Economist warns fixing economy will be painful

Whichever political party wins the next general election due next year, Barbadians will not escape the painful remedies necessary to fix the ailing economy, according to one of the region’s leading economic experts.

And former RBC Group economist Marla Dukharan is advising Government to “pick your poison” now by determining whether it must stick with the so-called homegrown austerity programme or turn to the International Monetary Fund (IMF) for help, advice the Freundel Stuart administration has repeatedly dismissed.

Dukharan this morning told a forum organized by the Institute of Chartered Accountants of Barbados that it was important to “press the reset button” early in order to end the suffering as quickly as possible.

Once the necessary measures are implemented to reverse the economic woes, the island’s health could be stabilized in three years, she said.

“While I don’t want to use the word austerity . . . it is a fact.  It is going to have to happen regardless of which party is in power, regardless of if it is the IMF or a homegrown programme,” she told participants at the forum themed Homegrown or IMF Designed: What Should Barbados’ Economic Plan Look Like?

Pointing to some of the IMF’s recommendations in its last Article IV Consultation, the newly appointed chief economist at financial technology company Bitt Inc said: “The IMF doesn’t tell you that you have to devalue your currency. The IMF tells you ‘this is your problem, these are your policy options, you have to pick your poison. It is going to be poison but you have some leeway as to what you pick’.

“I just want to say that I believe that Barbados can press the reset button now and fix the problems we discuss today . . . If Grenada can do it, Barbados can do it. It took Jamaica and Grenada about three years each to get back on a stable path. You have to stop the patient from bleeding and then do the reforms to get the patient healthy again.”

Dukharan reiterated that the longer Government delays implementing the corrective measures, “the steeper the adjustment will have to be”.

She listed high debt, low economic growth, falling reserves and a widening fiscal deficit as key areas that must be addressed, adding that the two to one peg to the US dollar was at risk given that that there are 7.6 times more Barbados dollars in circulation than US currency.

“This is a very difficult position to continue to hold at a two to one exchange rate. And to solve this, we have to go all the way back to solving the fiscal deficit,” she warned.

Largely agreeing with the IMF’s recommendations, and using Jamaica and Grenada as examples of how an IMF programme can result in positive change, Dukharan said any programme undertaken by Barbados should consist of public sector reform, public consultation, regular communication, accountability and strengthening of the Barbados Revenue Authority in order to improve tax revenues.

“Jamaica is growing, not at the rate they would like to, but they are growing and confidence is coming back and their currency is actually appreciating. Grenada is growing between three and four per cent on average after having two debt restructures and having been [affected] by a hurricane. So I am saying that to say it can be done, even if it is under an IMF programme. The IMF is not as bad as we think or some people like us to believe.

“To fix the currency and reserves problem, we have to fix the fiscal deficit, and to fix growth, we have to fix the fiscal deficit. We can’t escape that,” she said.

President of the Private Sector Association Charles Herbert, who participated in the discussion, she he was disappointed that despite more than a dozen reports and recommendations over the years, Government had yet to implement a workable solution to the island’s economic woes.

Herbert said the current economic climate called for focused and firm leadership, political will, national buy-in, fairness and stickability.

He also pointed to the need for Government to improve the ease of doing business and for the private and public sectors to trust each other.

“The implementation needs national acceptance. All of our plans and recommendations are generally secret from our population. We don’t discuss the hard facts,” he said.

Herbert was at pains to state that if Government had stuck to the Barbados Medium Term Growth and Development Strategy 2013–2020, “we wouldn’t be where we are now”.

During the event, there were also calls for the strengthening of the Public Accounts Committee; for the concerns highlighted in the Auditor General’s Report to be addressed; and for continued strong attention to be given to some factors such as correspondent banking issues, the island’s credit rating, and international sanctions that continued to affect the international business sector.

marlonmadden@barbadostoday.bb

14 Responses to Economist warns fixing economy will be painful

  1. Outsider looking in August 25, 2017 at 4:33 am

    MORE FISCAL PAIN. How dear her! What is she talking about?

    I mean the economy has been humming along in Barbados Under this Government and their minister of Finance.

    As a foreigner looking in at your country, I was impressed by the way your finance minister just ignored any sound advise from international Financial institutions.

