Slippery slope

Holder: Latest downgrade worrying

The latest downgrade of the Barbados economy is an indication the country is approaching crisis levels, according to Chief Executive Officer of the Small Business Association (SBA) Lynette Holder.

Concerned that Government continues to finance the country’s high debt and deficit through the printing of money, Caribbean Information and Credit Rating Services Limited (CariCRIS) lowered its ratings on Government’s $300 million debt issue to CariBBB from CariBBB+ and its foreign and local currency rating from CariA-  to CariBBB+.

Lynette Holder

This brings the number of downgrade to more than a dozen since 2009, and Holder said it was not a good sign.

“[It] suggests that we are near crisis level, if not there,” the SBA executive said.

Holder blamed the recent downgrades on the failure of Government’s fiscal policies, and she called on the Freundel Stuart administration to “come back to the table, engage the public, engage the citizenry and look at what strategies we need to put in place to correct those failures”.

She said it was no longer good enough for the Prime Minister and members of his Cabinet to address important national issues such as the state of the economy at Democratic Labour Party meetings, insisting the entire country ought to be part of the efforts at a solution.

“We have a situation that is national in proportion and therefore we need to hear from the leaders of this country. We need to have national dialogue that will engage business leaders, civil society, trade unions et al, to look at the solutions to getting our country on a growth path. That is really it. It is no longer business as usual,” she said, adding that Government should put politics aside and think about the country’s future.

While the latest downgrade was troubling to business leaders and economists, it did not come as a surprise to any of them.

Among those who saw it coming was President of the Barbados Chamber of Commerce and Industry (BCCI) Eddy Abed who saw the deficit as a huge weight dragging down the economy.

Eddy Abed

In fact, Abed said unless Barbadians demand a reduction in Government spending the country would continue “on this slippery slope”.

However, he warned that any cuts could lead to “further hardship to those who depend on Government’s welfare and entitlement programmes” in the short term, but Barbadians had to understand that the social programmes were costly and would have to be paid for by user fees, or drastically scaled back.

In any event, Abed said, many of the social programmes were so poorly financed that the quality had fallen and would “only get worse without a medium-term solution that requires all stakeholders to brainstorm as to which of Government services should be maintained, privatized or restructured in a private/public partnership.

“There are no easy solutions and to further kick the can down the road will result in greater hardship as the size of the problem will only get larger,” Abed said.

Similar sentiments were shared by Executive Director of the Barbados International Business Association (BIBA) Henderson Holmes, who expressed concern that continuous downgrades could deal a devastating blow to the island’s attractiveness as a jurisdiction in which to do business.

Henderson Holmes

“No downgrade is good news for Barbados; it just makes our situation worse. There is not much we can say about that other than we are now in a very serious and difficult position in terms of our attractiveness to the rest of the world. We have to be very concerned about that,” Holmes said.

The business executive called for a medium to long-term solution which would include an environment that is conducive to business, warning that additional taxes would not cut it.

“We are not going to improve this by political will or by increasing taxes. There is just so much tax you can get in a reasonable way from an economy of this size, but you have to grow the economy. We have to encourage more business activity. In other words, we have to pay attention to the whole business facilitation or the ease of doing business in the country,” he said.

Meanwhile, commenting on the downgrade in a post on his Facebook page this morning, economist Jeremy Stephen said “the particular debt issue of US$300 million was seen as very problematic” and the downgrade could make it more expensive for Government to borrow regionally.

Jeremy Stephen

Stephen also suggested the downgrade meant CariCRIS was “expecting a devaluation without saying that much”.

“Any time you see a rating drop like that it increases the likelihood, in their minds, of a devaluation coming sooner rather than later,” he said.

However, he did not expect Government to take the latest downgrade too seriously, although he thought there would be “a lot of political will this year to get some . . . tourism projects pushed through.

