It is not a matter of insignificant moment that Prime Minister David Thompson has appointed a new Minister of finance in the latest reshuffle.
The appointment is perhaps a clear consequence of the prime minister’s malady as much as it is recognition that attention must also be paid to an ailing economy, and that such attention requires the efforts of a minister not distracted by his own illness.
In our spin-off economy we aim in the main, to provide tourism and international financial services for the metropolitan countries, and it follows, as night follows day, that economic problems “over there” will mean problems over here, and problems in the international economy still require some further medicine before the “patient” can be discharged as cured.
President Obama and Prime Minister David Cameron are currently grappling with their own problems of high deficits on the one hand and the need to keep stimulating the economy on the other, in a two-handed effort to stabilise their economies while curbing unemployment and restoring business and investment confidence.
Open economy that we are, we are facing similar if not identical problems. Some local commentators are calling for a budget while the government is pointing to its Medium-Term Fiscal Strategy as proof that we are on the right track. Also to some extent, the illness of Prime Minister Thompson has conduced to a wait-and-see approach ever since the delivery of the Estimates in March.
Into this situation, Mr Chris Sinckler has been appointed Minister of Finance and Economic Affairs. His is a powerful ministry with most, if not all, of the financial and economic levers of the government concentrated in hands little experienced in government.
In recent times, both Prime Ministers Arthur and Thompson shared the Economic Affairs part of this new ministry with Miss Mottley and Mr Estwick, respectively. Sinckler has both parts.
As minister he is now faced with the reality that the deficit on current account for the past two years amounting to some BDS$250 million has to be reduced. The medicine will almost certainly be unpalatable. The current suggestions focus on cutting public officers’ salaries, cutting the tertiary education bill, and reducing what the economists call “transfers and subsidies”.
Recent European experience suggests that cuts aimed at reducing government expenditure are not popular with voters, especially when the cuts touch the social safety nets or extend the age of retirement; and Britain’s Minister of Finance George Osborne has incurred the wrath of the unions by his proposals for drastic cuts in the social security benefits system.
However one looks at it, the bullet will have to be bitten. The Government must as a matter of urgency, reduce its expenditure. The Constitution, as amended by the Arthur administration will not permit civil servants’ salaries to be cut, absent another change in the constitution, and therefore “transfers and subsidies” which have grown since 2008 may have to come under the chopping block.
The Government has spoken laudably about the need to create and build a society in contradistinction to building an economy; but it is clear that a proper economic foundation will better support a society rather than the other way round!
The new minister of finance has his work cut out, but we feel sure that Barbadians will support policies which though unpalatable, are carefully developed and worked out, properly explained and are workable, and designed to put the economy back on the path to stability.
Such plans and policies must include expenditure cuts on current account reasonably applied, but there must also be increased capital expenditure to boost recovery of the economy.
Time is now of the essence brought about in part, by an extraordinary confluence of events. Fortunately we have a level of foreign reserves which leaves us free of IMF clutches, but as the old saying goes, it is minutes to midnight!