    I wanted to imitate the bravado and confidence with which he dismissed the 1, no 2 , …….crap, forgot how many time Barbados was downgraded by Moodes, Standards and Poor.

    Doesnot matter how many times, you Bajans just needed to sit in wonder as your minister explained how , “they” didn’t know what they were doing, and that their calculations they used to downgrade didn’t apply to Barbados.

    I got to say, I never understood why he was not working for Goldman Sacks and was wasting his talents being the minister of Finance to an ungrateful country.

    To me he is a salesman to admire! I mean, name one other minister of Finance that could sell the nations lone power generating company to a foreign entity (Canadians), any Hotel or bank he could to the Trinidadians.

    For Gods sake, he presided over the sale of the Barbados National Bank to TRINIDADIANS, WOOT WOOT! Name another minister of finance that sold their countries, National Bank? I mean he could sell ice to Eskimos.

    That’s why, you Bajans came across so ungrateful, when you didnot letting him sell the oil bunkers,so that yet another monopoly in Barbados could be formed. What, don’t you guys like living under monopolies. Cheffte, Simpson, Massy, Pinehill, B&L, Cable and Wireless, thought it was a way of life in Barbados?

    So with all this intense admiration you would understand how angry I got when I saw a post internationally of the following slogan.

    Sinkclair
    redefining ineptitude, one decision at a time.

    No more humor Barbados.

    Listen well to what that woman has told you.

    Your administration has ignored sound fiscal advice, time after time. Sent your sovereign credit worthiness, to a status of junk bonds so bad that Fred Sandford won’t touch it.

    They have sold, and continue to sell your national patrimony from under you, to foreign interests. With no transparency on how their deals are made.

    They are using the CLICO model with your NIS. Please remember what is the end result of the CLICO model; the executives get it all the money, and you, the working man that paid into it gets a smile and a shaft.

    And when they don’t have money, no problem, they just print more! So now you have “7.6 times more Barbados dollars in circulation than US currency”. Bajan Maths!

    About ten years ago as a foreigner, when I heard “Barbados”, I thought, Caribbean fiscal powerhouse. Now, when I hear “Barbados”, I think, well guys, I think; fiscal Sandford and Son.

    But Bajans, when inevitably the unfortunate happens, and you have to devalue your dollar, don’t only just blame your current administration.

    Find the closet mirror; look into it and repeat after me, ” I enabled this to happen to my country”, ” I was always waiting for some else to do something”, lastly , say these word with deep feeling, ” I don’t know if I can afford to eat now?”

    Right your ship Barbados, listen to the woman.

    Reply
    • Sunshine Sunny Shine August 25, 2017 at 6:51 am

      Barbadians are just like the current government. They are a docile lot who will only act when the effects of the government’s nonsense start to affect their homes and pockets. Until that time, the government can merrily along believing that their failed policies are working and the Prime Minister is the better than jobby.

      Reply
    • Carson C Cadogan August 25, 2017 at 2:37 pm

      You should offer your unwanted advice to your Govt. in Trinidad.

      Reply
  2. Darson August 25, 2017 at 6:00 am

    We must stop giving Carribean nationals living in Barbados under the CSME agreement Duty Free Status .
    they are using this to earn money illegally .and this is one of our foreign exchange sink holes ; stop it and plug that hole once and for all .
    Dont Believe me? go to a Duty Free shop and see for yourself
    You want to Help ? give some Duty Free Allowance to Locals .

    Reply
  3. Lee August 25, 2017 at 9:03 am

    What rubbish people are writing !! Obviously there is need for a community awareness programme before any meaningful remedial action can be taken if some of these responses exemplify the general understanding of the situation !!

    Reply
  4. Caroline Clarke
    Caroline Clarke August 25, 2017 at 9:06 am

    More pain again we gonana need a stronger pain killer than morphine.we wi’ll have to go in a medical Induce comma so that our bodies can heal from this truma

    Reply
  5. Janette Reifer
    Janette Reifer August 25, 2017 at 9:55 am

    There is not enough morphine to go around. The country seems to be better off dead. I thought she was coming with a solution. She telling us what we already know. If you all don’t have a solution. Keep quiet. All the economist saying the same dam thing. Wait wanna can’t come up wid some sort of tangible solution? Economist just another fancy word.
    I tired hearing wunna.