“So let’s put it this way; they are not going to take it that seriously yet they are going to do all that they can to avoid further downgrades,” Stephen said.

marlonmadden@barbadostoday.bb

25 Responses to Slippery slope

  1. Lilian Lloyd
    Lilian Lloyd January 11, 2017 at 11:27 pm

    THE PIT AND THE PENDULUM

    Reply
  2. Ryan Bayne
    Ryan Bayne January 11, 2017 at 11:32 pm

    Well, American icon Paul Simon’s song says it best:
    We’re slip sliding away.

    Reply
  3. Anson Sobers
    Anson Sobers January 11, 2017 at 11:45 pm

    Clearly this government has no idea what it is doing!!! We honestly as an island and people need to have more power to overthrow a government when it fails to deliver proper results for the country now come next election all these deplorables will be smiling all the way to the bank with a guaranteed pension while some of us continue to suck salt and wonder if we will get a pension. #sickodem

    Reply
  4. Francis McClean
    Francis McClean January 12, 2017 at 12:26 am

    Boy they are in a mess. As per the article they must cut spending; the welfare programs and entitlement programs which are in disrepair because they are so poorly funded. Just imagine them cutting those programs. The poor people are in trouble. Where else can they raise taxes? what else can they cut? They must find a way to generate revenue along with the cost cutting and tax raising. The article suggest that they must engage the public and the private sector for ideas. It’s obvious they are at their wits end with elections creeping up. They cannot cut and tax their way out of this mess. The long term approach solution
    to this mess has passed for they have run out of time. Downgrade after downgrade has placed us in a bind. Who will lend us money and at what rate. The continued printing of money is problematic. Look at what happened to Germany after world war 1. The money eventually becomes worthless. Devaluation is not a good thing. God help us.

    Reply
  5. Sandra Madea
    Sandra Madea January 12, 2017 at 1:50 am

    Call election now. #DlpMustGo

    Reply
  6. Leroy January 12, 2017 at 1:53 am

    One accountant friend of mine said that just as long as we can meet our obligations we dont have to worry,, what a short sighted and shallow reply I always get from him, who should know better,only a dem would make such nonsensical statements. The only way out is to grow the economy, we need serious investment in manufacturing and tourism, gov need to unshackke the private sector to allow for inflows of cash, either that or devaluation.

    Reply
  7. Hal Austin January 12, 2017 at 4:21 am

    The country is not approaching crisis level, it is in deep crisis and has been for a number of years.
    There is a myth that tourism can come to the rescue. Barbados gets about 600000 tourists a year, not cruise liners passing through, let us assume those tourist spent a per capita sum of $30000, a fantasy figure, we are simply talking about Bds$180,000,000.
    Is this enough to rescue the economy. The reality of course is that during the credit boom most UK tourists were coming to Barbados on debt, their credit cards. This is unlikely to happen again for a long time.
    The most consistent travellers out of the UK to the Caribbean will be heritage travellers, like the young people in my home who would not mind spending two weeks ever so often with their grand dad, but they also want to see the rest of the world. Our tourism marketing strategy does not include these people.
    Out of North America, in particular the US, most of the new tourism will be to Cuba.
    What the Barbados economy needs is urgent restructuring. Nonsense about international business is deceiving. IBCs only provide about 4000 out of a total of about 150000 jobs, including a growing number of university graduates.
    We cannot depend on China, a Communist country with a repressive military history to be our saviours.
    Many, if not most, small businesses cannot even afford cash flow, using their income tax, VAT and national insurance liabilities to keep their zombie businesses going. As soon as interest rates rise, these businesses will formally fail.
    Yet government keeps subsidising these privately-owned family-run, badly-managed businesses without demanding a say in how they are managed, shifting tax payers money to the wealthy and well to do.
    Barbadians are nervous, they are living in fear of losing their jobs, their homes, their lifestyles. They are desperate.
    That is the reason why they allow irresponsible trade union leaders to act like bandits in their names. They see no other way out – apart from migrating.
    We have already lost out international lines of credit and this latest downgrade means we are in danger of losing the regional rescue lines.
    Barbados is in serious trouble and those of us who see the mess from afar, and know there is a way out, are left in tears.

