IT’S MY BUSINESS: Case of no confidence, no revenue
“. . . (N)oting the loss of over $300 million in reserves in just over three months, it would be reasonable to deduce that much of this could be attributed to a decline in the level of overall confidence in our economy by foreign and domestic investors alike.” – Minister of Finance Chris Sinckler, Budget Speech, August 13, 2013, Page 27.
When you go hunting through the speeches of our Minister Of Finance, you find yourself trying to dodge over-the-top statements, comprised of sheer bravado, about how well the Government is doing. While this may be true to some extent of all political speeches, including budgetary statements, I find it has been very pronounced under the present minister.
However, amid the self-congratulation in the last Budget Speech and spirited defence of why policies and legislation promised a long time ago had yet to be implemented or enacted, there were some nuggets of hard reality.
The quote used at the start of this column is but one of them, although it may be the most telling. It was as if there could be no denying, when all was said and done, the most basic problem besetting the country right now, representing the culmination of all of the missteps, mistakes, arrogance and sheer hard-headedness of the present administration, nominally run by Prime Minister Freundel Stuart.
Here is how Mr Sinckler summed up the Central Bank’s report on the economy for the first six months of 2013, following on from what he called a “flat” 2012:
• “There was contraction in all the main foreign exchange earning sectors, while private capital inflows were less than the previous period.”
• Real GDP contracted by 0.6 per cent “owing to a 3.7 per cent decline in the tradable (foreign exchange earning) sector and weak performance in non-tradable (domestic) activities”.
• That decline in the foreign exchange earning sector was due “mainly to a 1.4 per cent decline in tourism output and depressed performances in both the manufacturing and agricultural sectors”. (Budget Speech, pages 18-22)
The terse announcement last week that the same Government had been unable to raise half of the foreign currency it had been authorized to raise should therefore not surprise anyone.
I wonder if the sudden pouring of cold water by Mr Stuart on the announced plans to cut back on spending had anything to do with it, considering it placed on hold much of the thrust of the Government since June when it released its Medium-Term Growth And Development Strategy, sacrificing it to expedience when a groundswell of complaints against his administration’s handling of things started to build.
Albert Brandford’s excellent reporting also showed how the downgrading of Barbados’ debt to junk bond status has begun to have a tangible impact on our ability to raise money abroad. “When Barbados’ credit rating fell below investment grade, it lost its insurance company investors,” Dr Carl Ross, managing director of Oppenheimer & Co. of Atlanta, told Mr Brandford.
Remember when we were consistently told a downgrade was no big thing because the Government did almost all of its borrowing on the domestic market?
Finally, refinancing at a higher rate for just an extra year or two on the life of the bond issue certainly suggests desperation on the part of the Government. Whatever happened there, it once more reflects the “loss of confidence” in his own Government so well put by Minister of Finance Sinckler last August.
A classic example of how loss of confidence quickly causes loss of revenue.
So with the Prime Minister ring-fencing the Government employees, and the hoped-for lenders ring-fencing their capital we so desperately sought, what will Barbados do next to bring in foreign exchange over the next six months? Will we continue to operate government with money we don’t have and can’t even borrow?
If we had a less distant administration than the present one – which, as far as I am concerned, could as well be operating out of its embassy in China given the amount of information and explanation offered to the people on how it is spending their money – we might have a better understanding of the state of the economy.
Ah, China. I forgot. Let us now turn our hearts and minds to the east. The Far East.
• Pat Hoyos is a publisher and business writer.