Wrong way

After C comes D, warns Arthur

A strong word of warning today to the Freundel Stuart administration that it is “running out of time”.

Reacting to the latest Moody’s downgrade of Barbados’ issuer and bond ratings to Caa1, former Prime Minister Owen Arthur pointed out that after “C” comes “D”; therefore the island was one notch above debt “default”, which would only mean further downgrade.

He likened the economy to an aircraft, pointing out that eight years after Government embarked on a programme of economic stabilization, it was still going through  “tremendous wind shear, being tossed and turned by contending forces,” adding that there was “urgent need to pull out and change course”.

“In economic terms it would be for the Government to recognize that you cannot go safely through what you are experiencing without a very significant change in policies,” Arthur warned, while lamenting a seeming reluctance on the part of Government “to do the necessary things that would stabilize the economy for fear that it would cause it popularity”.

However, Arthur, who was prime minister for 14 years until 2008, advised, “good politics and good policies are one of the same” and that though “the wine is bitter, it is all wine”.

In this regard, he pointed out that the current rate of growth in the order of 0.1 to 0.2 per cent really amounted to “no growth”, adding that the International Monetary Fund had told Government as much.

Arthur also expressed serious worry over the state of the country’s foreign reserves, which he said continued to fall and were now $500 million less than they were in 2008.

“That is a serious matter because the direction of the change in the reserves is what is critical; that you may still have enough for the time being ignores the fact that the direction is wrong,” he said, while concluding that Government’s growth strategy was not working and the administration was running out of financial options.

Arthur said the solution had to be more than simply “cutting spending and imposing taxes” as he called on Government to deal with its mounting debt, given that 60 per cent of its revenues currently go towards debt servicing, which raises the prospect of economic default.

“That in itself reflects a crisis,” Arthur said, warning that Government’s debt to GDP ratio was approaching 160 per cent.

The country’s former leader also suggested that more attention be paid to the business culture and “the ease of doing business” on the island, while insisting that Barbados’ economic growth must be investment driven.

He also suggested that privatization of some state assets was the way to go, arguing, “if you are cash strapped but asset rich, you have to sell assets”.

“I don’t think anything is off the table,” he said, pointing out that state transfers currently amount to $1.2 billion a year and that issues of governance also need to be addressed.

He also reiterated his warning issued during the Estimates debates for Government to avoid certain “high risk investments, such as the proposed $250 million sugar cane restructuring project, the waste-to-energy project, its planned marina project and dedicated cruise pier, which he said could not be justified on financial grounds but would add to the present debt.

Arthur also called on the Central Bank to stop printing money; a practice, which he said, amounted to economic “madness” and would only spell further downgrade. (KJ)

15 Responses to Wrong way

  1. Sunshine Sunny Shine April 6, 2016 at 5:53 am

    The idiocy of the Freundel Stuart administration is to believe that the rating agencies downgrades are a sinister ploy to destabilize the Barbados economy and, its current currency peg, to that of the US dollar as the ultimate goal. Even if there was a plot to make Barbados a target for wolves in waiting, Barbados economic position is just simply an economy gone bad with policies that have failed to work.

    The government of Barbados has been playing twiddly dee and twiddly dumb with their facts preferring to speak of growths that are in the negative that have very little impact on improving state affairs. And, lambasting the international rating agencies, and others, as if their outlook on the Barbados economic situation will change its dangerously positioned rating.

    Barbados should consolidate its current deficits via the sale of state assets since its income earning capacity is not bolstered by any meaningful productions toward exports or demand for a specific product indigenous only to Barbados. What they should focus on after the sale of these assets is to take the position of a regulator and auditor to oversee that those state assets function according to regulatory stipulations for the protection of locals and best practices of its new practitioners.

    Thus, it makes sense to embrace the advice of Arthur (as much as he is part of the blame) that in an obvious and desperate position one must resort to acts of a similar desperation if one is to survive the current turmoil.

    In addition, since Barbados has never shown any real interest towards investing tax payers dollars in any viable industry outside of tourism, it would make good investment sense to do so now since earnings can no longer be dependent on one entity. As I have said before, investments that carry the greatest risk of no returns (e.g. Cahill Waste to Energy project, the sugar cane restructuring project, and the touted Sugar Point Bridgetown port redevelopment) just reiterate Arthurs point, must be replaced with projects that can offer the island the greatest capacity to earn.

    They also should seek to heavily invest in alternative agriculture mechanisms for the growing of food and the investment of industry to produce the desired value to that food and increase our dependency on high imports with high bills.

    The current path Barbados is taking is proving not to produce or reduce, under the Freundel Stuart led administration of fiscal policies and reduce deficit initiatives. It would make good sense to heed to the alternatives put forth.

