THE ISSUE: Govt, critics differ on handling of economy
Barbados’ economic performance has been a hot talking point for the past five years.
At the height of the world financial crisis and global recession, debate about the need to restructure the sectors through which the islands earns its money was rekindled.
Now, with the local economy back in recession and government battling protracted fiscal problems the discussion continues and the solutions differ.
The current Democratic Labour Party administration and its various advisors admit the problems have persisted for much longer than they anticipated. They have equally argued, however, that they have made the right choices with the various measures introduced between 2008 and this year.
The Opposition Barbados Labour Party, individual local economists and other individuals and institutions have argued otherwise.
One of the strongest critics has been former prime minister Owen Arthur, who was also minister of finance between September 1994 and January 2008.
On May 16, 2012, the MIDWEEK NATION, in a report on an address Arthur delivered to members of the Barbados Employers’ Confederation, quoted him as saying government was yet to bring any major, new transformational initiatives to bear far-reaching adjustments to the economy.
“This failure is deeply rooted in the official mindset, so often expressed, that our economic problems are due to the effects of the international recession, and that once the recession lifts, economic buoyancy will return. That is not true,” he said.
Then recently Arthur blamed the island’s foreign reserves problem on the Central Bank of Barbados’ printing of $370 million to purchase government treasury bills, which caused the foreign reserves to plunge.
“The printing of money on this scale to accommodate government’s fiscal deficit is the chief factor which has triggered the dramatic plunge downward in the country’s foreign exchange reserves. If this plunge is not immediately checked, the economic affairs of Barbados will enter a new and very dangerous territory. Fiscal deficits that were accommodated through the printing of money played a crucial role in undermining the currencies of Guyana and Jamaica,” Arthur cautioned.
Prime Minister Freundel Stuart, on the other hand, has not only persistently defended his government’s handling of the economic situation, but defended and praised his Minister of Finance.
On October 28 this year the Barbados Government Information Service reported him as identifying economic diversification as the most effective of stimulating an economic revival. This included focusing on the renewable energy sector and other areas, including the cultural industries and new tourism product.
“The strategy is to develop the cultural industries as another economic platform on which Barbados can depend, since they rely solely on the well known creativity of our human resources, as demonstrated by the Landship.
It will help talented Barbadians to acquire the entrepreneurial skills to transform the sector and make a significant contribution to the country’s GDP,” Stuart said.
Other voices have had their say, including Central Bank of Barbados Governor Dr DeLisle Worrell and other veteran economists such as Sir Frank Alleyne and Professor Michael Howard.
While Worrell and Sir Frank, who heads government’s economic advisory council, have also defended the administration’s fiscal and economic policies as being correct for the current times, Howard has differed, suggesting to the MIDWEEK NATION on October 30 that officials should consider turning to the International Monetary Fund for help.
Howard said the depressed state of the economy and the recent rapid decline in the country’s international reserves should signal to policymakers they may soon have to “seek IMF accommodation” as a cheaper source of funding and balance of payment support.
“The Government already has an austerity programme in place which can be accommodated under an IMF programme,” he said.
Barbados Economic Society (BES) president Jeremy Stephen and his predecessor Ryan Straughn have also identified a need for government to do more, especially to spur investor confidence.
“We at the BES believe that if the Barbados Government is not able to implement any growth initiatives as outlined in the Budget, that is make sure the financing of the Four Seasons project bears fruit so that construction resumes post-haste, as well as the Almond Beach project . . . and about two or three other projects – if those are not put into place then it is very likely that the confidence within this economy will dip a lot more,” Stephen recently told the DAILY NATION.
Additionally, Straughn said: “Investors do not have the kind of information which IMF officials would collect when they visit a country . . . and the IMF was here in July prior to the investment road show [by the Minister of Finance] in the international market. Given that Barbados is the only country that isn’t projected to grow, that of itself would signal to the market that something is not right here.”