    Reply
  6. Alex Alleyne August 25, 2017 at 9:59 am

    Agree, no quick or easy fix.
    Anyone who think differently living in another world.
    “TOO MUCH DAMAGE ALREADY DONE”.

    Reply
  7. Ferreira Claude
    Ferreira Claude August 25, 2017 at 10:24 am

    Measure must be taken but, sadly it is always against the minimum / middle income wage earners, the target should be the (hemorrhage) obsolete bureaucracy who earn big salary, accommodation and transportation for not doing nothing which would help the economy. Who ever is the next government should create an environment conducive for investment, business is always a risk so take a risk and get rid of some taxes.

    Reply
  8. milli watt August 25, 2017 at 10:34 am

    I read the assessment by Dukes, she is a proper bird. Well read, articulate and clear. Only one problem and that is it does not serve my political agenda SORRY!

    Reply
  9. Donild Trimp August 25, 2017 at 1:06 pm

    “The IMF tells you ‘this is your problem, these are your policy options, you have to pick your poison. It is going to be poison but you have some leeway as to what you pick’.

    Does anyone here understands the significance of the above statement?

    “POISON” is deadly.

    If you want to take this lady’s advise and pick your your own poison, by all means, go ahead and do so.

    “While I don’t want to use the word austerity . . . it is a fact. It is going to have to happen regardless of which party is in power, regardless of if it is the IMF or a homegrown programme”

    My question to all Barbadians, if it doesn’t matter which party is in power, WHY VOTE IN ANOTHER PARTY?

    Just asking.

    Reply
  10. Lionel Gittens
    Lionel Gittens August 25, 2017 at 1:31 pm

    I am always preaching that. Don’t care who ever is driving this little vehicle it’s not going to be easy. It’s small but the engine is powerful and the road is rocky and rough.

    Reply
  11. seagul August 25, 2017 at 1:46 pm

    Our solution is in agricultural creativity. However we must overcome that mental illness which dictates our senses that this is beneath our intelligence. Pride in industry fellowman!!!

    Reply
  12. Tee White August 25, 2017 at 8:16 pm

    Why is it that those who are beating the drums to put Barbados in the hands of the IMF haven’t got the decency to tell us exactly what poison the IMF have in store for us? Is it going to be bus fares at 5 dollars? More cuts to money available for the the hospital and the polyclinics so their service gets even worse? Will it mean sending home more government workers?

    Today we are being subjected to a propaganda war to convince us that what little ordinary Bajans have is too much and the country can’t afford it. We have to tighten our belts and suffer under austerity, but do we? According to the World Bank, the Gross Domestic Product of our country in 2016 was BD$9.18 billion. That means that through our labour, the working people of Barbados created BD$9.18 billion worth of wealth. The government took BD$2.7 billion or 29% of it in taxes and the other BD$6.4 billion or 71% was shared out between the workers and the owners of the various companies and businesses operating in Barbados. We know from experience that most of that didn’t come to the workers. So the problem isn’t that we are not producing the wealth. The problem is that some people are pocketing most of it and then tellng us that we don’t have no money. According the Barbados Government Estimates which were tabled in Parliament on 8 March 2016, the gap between the government revenues of BD$2.7 billion and its expenditure of BD$4.4 billion is BD$1.7 billion and the amount we are paying on debt servicing is BD$1.5 billion. So putting a moratorium on debt repayment would practically get rid of the fiscal deficit.

    The thing is that Barbados will never be downgraded by Moody’s or Standard & Poor’s if you go to QEH and they don’t have the medicines you need or the equipment to treat you. They will never downgrade Barbados because you can only get water out of your pipe 3 or 4 hours a day or because you have to use an outside toilet in this day and age. They will only downgrade Barbados if there is a threat to the money of the foreign money lenders. As Bajans, we need to make ourselves informed about our country’s economy in its entirety so that we can give an informed view about how to get out of the current situation. If we fail to do so, other people will set the agenda to suit their interests and we will end up suffering even more.

    Reply

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