    Reply
  8. David Hall January 12, 2017 at 5:13 am

    The most disturbing in all this is the Government and the Central Bank’s persistence in pursuing unworkable (tried,tested and failed) fiscal and monetary policies respectively.

    Reply
  9. seagul January 12, 2017 at 5:22 am

    Trade generates incredible wealth, and links the lives of everyone on the planet. Yet millions of people in poor countries are losing out. Why? Because the rules controlling trade heavily favour the rich who sets the rules. Many poor countries can only afford to export raw materials, which give far lower returns than finished products. For example, the rich world buys cheap cotton and cocoa and turns them into expensive clothes and chocolate – reaping all of the profit. At the same time, poor countries are threatened with having loans withheld unless they open their markets to rich countries’ exports. When we revolt it’s not for a particular culture or party. We revolt simply because, for many reasons, we can no longer breathe. A silent word to the petty bourgeoisie….the revolution Bridgetown.

    Reply
  10. Hal Austin January 12, 2017 at 5:33 am

    Leroy,

    That is why your friend is an accountant and not an economist. Paying interests is one thing, but the capital debt still remains. When the base rates goes back up, and it will as night follows day, what happens then?

    Reply
  11. Hal Austin January 12, 2017 at 5:41 am

    go

    Reply
  12. Tony Webster January 12, 2017 at 6:16 am

    Peoples…please save @Hal Austin’s succinct analysis; date it; frame it; and think on it, as we make our merry way through the aproaching “Silly Season”. Help your kids both to read it, and to undertstand it….like if your very life – and their future, depends on it. I cannot even say, that we now have the dice in hand, and this is our “last throw”, for there is a smell of blood in the air….OUR blood, we have already squandered our several “Last Chances”, and like a wandering sheep we apparently await the shepherd to come find us in the appraching winter blizzard.

    Yes, unavoidably, and inescapably, there will be tears; and hard heads, shall learn hard lessons. The most dangerous weapon I have ever encountered in my 73 years, is an indelible pencil: it is (figuratively) sharpened at both ends: one for good; and one for ill. Remember when you contemplate, just where to put that “X”.

    BTW for our true-true-citizens: if anyone, anyone wearing yellow, or red, wid a grantley in he hand… or a tablet… or anything so, might approach you wid an Anansi-like smile in the coming months, …tell him/her…that you have self-respect, and to shove it where the light doan shine. That person, dear citizen, is not your friend: he is your mortal enemy and the nemesis of you, your children, and your country.

    God Save Bim.

    BTW #2, for @Hal Austin: masterly, Sir…just tek bow!

    Reply
  13. bajan boy January 12, 2017 at 6:20 am

    Leroy all accountants or so called accountants like Sinkler and Kellman with not an ounce of economic knowlege think like that hence we are here in the guttet..

    Reply
  14. The Negrocrat January 12, 2017 at 6:39 am

    We talk and talk and talk and in the meantime a handful of ignorant people are mashing up this Island.
    Time to get rid if them “by any means necessary”

    Reply
    • Peter January 12, 2017 at 8:13 am

      I am in full agreement with you. It is passed the time Barbadians take the bull by the horn. Barbadians are not known as violent people But the bible which by which we are guided, tells us that if thy right hand offendeth thee, CHOP IT OFF!

      Reply
  15. harry turnover January 12, 2017 at 8:10 am

    People….,the DEMS are making sure this time around that the FOOLISH people who voted for them in the last election do not vote for DEM again.
    They didn’t expect to win in 2013 and ALL the things that they said the BLP would have done if they had gotten in…..DEM had to turn around and do .
    The MOST glaring….NO LAYOFFS during the buildup to the elections….the BLP has plans to lay off over 3000 public servants if elected.
    After they won….LAYOFFS would be THE LAST resort and to make it look like that.. dilly dallying until they couldn’t dilly dally any longer as the economy was rapidly plunging…..over 2000 public servants GONE.

