Start by cutting back at the Post Office, suggests Arthur

Former Prime Minister Owen Arthur today warned of the need for immediate rationalization of Government, suggesting the General Post Office (GPO) may be a good place to start.

However, given the urgency to bring down the national deficit, he again called on the Freundel Stuart administration to revisit its spending on all 63 statutory agencies.

Pointing out that transfers and subsidies to these entities were originally $1.2 billion, Arthur said it was a luxury Government could no longer afford.

Therefore, he said immediate expenditure cuts would have to be made.

“It is going to be a difficult adjustment, but it is less difficult than having devaluation,” he told Barbados TODAY following the latest report from the Central Bank which showed the island’s foreign reserves had fallen below the benchmark 12 weeks of import, to less than $700 million at the end of December.

Since then there has been every indication that the situation has worsened, with transfers to state-owned enterprises having fallen by $17 million, although interest payments rose by $53 million.

As at January 2017, capital expenditure had also fallen by $36 million and the overall fiscal deficit, estimated at $665 million, was said to $5 million smaller.

With the situation as it stands, Arthur cautioned that “to refrain from doing what you need to do is going to cause more pain than doing that which you need to do”.

Zeroing in on the operations of the GPO, he suggested that amid technological change, the island’s postal services were now ripe for rationalization.

“I am not saying to sell it, but I can’t tell the last day I sent out a post card  . . .  .Yet every year you have to transfer into that,” he said, while pointing out that “Trinidad addressed theirs, New Zealand addressed theirs [but] we in Barbados continue to bury our heads under the sand.

“We have to rationalize the operations of a post office to make it compatible with living in a world where people are no longer sending to you through the post, but sending messages and post cards by WhatsApp,” the former prime minister and minister of finance said, while emphasizing that adjustments had to be made.

Arthur also acknowledged that state rationalization had been recommended by the International Monetary Fund. However, he said even though the process was now past due it had apparently been halted following the controversial early retrenchments at the Barbados Investment and Development Corporation in 2015.

To get the process going again, he suggested that Government would have to move quickly to try to forge a “national consensus” similar that which existed in 1991/1992 when the then Erskine Sandiford administration was faced with a possible currency devaluation.

However, with a worrying deficit, he emphasized that there could no longer be any sidestepping of the matter, neither that of privatization, which he said must be dealt with “in an enlightened way given that Government is asset rich and cash poor.

“All that privatization means is that the [entity] is now owned by the private sector rather than the Government but it has nowhere to go,” Arthur said in defence of divestment.

He also suggested that it could be an option for the state-run Transport Board, since the national transport system was already largely private. However, he said where possible Government’s divestment strategy should enable workers to have rights of ownership too.

To date, the Freundel Stuart administration has shied away from privatization, except that it recently announced the proposed sale of the Barbados National Terminal Company Limited to energy giant Sol. Today Arthur described the proposed sale as only a “stop gap” by Government which he said still needs to address its “excessive expenditures” that have created too large a deficit.

“We are fully loaned up to local banks . . . we have utilized the National Insurance to the hilt and because of the downgrades you cannot go and borrow from institutions [or] investors abroad who have a duty of care not to put pension funds and  other investments in junk bonds,” he explained.

And with the Central Bank now refusing to print money, he stressed that the only other option was to cut the size of Government even though it may be an unpopular option politically.

With the Stuart administration currently banking on the delivery of several capital works projects, including the US$100 million Hyatt hotel, Arthur further cautioned that the dollar value would not be delivered in one fell swoop.

“They [the developers] will bring in enough [money] to meet wages and local purchases and hold the rest in a foreign account to pay imports,” he said.

14 Responses to Start by cutting back at the Post Office, suggests Arthur

  1. jus me February 9, 2017 at 2:58 am

    Sorry Mr ARFER
    disagree totally.
    WE do not have our heads in the sand THEY have THEIR heads in the SAND.

    So lets say we DO AWAY totally with the post office, which is not a bad idea,as my experience of it ,is that its a mess of obstructive individuals. Doing nuffin but Maliciousness to US the general public

    What do we do with the problems, or is it back to the SAND recipe?
    These problems??
    They don’t get severance?
    Unemployment?? etc etc etc.
    From which they will NOT PAY any taxes, at least while them employed the Government can steal from them ,overly, like it
    does from us.

