AS I SEE THINGS: Economy needs overhaul

Two thousand and fourteen has only just begun but already several key issues are emerging as potentially serious talking points among policymakers in various Caribbean countries.
While I fully appreciate the deliberations among our leaders in and out of Government, it is my hope that the general public would also dial in to those discussions so that at the end of it all public policymaking would have benefited from as wide a cross-section of ideas as possible. That said, I wish, specifically, to zero in on two matters in relation to Barbados and Jamaica.
Let me start first with Barbados. The debate in the House of Assembly on the Appropriation Bill for 2014/2015 has once again revealed the significant challenges facing the Government on the fiscal side. In a nutshell, current revenue continues to perform poorly while current expenditure remains high. The net effect is that the Government is finding it rather difficult to meet its projected fiscal targets.
Given the fact that the local economy has not been able to generate any significant real economic growth over the past few years, job creation in the private sector has not been robust and hence the rate of unemployment remains comparatively high, it is understandable that current revenue will suffer from both the direct and indirect tax sides. Everyone on both sides of the House should at the minimum recognise and accept this basic conclusion.
But perhaps what is even more fascinating in the Barbadian context is that it is now beyond any doubt that the economy is badly in need of structural reform. The need to restructure the local economy has been talked about for decades by those in authority. But the time has come for real action. It is absolutely clear that given the recent performances of the key productive sectors, unless major changes are forthcoming soon, the economy of Barbados will remain stagnant and economic growth will suffer as a result of increasing fiscal deficits and public debt.
To get the productive sectors to respond positively, Government has to provide the right incentives to those sectors to boost production. Hence, the Government as well as the key players in those sectors need to combine their intellectual capital to addressing this issue sooner rather than later.
In Jamaica, it was reported that former Finance Minister, Audley Shaw, is calling on the present administration “to fix the exchange rate in the interest of economic stability,” a move that has reportedly already been opposed by the head of the department of economics at the UWI Mona Campus. I am certain that over time this issue will gather momentum and rightly so as the pundits begin to weigh the pros and cons of fixed and flexible exchange rate systems and their appropriateness in relation to Jamaica. But to me, the more important consideration is whether or not the current exchange rate system is working in the country’s best interest.
If no, change the system. If yes, then, let the status quo continue.
Although I have focused on only two recent issues in relation to Barbados and Jamaica, there are clearly many other regional developments that deserve greater inputs from not only our political leaders but also the public at large because widespread discussions on critical issues could only redound to the benefit of our Caribbean economies. Without doubt, the timing for such interventions cannot be better.
Brian M. Francis, PhD, is a lecturer in the Department of Economics at the University of the West Indies Cave Hill Campus. Email bfrancis@uwichill.edu.bb