Barbadians are today facing a dilemma over the best remedy for this country’s ailing economy. They are encircled by views from the Government, the Opposition, international rating agencies Moody’s and Standard & Poor’s (S&P), the local business fraternity and economic society, and the International Monetary Fund (IMF).
The question most Barbadians are asking is, which viewpoint gives the most effective cure for Barbados’ economic ills?
Though several approaches have been suggested on the course of treatment needed to resuscitate the economy’s ailing fortunes, there is general consensus that Government must slash its burgeoning fiscal deficit by cutting subsidies and transfers to statutory bodies and trim its wage bill. Where the viewpoints vary is on the way Government should go about achieving this.
And this is where the dilemma begins.
Government has formulated a Medium Term Fiscal Policy to correct the economic challenges, and as recently as Sunday, Minister of Finance Chris Sinckler trumpeted its success.
“Our Medium Term Fiscal Policy is the correct path for us. Our fiscal deficit has been brought down quickly and we have still kept the country stable and people employed,” Sinckler told a St James South constituency branch meeting.
However, last week at a meeting in Trinidad, the IMF’s deputy division chief Therese Turner-Jones stressed that for Barbados to see an effective turnaround in its ailing economy it needs to take quick corrective action, similar to what was done in 1991 when there were layoffs of hundreds of public sector workers and an eight per cent cut in other’s salaries.
“One of the things we [the IMF] are learning from lessons around the world is that for our medium-term fiscal strategy and fiscal consolidation to be credible, the most important thing is that it needs to be front-loaded,” said Turner-Jones.
“There needs to be what I call some very strong one-time action to cause a correction that is fairly large in the initial years,” she added.
In May when S&P downgraded us to “junk bond” status, two of the remedies suggested to tackle the high fiscal deficit were cuts in public sector jobs and privatization of some statutory corporations.
The Opposition Barbados Labour Party (BLP) is saying that stimulus rather than austerity is the way to go because Barbados has the foreign reserves to support this, unlike in 1991.
In July that party’s spokesman on the economy, Clyde Mascoll, told a public meeting in Deacons Road that to deal effectively with the fiscal deficit Government needed a lump sum of money. One option the BLP proposes to get this is to sell shares of profitable statutory corporations like the Barbados National Oil Company to Barbadians, businesses and the credit unions to generate the necessary cash.
With this cash in hand Government would be able to pay off some of the debt and at the same time offer tax relief. The former would put a dent in the deficit, and the latter would put more money into people’s hands to spend. This spending would help to stimulate growth in the economy.
Mascoll concluded that far from cutting jobs as the Government spokesmen have been consistently accusing the opposition party of planning to do, the BLP needed to keep people working so that they can spend more and boost economic growth.
Barbadians’ dilemma is to determine which is the more realistic viewpoint. But I suspect it will come down to who they feel can better manage the economy. Whichever party that is will most likely win the next general election.
• Sanka Price is the SATURDAY SUN editor.
