The failure of the GOVERNMENT to adequately manage the Barbados economy over the last five years becomes particularly evident during the Christmas season. This is because the consumption of food, fuel and light and transportation reaches a high during the festive season. The burden becomes visible and visual at this time of year.
There is compelling evidence that fuel and light, food and transportation have been the fastest areas of increases in the cost of living. And while it is true that import costs have contributed to the increases, it is also true that Barbados has had by far the highest inflation rate in CARICOM for the last two years. There are reasons for the latter, which may be summed up as poor domestic policy choices.
The reasons are directly related to the increase in the VAT rate to 17.5 per cent and the 50 per cent hike in excise taxes in the Budget of December 2010. In addition, there was some increase in the level of VAT transactions in 2011, following on the poor performance of the economy in 2010. But the worst policy choice has been the change in the energy pricing policy, coupled with the decision to allow the Barbados National Oil Company (BNOC) to realize excess profits during a most trying period.
The general manager of BNOC, who is now a policymaker, recently admitted that a now unnecessary gas and diesel cess is responsible for some of the excess profits. The subsidization cost was $135.5 million. The BNOC loss recovery started in January 2008 and the loss has been fully recovered.
Profits
In January 2010, two years after the start of the loss recovery initiative, BNOC went to the market to raise $160 million in bonds. By this time, BNOC only needed a bond of around $90 million. The suggestion that BNOC used its profits to drill more oil wells does not make business sense.
At the height of galloping fuel and light bills, BNOC is able to transfer $25 million to the Government revenue for this fiscal year 2012/13. This transfer comes from profits. Neither in this world nor the next should the Government and BNOC be able to realize profits from the buying and selling of fuel products at the expense of Barbadians in these tough times.
But this Government continues to put itself first. Since 2009, we have argued that Barbados has a fiscal crisis, not an economic crisis. In the context of Caribbean economies, crises are truly on when there is a shortage of foreign exchange – that is when business with the rest of the world is compromised.
The refusal to adequately manage the fiscal crisis has created a spending crisis in the private sector. Since the Government relies on taxation and borrowing to support its appetite for spending, it is clear that excessive Government spending comes at the expense of private sector spending. This reality is now the source of economic stagnation in Barbados.
In the past, in a typically difficult year, Barbadians were still able to find money to spend at Christmas time.
This year will not be typical as the cumulative effects of harsh taxation policies, no increases in wages and salaries and the galloping cost of living have taken their toll on all Barbadian households, not just the poor.
The current Government is not only unable but unwilling to help Barbadians out of their misery, the misery caused by a combination of rising unemployment and cost of living. The apparent joy of saying that no public sector worker has gone home when over 16 000 private sector workers have lost jobs is an unbelievable abandonment of responsibility for all Barbadians by the sleeping giant and his cast.
This festive season will become better known for the political machinations of a weak Government trying to hold on to power rather than providing hope for the people. It is a sad reflection of what the country known for “punching above its weight” has become – a country “waiting for a punch”.
This is my favourite time of year. However, there is a reality confronting this land of ours that cannot be ignored even at this time. It is hoped that somehow Barbadians will find a way to absorb the ongoing pressure, with the real hope of better to come.
Believing in a better future first requires conceiving of it. Waiting for the world to deliver it for us is unrealistic.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy.
