IN RESPONSE TO the most recent downgrade of Barbados’ international credit rating by Standard & Poor’s (S&P), Minister of Finance Christopher Sinckler accused S&P of moving the goalposts with respect to the fiscal deficit, debt and economic growth, in particular. Earlier this year, Moody’s was rejected as a rating agency for Barbados, for apparently similar reasons.
But what amazes me most is the following comment by the minister: “We have set a course to achieve this [the debt level] over a three-year period starting from this financial year. That is why we designed the Budget the way we did this year.”
He further noted that Government would press ahead with its medium- and short-term economic programmes and leave the rating agencies to do what they do best. But what is it that the Government has done best?
As far back as 2009, Government produced a fiscal strategy document outlining the following goalposts/objectives: (1) maintain macroeconomic stability; (2) ensure strong growth through increased efficiency, productivity and competitiveness over the medium term; (3) reduce the fiscal deficit; (4) decrease the level of debt and improve the country’s credit ratings leading to lowered debt service costs, and (5) guarantee that domestic and external confidence in the ability of the Government to manage its resources in an efficient and balanced manner is maintained.
Not one of the above objectives has been achieved. In fact, all of the economic indicators have worsened since 2009. Indeed, the Government is very guilty of shifting its own goalposts. The Barbados economy is smaller than it was in 2009. The national debt has more than doubled over the period. The fiscal deficit is worse. The country’s credit rating has been downgraded several times and debt service costs have risen dramatically.
In the face of overwhelming evidence, there is a guarantee that domestic and external confidence has fallen. In the circumstances, it is silly to continue to blame others for the shortcomings of the Government. It is time to take the blame and move on.
Is the subscription to S&P going to be stopped? And is the subscription to Moody’s going to resume? There is a sense in which the Government expects to receive a passing grade, even when it fails to meet its own objectives.
Unfortunately, the local examiners are believed to be biased in their assessment of the Government’s performance. However, there is a consistent thread of analysis that is common to both local and foreign examiners. Yet the grading of the locals is bias. It is a feature of smallness.
As far back as 2010, it was observed that the printing of money was a factor in the downgrading of Barbados’ international credit rating. But to this day, there is denial in some quarters that the Central Bank is printing money.
What matters most is for those in denial to answer the following question: Name another institution in Barbados that is making losses but is able to buy over a billion dollars in Government securities? The answer to this question requires the institution to be able to spend money that it does not have.
Furthermore, it requires that once the evidence becomes available with respect to the source of the money, that the institution is not breaking the law. While the Central Bank is not breaking the law, it certainly has shifted the goalpost. It can only do so with the consent of the Government.
In Jamaica, the limit on the bank’s purchases of the primary securities of the government is determined by law. In Barbados, the limit is at the discretion of the board of the Central Bank. This is unfortunate.
Given the condition of the Barbados economy, the discretion given to the board prevents the Government from having to go to the Parliament for serious debate that is concentrated on specific issues, such as the printing of money.
A Budget debate is too broad-based to get the kind of discussion that is required to pin down the Government on the fiscal problem, which starts with the current account deficit and ends on the printing of money.
As is being noted by all the external examiners, if there is a loophole in the system that permits the Government to turn to the Central Bank for rescue, then the Government is able to shift its own goalposts.
Unfortunately, the country continues to suffer, while the Government shifts blame. The blame game, however, only postpones the day of reckoning.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: clyde_mascoll@hotmail.com