Former PM advises Government to chart new economic course
Warning that Barbados was in the departure lounge awaiting the final boarding call to disaster, former Prime Minister Owen Arthur today urged Government to chart a new course without delay.
“We are facing a very, very dangerous problem,” Arthur said as he described the measures in the 2016 Financial Statement and Budgetary Proposals as a start, but “insufficient” and “high risk”.
“The measures before the House are part of an important set of measures that can help to improve stability. They are necessary, but not sufficient,” he continued.
Delivering a lesson in economics as he took to the floor of Parliament on Thursday night, the economist cautioned the country was now on the brink of the economic and financial disorder similar to what occurred in Guyana and Jamaica, because of Government’s failure to correctly handle two glaring problems – falling foreign reserves and the printing of money.
On the issue of foreign reserves, Arthur said there was a dramatic falloff over the last eight eights despite the Freundel Stuart administration’s fiscal measures.
“This country as a small open economy has lost almost ten hundred million dollars in reserves over the course of the last three years. It’s now down 800 million dollars.”
He said Barbados was placed in this tragic circumstance because the Central Bank had been printing money to finance Government’s operations, causing the foreign reserves to fall by $600 million.
“The only thing on which the Government can be sure is that the Government cannot continue this policy of printing money by the Central Bank by which it tends to finance its operations,” the former leader warned.
Arthur, who late last year revealed that he had been approached by Minister of Finance Chris Sinckler to replace Sir Frank Alleyne as chairman of the Council of Economic Advisors, acknowledged that he had been harsh on Governor of the Central Bank of Barbados Dr Delisle Worrell on the matter, saying “ . . . he knew what he was doing is wrong, he is not helping the Government by indulging the Government’s appetite for finance by opening up the printing presses of the Central Bank”.
Had Sinckler got his wish, Arthur’s appointment would have put him in conflict with Worrel, whose economic policy the former Barbados Labour Party (BLP) leader has often criticized.
Repeatedly insisting the Central Bank must abandon the practice of printing money, Arthur urged parliamentarians not to support the budgetary measures if Government failed to abandon the “worst practice” for a small open economy.
“This House should only agree to support the policies if there is a clear declaration by the Minister of Finance that he will stop using the printing of money,” he proposed.
The Member of Parliament for St Peter, who quit the BLP and now sits as an Independent legislator, added that the Central Bank itself should also make a commitment to put a stop to the practice by following the laws set out in the Central Bank Act.
Turning his attention to the financial measures, Arthur said they were a set of proposal that reflected a determination by the administration to move away from printing money to funding its operations by taxes.
Saying that some of the measures were” neither here or there”, the veteran politician admitted they were not “easy measures” and the introduction of new taxes were in fact risky.
“Because the Government is seeking to maintain expenditure and activity by increasing taxation in a shrinking economy, the result may be that the Government does not succeed at all because if you continue to increase taxes on a shrinking economy, you will get less and less and taxes,” he maintained.
However, the former Prime Minister expressed support for Government’s attempts to increase the level of investment in the country, but cautioned that it had to pay attention to the island’s institutional arrangements.
“When you are dealing with fiscal consolidation driven by investment is a correct measure, but the institutional arrangements by which the Government is seeking to bring that is not coherent,” he said.