WILD COOT – Need a haircut
IT IS ALL WELL AND GOOD to say I told you so. But that does not help the situation now. Barbados must decide what is to be done now. The decision will influence what happens to us and our children in the future.
When I say the future, I do not mean January 2013.
What we do now goes beyond the next election. Whether the present Government remains in power or whether there is a transfer of leadership and party, the Government will have to make serious decisions.
From the way things are looking, Government is boxed into a corner. The further it allows itself to be boxed in, the worse it will be for the country. For example, let us look at the debt situation. Government says that it is committed to maintaining jobs and is making every effort to pay the individuals involved. This seemed a good strategy at the outbreak of the debacle in 2008.
At that time it appeared that the recession would have panned out in a short time. Indeed, that would have been an appropriate strategy because by keeping people working, money would have been circulating, business would have continued, employment would have survived, and we would then have to face the consequences of a high deficit. Nevertheless, with a high deficit and the world recession receding, we would have been able to afford to whittle down the deficit by whatever ingenious way possible.
This did not happen and the recession is now even more virulent, catching the Government with poor options. One option taken that shows desperation is the option of getting the university to borrow directly from the National Insurance Fund instead of being supported by taxpayers.
I suppose that the contra to borrowing in the National Insurance Fund books would be a letter of comfort from the Government, not the real estate of the university. Another device is to raise the borrowing limit of accommodation from the Central Bank.
In the first place, we may well be breaching National Insurance Fund regulations. In the second case, it is an extremely dangerous move to print money in our open economy. I do not buy the fandangle explanation given by the Central Bank. For every dollar that comes into the economy, nearly half goes out in foreign exchange. This is well known because when it was done in the past we suffered from the results. So why is the Central Bank allowing this? Are the commercial banks afraid to support treasury bills out of fear of what is happening in Europe, where the haircut is as much as 50 per cent?
Because of these two scenarios the Government seems to be running out of options as it tries to maintain its wages bill. Even so, the wages bill that the Government is trying to maintain is affecting the good name of the country at this time. People are complaining about the IOUs’ trail both local and overseas.
Soon the unions will have to act. They have been understanding about what is happening. However, with the IMF recommending a haircut of public servants, their members will bear the brunt of any Barbados Spring so they are ambivalent about the recommendation.
Back in 2008 I advised that we should bite the bullet so that Government would have some elbow room near elections. This advice was not taken. It seems that it has to be done now as Government is scratching around to see wherever it could cut and contrive – but not on trips abroad, where it has “to promote the good name of Barbados”.
How can we be giving hope to CLICO policyholders that Government would come to their rescue? How can we continue to support Four Seasons? If we can do all of these things, surely they can pay Mr Barrack.
Those who want to dispute my argument can find me on my blog, wildcoot70.blogspot.com where I am promoting my first book espousing the “joy of sex’ as advocated by the main protagonist Sammy.
Maybe the country could do with some good news.
Harry Russell is a banker. Email [email protected]