IN ORDER TO put the recent downgrade in its proper context, it is instructive to review the attitude of the Government’s economic spokesman to previous downgrades. In Bajan parlance, they have been “powerful foolish” toward independent assessments of Barbados’ international credit rating, which has moved from it A to C class in the last seven years.
If a minority of Barbadians believes that local commentators have reason to be biased, notwithstanding the compelling evidence to the contrary, then foreign commentators cannot be accused of bias. Yet the diagnoses of the two sets of commentators have been rather consistent over the years.
There are some among us who are prepared to ignore facts because of the identity of the commentator. This sentiment is frequently echoed, especially on call-in programmes. Fortunately, the one friend honest commentators have is time. By now, Barbadians ought to be aware of who is telling the truth and who is prepared to embrace it.
In fact, attempts have been made to pit the credit rating agencies against each other by the policymakers. Doing so is designed to cast doubt on the analysis of the agencies when it seems unfavourable. In recent times, it would have been difficult for them to provide favourable commentary.
In July 2009, it was noted by the policymakers that the downgrade “still leaves Barbados squarely in investment grade category”, which is an important factor in the international borrowing markets.
It was further noted that a downgrade adds costs to any future market borrowing. It therefore makes little sense being critical of credit rating agencies, especially in relation to their assessments of countries. These assessments are not complicated and furthermore, the data comes from local agencies, including Government.
By October 2010, an agency lowered ratings on Barbados’ debt but it remained in investment grade status. The agency adopted a stable outlook for Barbados’ credit rating. At the time, the Central Bank of Barbados expressed disappointment with the downgrade, which was attributed to delays in fiscal consolidation efforts, a slower than expected economic recovery and an expected increase in debt over the next two years. Since then, the national debt increased significantly, recovery has not happened and delays in fiscal consolidation have persisted.
In June 2011, there was a further downgrade. However, one agency gave Barbados a negative outlook in contrast to the other. As expected, the policymakers played up the positive/stable outlook, which indicated that going forward, the economic outturn was not likely to warrant a further change in the agency’s rating.
The less optimistic agency suggested that its rating could be lowered over the next couple of months to better reflect the expected economic outcome.
By July 2012, Barbados lost its investment grade and was given a negative outlook. This outlook reflected the views of the less optimistic agency which noted that “even if deficits continue decreasing slowly, as contemplated by the Government’s strategy of gradual fiscal consolidation, they are likely to remain large in absolute and relative terms for the next few years”.
Time has supported the views of the less optimistic agency.
Only last week, Barbados’ international credit rating dropped to the C class. There were warnings during the recent Estimates Debate that the Government’s numbers would invite attention from the rating agencies. The numbers suggest failure of fiscal consolidation, as the Government projected a higher fiscal deficit in this financial year 2016/2017.
In addition, the national debt is expected to increase and genuine economic recovery remains elusive.
No one, except the policymakers, should be surprised by the most recent downgrade of Barbados’ international credit rating. The problem is that it is much easier to spin words that it is to spin numbers, especially your own numbers. Barbadians have been fed a diet of fiscal consolidation and yet the economic fundamentals are deteriorating.
In the face of such abject failure, honest men are expected to play the patriotic card while Barbadians continue to endure growing hardship. Nobody gains from ignoring the truth, especially when it cannot be detached from the daily reality of most Barbadians.
There is a sadness that comes with having to comment on the fall of Barbados. Contrary to what some may feel, there is no pleasure associated with facing a more difficult future. Fortunately, the circumstances faced by Barbados need a combination of management and leadership that is willingly informed by intellectual and empirical inquiry.
