PURELY POLITICAL: Time for straight talk
Next week Tuesday, when the House of Assembly resumes sittings after the summer recess, would be the ideal moment for this administration to start talking candidly with a disappointed people.
In fact, it would be an opportune time for at least two Ministers of Government to do more than just talk, but to fully explain the seemingly never-ending series of post-Budget mishaps (I put it no higher!) to an anxious, fearful and bewildered populace.
Let’s start with the Prime Minister, in his capacity as Minister of the Civil Service, who by now should have the analyses he ordered by September 30 of the impact of the austerity Budget package on his tremulous workforce. But it is his style to read (or sometimes, not to read) such documents, digest them, cogitate on them, before speaking
Then, there is the Minister of Finance who – along with his sidekick and chief adviser – apparently went against better advice on the failed $500 million bond tender and buyback scheme and now perhaps more than any other owes Barbadians, if nothing else, an explanation for the withdrawal of the offer, if not also for drawing Barbados’ once good name through the mud on the international capital markets.
This, of course, is quite apart from the continued uncertainty over Budget proposals such as the consolidated and municipal taxes and, until a few days ago, confusion over the VAT rate for hotel accommodation that was to take effect from October 1.
We have been told that discussions are ongoing over the tax rate to which suppliers of Direct Tourism Services (DTS) would be subjected and specifically, which services would be affected.
Correspondence from the VAT Division outlining some of those services has since been withdrawn and people in the sector, whose livelihoods very much depend on providing those services, are still in the dark.
Taken together with the deafening silence on the much ballyhooed ten-point tourism plan, announced from the rooftops in August but from which people in the industry are yet to see any benefits, these failures call into question the seriousness of Government’s stated commitment to the restoration of the health of the sector that is seen as the driver of any future growth in the economy.
But what may be of even greater importance is the likely impact on Government’s chances of raising the badly needed funds on the international capital markets with this bond disaster.
This is because Government intended for the proceeds from the bond offering to be used to finance its fiscal operations, build foreign exchange reserves and improve the country’s external maturity. There is now considerable doubt over the last objective, since the Government attempted to issue a new ten-year bond to replace existing debt that is cheaper and, according to the experts, there is no change in the maturity period.
While there is confusion over the implementation of the major policies in the Budget for those affected by measures at home, the international community seems more concerned with the implications of the policies for Barbados’ credit rating.
Part of the confusion lies in the Minister of Finance announcing one set of measures which the Prime Minister subsequently appeared to repudiate, giving rise to not decreasing the fiscal deficit by the desired amount.
There is also uncertainty about whether the country’s credit rating is going to stabilize based on the policies in the Budget, or if it is going to deteriorate further.
In the face of anxieties in the tourism sector, since the proposed benefit in reducing the VAT rate on DTS was completely offset by the tax on property values, the ability to build foreign exchange reserves without borrowing in the coming winter tourist season seems highly questionable.
The withdrawal of the bond offer on the international market has to be explained within the context of the declining foreign reserves experienced over the last four months and the prospects of another weak tourism season.
According to Dr Carl Ross, managing director of the Atlanta-based analysts, Oppenheimer & Co.: “The new money is more costly and offers very little in terms of maturity extension. To me, the only logical explanation is that Barbados needs the money badly to shore up a balance of payments deficit that is looking precarious, given the fall in foreign reserves this year.”
The blunders seem indicative of panic as much as of incompetence, since the one economic indicator that the country was being given some assurance about was the adequacy of the foreign reserves over the period of economic crisis.
The time has come not only to talk but to do so candidly. Certainly, it is inappropriate to “outsource” both our political and economic leadership. But it is equally inappropriate for the Government to continue dodging serious debate on the economy as suggested by the Opposition time and time again, especially now that offshore voices have entered the conversation and they do not have a political axe to grind.
It is time to put Barbados first and not a political family.
• Albert Brandford is an independent political correspondent.