying out more each year than we are pulling in. So even when you pay off this debt you are still going to continue to borrow – granted the borrowing will not be at such a high level, you will still have to borrow. The loan will not eliminate your fiscal deficit,” he said.
But why the UAE? The UAE is a federation of seven states formed in 1971 and its large oil resources make it one of the richest group of countries in the world. That wealth has been used to fund the rapid development of member states including Dubai, but increasingly other independent countries in other parts of the world have sought to cash in on the UAE generosity.
For some countries the attraction to these Arab states is partly due to the perceived easier terms offered when compared to other financial institutions, including the multilateral agencies like the International Monetary Fund (IMF).
This was a point highlighted when Estwick proposed his UAE-focussed measures.
“What the Abu Dhabi and UAE governments propose to do, is to establish a sinking fund to retire the national loans when they become due. They have proposed a US$4 billion fund at a fixed interest rate of two to four per cent, over a 30 year period. These terms are negotiable,” he said.
“If you compress all of the loans together and create one sinking fund, when loan payments are due on the various loans, they are paid from the single collective sinking fund and not from current revenue.”
On the other hand, the measures the Stuart administration has repeatedly announced preference for and which are being implemented focus on a series of expenditure-cutting efforts, including 3 000 public sector layoffs, a freeze on new hiring, reducing financial allocations to a number of state agencies, and the eventual reduction in statutory bodies.
Debt restructuring has not been identified as part of the favoured plan announced by Stuart and it was also ruled out by the IMF, which recently concluded discussions with the Barbados Government. The IMF said debt restructuring “is not an issue up for consideration”.
While the debate is continuing, one persistent view that has emerged is that while aspects of the Estwick plan appear interesting and innovative, they might not be right medicine for the Barbados economy at this juncture.