THIS FINANCIAL YEAR will be the real litmus test for the Mia Mottley administration in its resolve to restructure the Barbados economy. For though Government has been able to stabilise the economy and stop the bleeding, it now has to implement the changes needed to put it on a sustainable path.
Does Government have the discipline to stay the course to achieve the targets it has set, especially when those who can least afford any further belt tightening begin to vocalise their suffering, and the political criticisms of the administration’s decisions intensify?
That is the question the administration must demonstrate it has the resolve to deal with.
The majority verdict from economists on the performance of the Barbados Labour Party (BLP) in its first 12 months in office has largely been favourable, but most indicate this year could be a tough one as the administration seeks to achieve the six per cent of gross domestic product (GDP) primary balance target set under the International Monetary Fund (IMF)backed Barbados Economic Recovery Transformation (BERT) programme.
The primary surplus on the fiscal accounts can be defined as what is left to service debt after the Government considers its revenues and expenditure on running the country. So spending on wages/salaries, social programmes and general infrastructural maintenance is taken out of revenues, and what is left is called the primary surplus.
Achieving the surplus target would allow the Mottley administration to spend more on fixing roads, buying garbage trucks and creating job opportunities for the most vulnerable through implementing different social programmes, and more. In short, it would go a long way towards political stability as people from all levels are feeling the pain of adjustment, especially those at the bottom of the income ladder.
This means the Mottley Government must demonstrate hard-nosed discipline while seeking to get full value for every dollar it spends. Therefore, there can be no bailing out of any statutory corporations like the Barbados Water Authority.
At the same time, the maximum revenue possible from taxation must be earned because if those fail to materialise, then the levying of further taxes may be likely – since further large-scale layoffs have been ruled out.
The dilemma facing Government was explained best by senior lecturer in management at the University of the West Indies Cave Hill, Dr Justin Robinson, in the last SUNDAY SUN.
“The next 12 months could well be the most challenging part of the adjustment to date. Under the terms of the IMF Structural Adjustment Programme the initial primary balance target was set at 3.30 per cent of GDP, and the current financial year will be the first where the 6.0 per cent of GDP primary balance target will have to be met,” he stated.
“The new administration inherited a primary surplus . . . . The additional adjustment required to meet the targets in the first year was relatively modest.
However, an adjustment of an additional 3.1 per cent of GDP will be required in the current financial year. This will require serious fiscal discipline and will severely test the patience of the austerity-weary people of Barbados and by extension, the resolve of the Government.
“The Government and its advisors will do well to take their own advice and ‘stay the course’.”
Given this scenario, we call on the Mottley administration to take the public into its confidence and explain what, and how, it intends to meet this challenge.
DR JUSTIN ROBINSON (GP)
