2018: The Outlook for the Barbados Economy

As I write this in the last week of 2017, the outlook for the economy is dire: foreign reserves reported by the Central Bank were only $550 million in September, with over $100 million in foreign debt and interest payments due in the final quarter. The NSRL and foreign exchange fee have fallen short of expectations, and Government continues to spend more than it receives in taxes.The new taxes are driving the economy into recession, and the declining reserves have undermined investor confidence. The country’s low credit rating means that it has no access to foreign market borrowing, and maturing debt has to be repaid in full.

Even at this late date, an alternative future is attainable. My paper, The Barbados Economy – The Roadto Prosperity, available for free download at www.DeLisleWorrell.com, offers a seven point strategy to restore foreign reserves, eliminate Government overspending, stimulate sustainable economic growth and repair Government’scredit worthiness. The recommendations are:

– A public sector reform package, to be implemented over three years, to eliminate Government’s operating deficit and to achieve measurable improvements in public sector productivity;

– As part of that package, job cuts of about 1,500 per year in the public sector over three years, with separation packages to be funded by seeking financial support from international financial institutions;

– A cut in subsidies to state-owned enterprises of ten per cent per year for three years;

– An aggressive programme of divestment of carefully selected public assets;

– Temporary freezing of all public investments, except those funded by foreign finance;

– Final approval and start of major works on all tourism projects that were to have started in 2017;

– and undertaking negotiations with the IMF, the Inter American Development Bank, the Caribbean Development Bank and other official and international institutions for financial support for a five year programme of structural adjustment, the centerpiece of which would beconditionalities on the implementation of fiscal reform.

Firm, decisive and urgent action is needed to turn the economy around and set the country on the road to economic prosperity.

Source: (Dr DeLisle Worrell is the former Governor of the Central Bank of Barbados)

2 Responses to 2018: The Outlook for the Barbados Economy

  1. Falernum January 5, 2018 at 11:08 am

    What are we to do with the decline in forex reserves Dr Worell? The IMF is not going to refloat Barbados so that we can continue to afford consumer imports wherein we are hemoraging at the rate of 80+% of every dollar. We are no longer (sufficiently) competitive in our principal forex earning sector simply because we are pegged to an overvalued US dollar !!!

    The writing is on the wall.

    Reply
  2. Falernum January 5, 2018 at 12:44 pm

    See the chart used in this BT article: It took eight years for Barbados to rebuild its forex reserves to the six-week-cover level. Can we keep above water long enough for confidence to be restored in our international competitiveness ? Yes, perhaps . . . but only if the industry can afford to take it on its chin to cut the prices of its various offerings down by at least 30% so as to attract more overall tourist spending, and if Government removed restrictions on foreign exchange deposit accounts so that investors and traders in the industry would not be so jittery about the currency.

    Reply

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