    The system is in BIM and always has been,for all my years,that DEMS take whatever they are able , and then kick the can down the street, cos DEMS sure dey ent around to have to pick up any cans , when can pickin time rolls round.

    My feeling is we way past tipping point, and those responsible will be away in fair foreign lands enjoying the fruits of their/ OUR labours ,when we get to zero hour..
    Hi to ZIMBADOS ,Hi Barhaiti. Take your pick, same difference.

    Reply
  2. Hal Austin February 9, 2017 at 4:12 am

    Instead of cutting back on the 18 post offices, government should turn them in to post office banks, as part of the financialisation of the local economy.
    Every public servant should be paid through accounts with the new balance sheet bank, which would offer instant access and notice accounts, credit and debit cards, standing order and direct debit facilities, mortgages, and small business accounts. It would be prevented through the new legislation from engaging in wholesale and investment banking and high-risk funding strategies.
    Credit and liquidity risks would be strictly managed and so would duration, ie borrowing short and lending long would be based on soundly based cash flows and not speculation.
    This means new deposits, inter-bank loans, household loans, etc would be measured and cautious.
    It was a large mistake to sell the Barbados National Bank and to now sell the post offices – does this proposal include the mail network, which is a separate business to the post offices?
    What we really need is a proper national debate rather than people who ought to know better intervening with silly ideas as if they were political snipers.
    Arthur had 14 years n which to do all these things. He still needs to explain why he did not.

    Reply
  3. Don Keyote February 9, 2017 at 5:52 am

    It shows a total lack of conscience that with Government finances in a deadly stranna, the Stuart administration can maintain the largest cabinet in the history of Barbados, with all the attendant high salaries, not to mention the callousness of restoring their ten percent pay cut, having sent home thousands, with thousands more surely to go. Based on performance, there should have been a further ten percent cut, not a restoration. Thirteen ministers, thirteen ministries in a 2 X 4 island. Shows us exactly the kind of people we are dealing with. The skeleton of the fatted calf moos for mercy.

    Reply
  4. Francis McClean
    Francis McClean February 9, 2017 at 6:08 am

    OMG they have backed themselves into a corner with no easy way out. The economist has spoken with sound advise although not popular, seems to be the best solutions. Cutting more jobs will certainly seal their fate but as Mr Arthur said technology has rendered certain operations at the post office obsolete. Oh dear

    Reply
  5. David Spieler February 9, 2017 at 6:23 am

    Air parcel post is key for survival of small exports. If this were changed the overnight courier rates, like fed ex and DHL would be the only alternative. Customers usually won’t pay the higher rates for parcels, and so this avenue would be lost.

    Reply
  6. Hal Austin February 9, 2017 at 6:27 am

    Don,
    That is a moral issue, and you are right. The real problem is that they are all unproductivity – getting paid for not turning up at work. That is the Bajan disease, wanting something for nothing.
    But I have seen these very people working on London Transport and in the national health service, getting up at 3am, and going to work in foot high snow; paying thee forms of taxation: National (Federal), county (state) and local (city) without a single complaint.
    More important, despite 14 years as prime minister, post-graduate studies in economics, it appears as if Mr Arthur still does not understand the importance of financial intermediation’s role in economic growth.
    The literature is there: endogenous growth theory, see the works of Nobel Laureate Merton Miller; Bagehot wrote about this in 1873, and Pagano in his “Financial Markets and Growth”, in the European Economic Review.
    We do no try to re-invent the times table, or the ABC every generation. Why is it that Barbadian politicians always try new economic strategies even when they have clearly failed.
    I think Arthur wants an opportunity to make up for his failed years. He should move on.

