Time to help Bar­ba­dos with a les­son

Jamaica Gleaner - - OPINION & COMMENTARY -

FUN­NILY, THERE are lessons in eco­nomic man­age­ment for Bar­ba­dos to learn from Ja­maica. And that’s a re­ver­sal. With per-capita in­come of more than US$15,000, Bar­ba­di­ans, on av­er­age, are nearly three times as rich as Ja­maicans. Fur­ther, Bar­ba­dos is among the top 40 coun­tries, and the only one from the Caribbean, on the United Na­tions’ Hu­man De­vel­op­ment In­dex, a mea­sure of so­cial and eco­nomic de­vel­op­ment on the ba­sis of life ex­pectancy at birth; ac­cess to, and in­volve­ment in, ed­u­ca­tion; as well as gross na­tional in­come per capita. Ja­maica, at 99th place, among 188 coun­tries, is around 60 places be­low Bar­ba­dos.

But Bar­ba­dos may find the foun­da­tions upon which such im­pres­sive so­cial gains rest in dan­ger if it can’t muster the courage, as it once did – and Ja­maica is now do­ing – to ac­cel­er­ate struc­tural re­forms to its econ­omy, par­tic­u­larly the con­tain­ment of its ris­ing debt, which War­ren Smith, the Caribbean De­vel­op­ment Bank’s pres­i­dent, re­cently de­clared to be “un­sus­tain­able”.

That debt has more than dou­bled over the past eight years, from 51.4 per cent of gross do­mes­tic prod­uct to 105.5 per cent at the close of the 2015-16 fis­cal year. The In­ter­na­tional Mon­e­tary Fund (IMF) has warned that it could reach 114 per cent by 2020. When deben­tures held by the Na­tional Insurance Scheme are taken into the ac­count, the debt is closer to 143 per cent of GDP. Those ra­tios, of course, are bet­ter than Ja­maica’s, whose debt, de­spite the 20-per­cent­age-point de­cline over the past four years, is still 125 per cent of GDP.

GLOBAL FI­NAN­CIAL MELT­DOWN OF 2007

Bar­ba­dos, in part, re­flects the on­go­ing im­pact of the great re­ces­sion un­leashed by the global fi­nan­cial melt­down of 2007 that hit Caribbean economies hard. The Bar­ba­dian econ­omy de­clined by an av­er­age 0.3 per cent on the six years to 2014 . But their sit­u­a­tion is ex­ac­er­bated by the lack of ap­petite the Ba­jans have had for painful, but nec­es­sary struc­tural re­forms.

For in­stance, while well shy of the whop­ping 11 per cent of 2011, the cen­tral gov­ern­ment’s deficit last year was seven per cent of GDP and the IMF projects it will be 6.4 per cent for 2016-17. Th­ese fis­cal gaps are cov­ered mostly by bor­row­ings from the cen­tral bank.

The Fund has cal­cu­lated that re­vers­ing the debt down to un­der 100 per cent of GDP by 2020 and deal­ing with the fund­ing the prob­lems would re­quire “fis­cal ad­just­ment of at least 3.5 per cent of GDP over the next three years”.

But it said in a re­cent re­port that “the gov­ern­ment’s re­cent weak track record raises con­cerns as to whether there is ad­e­quate im­ple­men­ta­tion com­mit­ment or ca­pac­ity” for such ac­tion. “Cur­rency de­pre­ci­a­tion, which the au­thor­i­ties re­ject, may im­prove com­pet­i­tive­ness and could al­low for a some­what less am­bi­tious ad­just­ment, al­though sub­stan­tial fis­cal ad­just­ment would still be re­quired ... ,” the IMF said.

That wasn’t al­ways the case. In the early 1990s Bar­ba­dos also faced a se­ri­ous macroe­co­nomic cri­sis. Then, like now, there was con­sen­sus against any de­val­u­a­tion or flota­tion of Bar­ba­dos dol­lar. The Erskine San­di­ford’s Demo­cratic Labour Party gov­ern­ment, how­ever, un­der­took a bru­tal pro­gramme of ad­just­ment that even­tu­ally re­turned the econ­omy to a sus­tained pe­riod of growth.

It’s an ap­proach that Delisle Wor­rell, now the gov­ern­ment of the Bar­ba­dos Cen­tral Bank, used – in the af­ter­math of Ja­maica’s fi­nan­cial sec­tor crash of the late 1990s – of­ten to com­mend to Kingston in speeches here and in ra­dio in­ter­views from Bridgetown. It took long for Ja­maica to im­bibe the les­son. But on the ev­i­dence from Bridgetown and Ja­maica’s be­hav­iour of the past four years, it’s one that Kingston should of­fer in re­verse.

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