Currency under threat
A leading regional political economist today warned of a very “rough and painful” road ahead for Barbados, while predicting that a currency devaluation was on the horizon, as well as another stringent International Monetary Fund (IMF)- supported austerity programme.
Professor Emeritus of the University of the West Indies (UWI), Neville Duncan, spoke to Barbados TODAY against the backdrop of last Friday’s announcement by Minister of Finance Chris Sinckler of 3,000 impending layoffs in the Civil Service between January and March next year.
Duncan, who is the former head of the Sir Arthur Lewis Institute for Social and Economic Studies (SALISES) and respected voice on regional economic and political issues, said while he generally sought to be positive in his assessment and outlook on the island, on this occasion, he really could not help but be negative, given its now obvious economic reality.
He noted that in response to its current problems, the Freundel Stuart Government had already moved to abolish free tertiary education, which had been considered a Holy Grail, by way of a significant cutback in its funding to the UWI.
“That was a severe cutback, so they would have earned some spending room; but obviously it is not enough and to lay off some 3,000 workers in Barbados is an extremely significant drop in employment given the population,” said Duncan.
He went on to suggest that with the loss of each job in the Public Service, about five to six other people would be impacted per household. This has nothing to do with other layoffs which could be pending as the private sector is impacted by the Government cuts.
“. . . So it is a crisis situation,” surmised Duncan, who lived and worked in Barbados for several years but is now based in his native Jamaica.
He also expressed serious concern that Barbados, which previously entered into a structural adjustment programme with IMF to stabilise its economy in the early 1990s, was headed right back into the clutches of the Washington-based financial institution once again.
However, he said that situation right now was even more dire than it was back then.
“It is worse because these are now actual layoffs. At that time, the Government could have called upon public servants to say, ‘Hey, look, take a pay cut and we will pay you back with interest when the time comes, when things get better’.
“That was an excellent strategy at the time. [Now] there is no promise like that that can be made because you can only make that kind of promise when you are sure that the initiatives you have taken will yield new jobs, new types of jobs to keep the Barbadian economy going; and it seems obvious to me that there hasn’t been that new and added dimension yet to the Barbadian economic development strategy,” the professor said.
On the issue of a currency devaluation for Barbados, whose dollar has been fixed at its current peg of at two to one against the US dollar since July 5, 1975, Duncan was asked directly whether he felt it was a real possibility.
He responded: “I think it is, but I don’t know how they [Government] are going to undertake any activity that can really prevent that. There has to be some adjustment [to the currency], but even that will be painful for people too, because the income they earn will be depreciated by the value of the food imports.
“Food imports will get more expensive and in Barbados you import way too much food, and so it is going to impact negatively on the people of Barbados as well,” he added.
Duncan also compared the economic situation to that which faced by banana-dependent Dominica back in early 2000 when it was forced to go the route of the IMF. The professor said Barbados was definitely worse off than Dominica was at the time. He also listed it among regional economies in trouble, like Jamaica and Guyana; but he pointed out that in Guyana’s case it was mineral-rich and had enough food resource to feed itself in its time of need.
The same, he said, simply could not be said for Barbados which he suggested had wasted precious time in diversifying its tourism-reliant economy and in recent times had been slow in reacting to the needs of a changing world economy.
And while there is more than enough blame to go around for Barbados’ economic troubles, he warned that the country’s problems did not develop overnight, as he urged trade unions, the private sector and the political Opposition to get on board with the Stuart Government as it seeks to manoeuvre through an extremely painful period.
In direct reference to the unions, which have been against the sending home of workers, Duncan cautioned them that they could make all the noise they wanted but there was simply no way of saving the 3,000 jobs. He also expressed doubt that the current situation would be any better if the Opposition Barbados Labour Party was in Government, saying now was the time to pull together a national Government in the best interest of the country.