  2. Sunshine Sunny Shine April 6, 2016 at 7:26 am

    oops should be decrease our dependency not increase it…

  3. Carson C Cadogan April 6, 2016 at 8:13 am

    Who needs his “advice”?

    Certainly not the Barbados Govt..

  4. Big Brown April 6, 2016 at 8:35 am

    And that Carson C Cadogan is exactly why we are in the mess we are now. We have a Minister of Finance who does not know what he is doing, depending on a Central Bank Governor whose only strategy is to protect the foreign reserves no matter what and no one in the Dems is prepared to listen to or take sound advice.

    Lord help Barbados!

  5. Donna Harewood April 6, 2016 at 10:00 am

    Big Brown, I voted against Owen and now I regret it. He was not perfect but he sure was better. Carson C. Cadogen and Co. have egos too big to admit they were and are still wrong. They will kill us all as long as they have the reins and therefore the resources to live lavishly and tell us that we are in good health as we suffer the agonizing pain of terminal cancer.

  6. BaJan boy April 6, 2016 at 10:20 am

    @big brown the problem is that the Carson Cadogans of this country are in the little clique enjoying the fatted calf and giving people the impression they are just regular folks but they will not be in power in this country again for a long time. So he and Freundel and them can write what ever they like. The fatted calf soon gone and so is DEM….

  7. Dennis Strong April 6, 2016 at 10:56 am

    There is substance to this advice. High-risk investments are questionable practice at any time but at this time, it’s destructive.
    Removing impediments to doing business is low-hanging fruit that is now rotting on the ground.
    This nation can have sustained greatness if its leadership collectively set an example of reality-based strategies buttressed by consistent follow-through.
    God bless.

  8. bajan sunshine April 6, 2016 at 11:07 am

    It really is beginning to look like the prime minister stuart doesn’t have a plan, and is surrounded by people who are only in it for themselves. There is no way any outsider will buy state assets at any premium given the legal system and the state of Barbados’s finances.

  9. Carson C Cadogan April 6, 2016 at 11:52 am

    Nothing he says makes any sense.

    His administration, among other things, took the price of Land in Barbados in many areas from $2.00 a sq. foot to $50.00 a sq. foot.

    Barbados is in the position it is in because of his administration. During the so called boom times his administration suffered 3 ratings downgrades.

    When the DLP left office under Sandiford we left the country with a AAA rating and it suffered repeated downgrades under his administration. That was the start of the slippery slope.

    Dont tell me that you all forget that already?

    • Basil Graham April 10, 2016 at 10:09 am

      Old news Carson my friend, old news.

  10. seagul April 6, 2016 at 2:28 pm

    The SSS boy’s wasted time–wow

  11. BarbadosFirst April 6, 2016 at 7:39 pm

    To Carson cadogan, Barbados was never rated in the Sandiford error..please check your facts, neither did Barbados ever had a triple A rating. Secondly, Arthur’s advice is very much needed by the Barbados government. Did not they approach him to head the economic advisory council after Sir Frank Alleyne left that council? Please be honest Carson Cadogan.

  12. Carson C Cadogan April 7, 2016 at 7:56 am

    David Thompson asked Yesterday man to join a multi sectorial group of persons to offer advice on ways to ride out the financial storm at the beginning of the Worldwide financial crisis.

    He bluntly refused saying not him. Then he promptly hopped on an airplane and headed to Antigua and Barbuda to help the Antigua Govt. Not that his advice was any use to them.

    Now Yesterday man wants to offer the Govt. “advice”. He can keep it, we dont need it.

  13. carson c cadogan April 7, 2016 at 5:57 pm

    Just to show what an idiot Yesterday man is.

    If I or anyone with the common sense that they were born with, had advice to give to someone. The best way to offer it would not be to call in The Nation newspaper, the Advocate newspaper, The Barbados Today, The CBC, The Starcom network and tell them to tell that someone that this is what I have to tell them.

    That is not the way it is done.

  14. jrsmith April 8, 2016 at 6:04 pm

    My take our present government seems not to know anything beyond tourism. our island is at the cross roads yet again with tin cup in hand but we are claiming 50 years of independence, oh sorry (DEPENDENCY) what are we going to do, we survived for decades on agricultures that’s failing ,our sugar industry is on its last legs.
    Our government is standing in the way of progress they don’t know what to do.
    Our jobs target would have to be minimum 3000 rising to 5000, to give the people of Barbados the spending power to get us moving, to think of a manufacturing base to bring jobs this will never happen.
    Why would corporates come to Barbados to employ people when they have Electrical Electronic Computing Automation which produces one thousand times the units to the human 100 times. this is the problem for the world ..We in Barbados must use what have to produce efficiently what we could


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