    Reply
  16. Kim Marshall January 12, 2017 at 9:07 am

    It would be interesting to hear what anyone in the current administration will say about this downgrade as it was made by a Caribbean credit rating agency. The mantra after every single downgrade we have had before was that international credit rating agencies do not understand how things work in Barbados. CariCRIS is based in Trinidad and Tobago! Certainly the country that owns a number of prominent businesses in Barbados understands quite a bit about how things work in Barbados so what will be excuse made this time?
    As a citizen of Barbados, I would like the truth…..for once. Not what is politically advantageous but the truth. Don’t I deserve that as a citizen who would like to to plan their future in the land of their birth? How can I do that if the government running the country cannot be honest enough to say that a devaluation may be or is on the horizon?
    So we call elections and the BLP or Solutions Barbados or whatever party gets in. Will that stop the devaluation of our currency from happening if we are at the point where this happening cannot be stopped? No! Will we ask for elections again if the new Government announces, after one week of celebrating their win, that a devaluation cannot be stopped and then start to blame the DLP for why it cannot be stopped? I am asking the Government, the people currently in charge of the government of Barbados, please respect the citizens of Barbados enough to simply state the truth about the state of the economy. You cannot fight a disease of the body by pretending you do not have the disease. Denial cannot help us at this point; acknowledging what is the truth (even it is painful) will be a good place to start.

    Reply
  17. Carson C Cadogan January 12, 2017 at 9:51 am

    The usual suspects saying the same old things.

    Reply
  18. Alex Alleyne January 12, 2017 at 10:47 am

    @ CCC, Missing from this picture is the “big money white men”.

    Reply
  19. jrsmith January 12, 2017 at 11:57 am

    The 1% which control our lives in Barbados ,are the ones who never worry themselves about politics….
    We have a try this try that government, a bunch of people who have no idea of running or Managing the country.
    As I always say you plan to build a house you employ 30 people but they are all painters, so where do you go from there…..
    Barbados is ripe for the taking but not by bajans…

    We have a top heavy non productive political infrastructure , a small island with too many politicians , what do they do, where do they live , what is they jobs , when do they meet they seems not to even know they job titles, you only hear from them when they are on overseas visits….
    @, Kim M , hail, hail, both barrels on the bulls eye , If you may recall an (AUDIT GENERAL’S) report was displayed to us mid (2016), hundred of millions of dollars owing to the treasury none of which seems to be accountable for, most departments in this here Barbados , have not been audited for decades , no one really showed any real concern , in some countries lots of politicians would have been arrested …
    Next comes tax avoidance , then not collecting the said tax which friends and families and friends of certain people dont pay…
    This is as though this government was put in place to destroy Barbados , these politicians is preventing our country from becoming prosperous……

    Reply
  20. Carson C Cadogan January 12, 2017 at 4:47 pm

    These people were predicting that the country would collapse since 2008.

    Now lets see what happen in 2008?

    Oh yea their party, the Barbados Labour Party, was booted from office. And they have not gotten over it up to this day.

    Reply
  21. Carson C Cadogan January 12, 2017 at 4:54 pm

    This is almost ten years that they have been hoping for the worse for Barbados.

    Reply
  22. Mickey January 12, 2017 at 6:54 pm

    Cannot believe how people are blinded by political BS Barbados simply in a mess

    Reply
  23. eddy murray January 12, 2017 at 8:24 pm

    When the lady in white said,let us march, we have no confidence in the MOF we like sheep, refuse to answer the call. When she said we have no confidence in the government we laught at her and call her a bare pooch cat. I wonder who pooch is getting bare.

    Reply
  24. John Q January 13, 2017 at 2:05 pm

    Gov’t doesn’t know or doesn’t care. As long as their pockets are being lined ….. it is all good !!!! Come back to live in Barbados ……. HELL NO !!!!!!!

    Reply

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