Sinckler came up short – economist
University of the West Indies economist Dr Don Marshall says Barbados has reached the point where it must begin debate on the issue of debt restructuring.
And, speaking to Barbados TODAY on the heels of this week’s Budget debate, Marshall said it was one of the critical issues that Minister of Finance Chris Sinckler fell short of addressing in his presentation on Monday.
Marshall said while Sinckler did a “reasonably good job” in laying the path for fiscal consolidation, borne out by a reduction in the fiscal deficit from around 11 per cent to 6. 6 per cent [of the Gross Domestic Product], the Minister of Finance had missed an important opportunity to articulate Government’s policy on continued debt reduction, growth and diversification.
While noting that both former Prime Minister Owen Arthur and Minister of Agriculture Dr David Estwick had strongly urged the Government to seriously address the debt, Marshall stressed that the debate should not be left to the country’s politicians.
“The time has come, but that debate is unfolding within the noxious environment of partisan discourse. I think it is the obligation of the media, and other organs of society to lift that debate away from such noxious terms towards a more balanced debate,” he said.
However, the acting director of the Sir Arthur Lewis Institute of Social and Economic Studies warned there were gains and losses in a debt restructuring exercise and there should be national buy-in on any such move.
He does not believe that Barbados needed to undergo a restructuring programme similar to that being pursued by some of its Caribbean neighbours, once investors maintained confidence in the economy by continuing to purchase Government paper and bonds.
“If they [investors] all collectively will roll over their debt when they become due, there is no need to undergo a debt restructuring of the kind that Belize, Jamaica and others have so undergone.
“But if it reached a point that we couldn’t be sure that when the Government paper and the bonds become due that these institutions would allow for a roll over, and by a roll over I mean when the Government paper becomes due these institutions immediately re-invest . . . then we would have to contemplate restructuring.”
Marshall warned that debt restructuring could harm a country’s image, and should not be entered into lightly despite the noise coming from some quarters.
“Now if we have to undergo a debt restructuring the first thing is, it’s an admission from the country that it is actually defaulting. Once you cross that rubicon, the situation actually becomes worse and you cannot go to market to raise any money. The only thing you get, is more fiscal space,” he said.
Marshall stressed the Government should focus on reducing the fiscal deficit even further so as to send the right signal to international and local investors.
Commenting on the wider budget debate, Marshall noted his disappointment with the parliamentary debate, suggesting that politicians from both sides of the political divide went off track, when they resorted to trading allegations.
“It’s a noxious environment. As we become a more mature democracy, I am beginning to worry about how partisan people have become. I have recognized that a lot of people’s identities are wrapped up with their party support and I don’t think the debate was any different from what we had for a long time . . . and so the Finance’s Minister reply, rather than being focused on how these targets can lead to safe waters, he ended up trying to defend a counter attack and I don’t think it was an efficient use of a reply,” Marshall said.