Home-grown fiscal strategy working – Sir Frank

Government’s home-grown fiscal strategy today got a vote of confidence from a top economist.

Contrary to what many observers have said, former Chairman of the advisory council on the economy Sir Frank Alleyne said he was convinced the Medium Term Development Strategy 2010/2014 was working.

“It is inaccurate to say that the Medium Term Development Strategy failed. Not so. It is because of the Medium Term Development Strategy that this economy is turning around and showing growth. The growth is not as significant as we want it to be . . . but the economy is showing growth and all the estimates suggest that in the next ten-month period growth is going to pick up to a further extent,” Sir Frank today told the Democratic Labour Party (DLP) lunchtime lecture on Fiscal Consolidation in Small Developing Economies at the DLP’s George Street, St Michael headquarters.

The retired academic pointed to the performance of the tourism sector and the fact that the international business sector had “turn the tide and is tracking again” as proof.

However, he blamed “persistent downgrades and the cost of going to borrow money” for the failure of the agriculture sector to live up to expectations.

Sir Frank said the economy had already “hit bottom” and was now beginning to pick up, but it would require fiscal discipline to drive down the debt to gross development product (GDP) ratio to about 70 per cent, insisting the most effective way to reverse the fiscal challenge was to control public spending.

However, with an election due next year, he was not certain the administration had the “courage” to take the risk.

“Reduction in the tax ratio as a percentage of gross domestic product as the value of goods and services in Barbados is better said than done, but it takes courage to do it especially with the election 15 months down the road. But failure to do that has enormous negative consequences in our society,” he warned.

Nevertheless, the respected economist advised against blanket cuts, stressing it would be dangerous to do so.

He explained that some services such as education up to secondary school level, health services, social services and infrastructure and developmental projects ought to be the last areas Government should seek to cut, and that health care funding should be tailored to help the most vulnerable.

In seeking to pin point the source of today’s economic woes, Sir Frank revisited the period of the Erskine Sandiford (now Sir Lloyd) administration in the early 1990s.

He argued that the fiscal measure implemented at the time, including a cut in public servants’ salaries, had worked, and by moving away from it the economy was again placed on a path to trouble.

“I am convince that the failure to embrace this adjustment strategy set by Sandiford in large measure accounts for our difficulties or our lack of capacity in dealing with the collapse of the financial services sector in the western world in 2008,” Sir Frank said.

The Sandiford Government collapsed in 1994 and the Barbados Labour Party under the leadership of Owen Arthur – who at one time was tipped to replace Sir Frank as head of the economic advisory group – oversaw a period of sustained growth.

Sir Frank added that reduced productivity and a lack of reward for productive staff also contributed to the shrinking economy.

In any event, he said “there are times when budget deficits are unavoidable”, but warned against taking such deficits to the extreme.

“What we know is that budget deficits carried to extremes are dangerous. They can lead to the collapse of the economy, and when I say budget deficits carried to the extreme I am speaking about situations where from year to year you are generating a budget deficit on current account,” Sir Frank said.

5 Responses to Home-grown fiscal strategy working – Sir Frank

  1. James Austin Bynoe
    James Austin Bynoe January 21, 2017 at 3:20 am

    Total nonsense Sir Frank and average Bajans know it …

    “I see they pulled you out the closet and dusted you off for another outdated economic assertion” …

    I guess it’s that time …

    Reply
  2. Greengiant January 21, 2017 at 10:56 am

    Then give us your economic assessment and solutions Jame Austin Bynoe, and please don’t tell me ” a change of government “.

    Reply
  3. Hal Austin January 21, 2017 at 11:02 am

    This is a bold statement. What is the homegrown fiscal strategy? Plse spell it out, what it is and how it is projected to work?
    Other wise it is more useless rhetoric.

    Reply
  4. C. Louis King January 21, 2017 at 6:22 pm

    A strategy can be called a success from two standpoints, either as a mitigating factor, or as an outright cure. The world is STILL in recovery mode from the US caused world wide economic downturn, so there can be no outright cure for this disease. This suggests that Barbados will inevitably be in the grip of extrinsic factors, the looming Brexit debacle being one of the knock-on outcomes. This also suggests that there is NO WAY than any fiscal or monetary strategy can ever be anything but a mitigating factor in our economic woes. So things could be on a downward trend, even though our fiscal strategies might have yet save us from worse times.

    Reply
  5. C. Louis King January 21, 2017 at 6:27 pm

    ADDENDUM:
    I meant to add: … Therefore, before we can accept Sir Frank’s bold assertion, he (or the reporter,) needs to reveal more of what that strategy was, and intended to do, so that we can make a more detailed assessment of its efficacy.

    Reply

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