    Reply
  7. Bajan boy February 9, 2017 at 7:59 am

    Stuart still thinking elections as he has been doing from the beginning. He is just too shame to even call the words privitization or divestment and worst to actipn towards such. He is as simple and childish as they come. He was the one who made a mockety of Owen’s assertion last elecyion that it was the way to go in order to bring the economy back to some respectability yet he denounced it yo win an election without consideration for our country. He just does not care since his lofty position has made him better off in 6 years than he ever was in his previous 61 years. He will not even call an election in the interest of the country since he continues to gloat in being PM and is lazier thsn a tortoise…

    Reply
  8. Baje Man February 9, 2017 at 8:38 am

    I don’t know what Hal is on about; it seems as though he’s fixated on the sale of BNB years ago.

    A government doesn’t have to own a bank for the country to flourish. It does need to manage it’s finances though;
    right through to efficient payment of salaries and bills. But products like credit and debit cards? No need to waste precious government funds on that. Regulate financial institutions if you must and deregulate where necessary to encourage more financial institutions in Barbados.

    Mr Arthur has had 14 years as prime minister, a post-graduate deg in economics, and several Caribbean governments have been interested in hearing his views on economics. He left office with almost $2 bn of foreign reserves in the coffers. We have ~$600 million now. It doesn’t take a genius to realize what could have happened if we didn’t already have such a large foreign reserves buffer.

    And yet the Hals of this world will say he does not understand the importance of financial intermediation’s role in economic growth.

    Economists are not gods. Economists get it wrong all the time. But as an economist, Mr. Arthur track record has proven himself as more than capable.

    Anyways; rationalization of the post office makes perfect sense to me as a start. Cuts have to be made to safeguard the country and no one’s talking about shutting down post offices; just using more technology where possible across the board and cutting down on inefficiencies in the Post Office.

    Yes, Bajans will feel it, it will be difficult for many, but if cuts have to be made to help to protect the Barbados dollar, let’s stop kicking the barrel down the road and get on with it.

    Reply
  9. Philip Matthews
    Philip Matthews February 9, 2017 at 9:16 am

    I wonder how many would Still be working if we did not have so many loans to build hotels and fits of fantasy?

    Reply
  10. Nico HL Beckles
    Nico HL Beckles February 9, 2017 at 9:23 am

    Look at licensing first about 20 people in the pine alone just taking up space

    Reply
  11. Shaunie Nurse
    Shaunie Nurse February 9, 2017 at 9:26 am

    Why didn’t he cut back when he was in office? Don’t act like this is a recent development.

    Reply
  12. MIIB February 9, 2017 at 10:10 am

    King of privatisation, sell sell sell and herd the locals in the middle of the island like cattle. The PO is a pivotal industry, forget Internet, forget courier services everything gets scaled as a people we are not against change, we embrace it, but how many MP’s, any serious political leader would look at the drain this is, in fact they want their 10% back, country top heavy badly, instead of restructuring from bottom up be efficient and start from top down…..

    MIIB

    Reply
  13. Observer February 9, 2017 at 4:48 pm

    Mr Arthur r u crazy,u have all of those government workers in the streets,in the offices,beach baths,and other places that I wouldn’t mention ain’t doing shit when the day come ,and the only government workers that really work you Mr Arthur got a nerve to want to mess with the postal worker’s that really works hard and have to put with a lot crap when the day come you need to stop

    Reply
  14. Hal Austin February 10, 2017 at 6:12 am

    Baje Man,s.

    Govts do not have to own banks, but the role of govt is to be a facilitator; if small businesses and households ae not getting the service they deserve, it is then the govt’s responsibility to establish a bank to provide financial intermediation for society.
    The sale of the BNB crippled the financial sector in Barbados. We now have to depend on foreign-owned banks, who do not put our priorities top of their lists.
    We now have a situation in which local businesses use VAT and income tax for their cash flow and beg for govt support. In the real world they would just borrow money from the bank.
    Further, and this is the high-risk, government underwrites the savings of ordinary households; that means, in simple terms, Barbadian taxpayers are underwriting savings with these foreign banks.
    Who regulates the banks, the Barbados central bank, the Canadians or the Trinidadians?
    If the Barbados central bank tells them to do something, and their head office tell them not to, who do you think local managers will listen to?
    We are taking serious chances and we do not even realise it. In one fell swoop, Arthur pushed the progress of Barbados back decades.
    I also know that the announcement of the sale of BNB was revealed in London before it was on CBC news.

    Reply

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