Econ­omy on lips of many

Daily Nation (Barbados) - - Front Page - By Shawn Cum­ber­batch

As 2017 draws to a close, one can­not help but re­flect on the year that was and all it had to offer.

To­day we con­tinue with our year in re­view se­ries fo­cus­ing on The Econ­omy – The Is­sue of the Year. There is one ma­jor rea­son Bar­ba­di­ans will be ea­ger to see the back of 2017.

The last 12 months have been ex­tremely chal­leng­ing eco­nom­i­cally.

Or­di­nar­ily, dis­cus­sions about gross do­mes­tic prod­uct, fis­cal deficits, mount­ing debt, and fall­ing in­ter­na­tional re­serves do not in­ter­est the av­er­age cit­i­zen.

This year was dif­fer­ent. Ba­jans felt the econ­omy’s stag­na­tion in their pock­ets via in­creased taxation, higher prices, and over­all re­duced spend­ing power. It there­fore had their full at­ten­tion.

In Jan­uary, Cen­tral Bank Gov­er­nor Dr Delisle Wor­rell re­ported that the econ­omy grew by 1.6 per cent in 2016. He also said the out­look for eco­nomic growth in 2017 was “en­cour­ag­ing”. Tourism and con­struc­tion led the way.

No one could have pre­dicted what would hap­pen next. Wor­rell was fired by Min­is­ter of Finance Chris Sinck­ler the next month, re­port­edly af­ter be­ing at log­ger­heads with mem­bers of the bank’s board. His at­tempt to save his job in court failed.

Wor­rell’s for­mer deputy Cle­vis­ton Haynes re­placed him on an act­ing ba­sis soon af­ter. Shift­ing from his pre­de­ces­sor’s poli­cies, Haynes im­me­di­ately restarted Cen­tral Bank quar­terly press con­fer­ences fol­low­ing a three-year hia­tus. He said Gov­ern­ment could no longer de­pend on the bank to cre­ate money for its use. He placed more of the bur­den on com­mer­cial banks,

Cle­vis­ton Haynes: Act­ing Cen­tral Bank Gov­er­nor. (FP)

com­pelling them to buy more Gov­ern­ment pa­per.

Un­for­tu­nately for Bar­ba­dos, the is­land suf­fered another credit rat­ing down­grade soon af­ter Haynes took of­fice. Moody’s In­vestors Ser­vice is­sued the down­grade. Six months later, Stan­dard & Poor’s fol­lowed suit, the over­all 20th credit rat­ing down­grade Bar­ba­dos suf­fered in the last nine years.

Un­known to Ba­jans, Haynes’ pol­icy changes and the first credit rat­ing down­grade fore­shad­owed the bit­ter medicine that was to come. Noth­ing left as bad a taste in the mouth of the pop­u­la­tion more than the con­tro­ver­sial Na­tional So­cial Re­spon­si­bil­ity Levy (NSRL).

Sinck­ler de­liv­ered his Bud­get at the end of May. Con­tin­u­ing his pref­er­ence for rev­enue-rais­ing mea­sures over spend­ing cuts, the min­is­ter an­nounced an in­crease in the NSRL from two per cent to ten per cent. On top of that, and with con­cerns about dwin­dling for­eign re­serves in­ten­si­fy­ing, he also in­tro­duced a two per cent fee on all for­eign ex­change trans­ac­tions, and in­creased the ex­cise tax on fuel.

The im­pact of the Bud­get would be felt from then un­til the end of the year for more than one rea­son. It included the pro­posed sale of the state-owned Bar­ba­dos Na­tional Ter­mi­nal Company Lim­ited (BNTCL) and Hil­ton Bar­ba­dos ho­tel. Both were key to shoring up the for­eign re­serves.

The Fair Trad­ing Com­mis­sion said no to the BNTCL sale as ap­plied for, say­ing it would be com­pet­i­tive. There were also con­cerns about the sale of the Hil­ton, re­port­edly for a price be­low what Sinck­ler ini­tially an­nounced and at the risk of a fi­nan­cial loss to the Na­tional In­sur­ance Scheme.

If the in­creased aus­ter­ity and con­cerns about for­eign re­serves left Bar­ba­di­ans wor­ried, the NSRL in par­tic­u­lar left the pri­vate sec­tor and trade union move­ment fum­ing. So much so that labour and cap­i­tal staged a protest march through Bridgetown. In the end, there was no roll back of NSRL. The lone con­ces­sion was a re­moval of the im­po­si­tion from a bas­ket of con­sumer items.

Amid all of this, trade unions ag­i­tated for a pay in­crease for pub­lic sec­tor work­ers, their first in about eight years. Gov­ern­ment re­sisted such an in­crease and the Cen­tral Bank said the econ­omy could not bear it.

Through­out the year, there was no short­age of ad­vice for the Fre­un­del Stu­art ad­min­is­tra­tion on how to fix its fi­nances and the econ­omy. The mes­sage from lo­cal econ­o­mists and in­sti­tu­tions such as the Caribbean De­vel­op­ment Bank, In­ter-amer­i­can De­vel­op­ment Bank, In­ter­na­tional Mon­e­tary Fund (IMF), Eco­nomic Com­mis­sion for Latin America and the Caribbean was that Gov­ern­ment needed to do more.

Af­ter his fir­ing, Wor­rell also con­tin­ued to give his own ad­vice. It Con­tin­ued on next page.

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