“The recent Government Budget was specifically designed to address a foreign exchange shortfall which only became apparent in May this year. As you may know, emerging markets worldwide experienced an outflow of capital ever since May, and the timing of our own difficulties suggests we may have been affected by this phenomenon.” – Central Bank Governor Dr DeLisle Worrell, speech to the Productivity Council’s Getting Everyone To Understand Productivity Programme, September 3, 2013.
It has become the mantra of our current political and financial leaders to say that they went to work one day in May and found everything in turmoil.
Some economic thief in the night had turned over their desks, scattered their files, disrupted their Internet connection – all metaphorically speaking, of course – and left them in a state of bewilderment. The people’s heroes – who had won re-election on the theme of “Stick with us, the country is stable” – found themselves suddenly drowning in a sea of instability.
And the country found itself stuck with them as they regretfully informed us of this unforeseen crisis.
This excuse for its myopic foresight is once more expressed in the quote above by the Central Bank governor, in which the operative words have the same three letters “may”, one of them capitalized at the beginning.
In other words, my friends, “May” is why we “may” have a problem.
It was something that nobody could have foreseen even three months before, in February, when, coincidentally, there was an election campaign in full swing in which the same political leadership had portrayed the opposition concern about that economic cliff on the horizon as fear-mongering just to get back into power.
In one of its political ads, the Democratic Labour Party (DLP) attacked the Barbados Labour Party (BLP) on the issue of privatization, showing a large toilet bowl with logos for CBC, the Transport Board and other Government-owned entities swirling around above and falling in. The message was that the BLP would privatize these entities and people would lose their jobs.
Later the Government would have to announce expenditure cuts of close to $300 million, a large part of it to be achieved by reducing public sector jobs.
Another ad offered the slogan, “Don’t put your future at risk . . . Stick with the Dems”.
So it was not that the writing wasn’t on the wall. It was that the DLP flushed all such concerns about our economic future down the toilet bowl of their political advertising.
To try to blame the coming to pass of what was predicted on some event that suddenly occurred last May begs the question: What event?
On September 3, the International Business Times noted that “(US) Fed Chairman Ben Bernanke announced in May the central bank may consider tapering its bond-buying programme if the employment outlook improved substantially, and added the central bank is ready to continue or shrink stimulus based on US economic data”.
Michael Hood, writing in Institutional Investor on September 6, noted: “Emerging market assets have suffered considerably since the Federal Reserve began talking earlier this year about the gradual reduction of market stimulus.”
He noted that, taken together, the exchange rate for such countries has fallen by ten per cent since the Fed chairman’s announcement.
What does that have to do with emerging markets, and maybe Barbados? “With the prospect of higher developed-country interest rates dampening capital outflows bound for developing countries,” writes Mr Hood, “funding for current account deficits becomes scarcer.”
In the absence of other explanations for our suddenly dwindling foreign reserves, I wonder if this could be part of the problem. Could it be that hundreds of millions of our foreign debt has suddenly matured but not rolled over into new bonds, leaving the Central Bank no option but to cash them out?
Could it be a question of confidence in the ability of the Government to turn the economy around? If investors don’t think you are going to be able to pay the interest or cash out the bonds when they come due, it doesn’t really matter how much you offer to pay in interest.
Once again, the public of Barbados is told that overseas developments are the cause of all our economic troubles, with no admission at all as to what effect our miserable economic policies over the past five years may have had to do with our position on this economic precipice.
• Pat Hoyos is a publisher and business writer.
