The recent declarations by the Central Bank concerning the state of our economy have understandably created concern. According to the report, our reserves now stand at $410 M or 6.6 weeks of cover, which is the lowest within the last 22 years. Many questions have been raised by local, regional and international experts and options such as the IMF and devaluation that were previously taboo are now common language and Barbadians have been asked to tighten their belts further.
Although many of us may not fully understand fiscal policy, deficits, or many other economic terms, we do understand that times are harder and the persons entrusted to manage the economy have had a difficult time doing so. We continue to hear about the effects of the worldwide economic recession, but we watch other countries that would have been similarly impacted, who were behind us in many rankings, now overtake us and leave us behind. The Ease of Doing Business report, International rating agencies and many other ranking systems that were widely used to show our prominence in the region, now reveal our shame.
The time for blaming others has long passed and a responsible government should look to implement action plans for the road to recovery, assuming that short, medium and long-term plans have been structured and independently vetted.
Barbados is not alone in its junk bond status, and there are several countries over the last three decades that have been relegated to junk status by Standard & Poors, Fitch and Moody including Brazil, Greece and Venezuela. However, there are a few countries that were once designated as junk that have managed to salvage their investment status, including the Republic of Ireland, South Korea and Iceland. Some of the methods used by these countries to recover include:
∙ Fiscal consolidation and/or austerity (Hungary, Ireland, Latvia, Romania and Slovenia);
∙ Significant economic and political reforms (Colombia, India, Indonesia, Turkey and Uruguay);
∙ Declining external and fiscal vulnerabilities (India and Thailand);
∙ Debt restructuring and economic policy reform (Antigua & Barbuda, Belize, Dominica, Grenada, Jamaica, Suriname, Korea Republic);
∙ IMF stabilisation programme (Jamaica, Grenada, Dominica, Guyana)
∙ Privatisation of public assests (Croatia); and
∙ Active intervention by a newly elected government (Iceland and Slovakia).
Of note, a cookie cutter approach is not recommended. Our method should be tailored based on our available resources and the fortitude of our leaders for implementation.
Make no mistake, the road to recovery will be long and hard. According to many experts, it takes an average of seven years for a country to recover from junk status, which unfortunately extends past the term for the political party that wins the next general election. I say unfortunate as many parties switch gears from fiscal responsibility to electioneering in an effort to secure votes to remain in office, which can at times derail progress made. It would take a mature and responsible government and electorate to ensure that this does not occur. The longer we take to implement a plan, the longer it will take for us to recover.
Meanwhile, what does this mean for the average Barbadian?
1.Our leaders will have to make hard choices when providing funding for what is widely seen as the critical needs of this country. Choices will have to be made between health care, public transportation, water supply, garbage disposal, roads and highway maintenance, education and so on. There simply will not be enough money to do it all.
2. Diminished disposable income for the average household. For those that have not already felt it, over the years many households have had to make many tough choices. Luxuries once enjoyed have now been shelved and our resourcefulness as a people has been called to the fore, as some have experienced difficulties providing for even basic needs. The expectation is to become even more creative and resilient in making ends meet without resorting to unethical or criminal behaviour.
3. Fear of long term purchases such as land loans and mortgages. Some Barbadians fear making such long term, significant commitments. Certainly, in my small circle of friends, I have seen some either change their minds or push to sell their property in fear that they may lose it further down the road due to unforeseen hardships.
In spite of this, I have seen, again from my small circle, Barbadians pull together and make strides regardless of the hardships:
∙ The start of small to medium sized business ventures with more effort to take the marketing, business management and finances seriously. Whereas some have been in traditional areas, I have seen some novel spins on old ideas, or bold ventures into niche markets that have yet to be proven in the current landscape.Efforts to have multiple streams of income without interfering with the main source. Side hustles have now become an accepted norm and will continue to make a difference between bare minimal survival for some families and thriving in times of austerity.
∙ Non-traditional means of educating one’s self and gaining new skills or talents. The school of the internet has provided many persons with the avenue to gain skills previously out of reach and has resulted in improved services in our chosen vocations, which makes us more marketable and results in a better product.
∙ Tapping into the overseas market. More and more, as foreign reserves dip, I am encouraging Barbadians to find opportunities to export their product abroad, right here from this island. The same vigour that we expend to import overseas products should be applied in exporting our own goods and services.
∙ Planting our own food. Reducing a supermarket bill, especially if it means reducing imported food that utilise foreign reserves, is commendable and on a wider scale, can contribute to reducing the pressures on our economy.
I hope that despite the very real gloom, we also recognize that there is hope for recovery. Citizens that give up on economic recovery almost certainly contribute to a self-fulfilling prophecy. Inspired and industrious leaders, who roll up their sleeves and get to the job of making things happen contribute significantly to the mood, temperament, pride and industry in a country. In short, we must all come together and play our roles on the road to recovery.