SELL RADIO STA­TION!

CDB PREZ TO CASH-STRAPPED NA­TION

The Star (St. Lucia) - - FRONT PAGE - By Kay­mar Jor­don kay­mar­jor­dan@bar­ba­dos­to­day.bb

Di­rec­tor of Caribbean De­vel­op­ment Bank Dr Justin Ram: His pres­i­dent Dr Warren Smith re­cently ad­vised in an in­ter­view with Bar­ba­dos To­day that the is­land’s fis­cal po­si­tion is un­sus­tain­able. “Long gone are the days when gov­ern­ments need to be in­volved in such things as air­ports and sea­ports.” He also ad­vised the Bar­ba­dos gov­ern­ment to sell the Caribbean Broad­cast­ing Cor­po­ra­tion!

Pres­i­dent of the Caribbean De­vel­op­ment Bank (CDB) Dr Warren Smith to­day sounded a stern warn­ing that Bar­ba­dos is not yet out of the prover­bial eco­nomic woods by a long shot. In fact, so wor­ried is he about the coun­try’s wors­en­ing debt sit­u­a­tion that he sug­gested “front end ad­just­ments” were ur­gently needed to cor­rect the eco­nomic slide. In a frank in­ter­view with Bar­ba­dos To­day, Smith also de­scribed the is­land’s over­all fis­cal po­si­tion as “un­sus­tain­able” while cau­tion­ing that if left unchecked, it would do untold dam­age to the Bar­ba­dos dol­lar.

Smith did not shy away from the dreaded “p” word– pri­vati­sa­tion—nam­ing Grant­ley Adams In­ter­na­tional Air­port and the Bridgetown Port as “nat­u­rals” for di­vest­ment.

“Long gone are the days when gov­ern­ments need to be in­volved in things such as air­ports and sea­ports,” he ar­gued. “We do not be­lieve that these types of in­vest­ments need to con­tinue to be in the hands of gov­ern­ment.”

While ac­knowl­edg­ing there would be po­lit­i­cal con­se­quences aris­ing out of the sale of these per­ceived crown jewels, he said Bar­ba­dos was not unique in that re­gard. The Ja­maican-born CDB pres­i­dent gave the ex­am­ple of his coun­try’s di­vest­ment of its Sang­ster In­ter­na­tional Air­port in Mon­tego Bay, say­ing, “For­eign in­vestors have come in, they have pumped money into the ex­pan­sion of the air­port which is now pro­mot­ing the growth of their tourism in­dus­try.”

Smith also ref­er­enced the re­cently pri­va­tised Port of Kingston which he said was now at­tract­ing large in­vest­ments, while stress­ing that air and sea­ports were “a means to­wards an end”. In the case of Bar­ba­dos, he em­pha­sised, there was room for both do­mes­tic and for­eign in­vest­ment in GAIA and the Bridgetown Port. He pressed home his ar­gu­ment that “these are op­por­tu­ni­ties to re­lieve the fis­cal bur­den that the gov­ern­ments face, so that you can put your pri­or­ity on other things!”

The CDB head in­sisted that gov­ern­ment would not be ad­versely im­pacted if the Port’s own­er­ship and op­er­a­tion were in pri­vate hands, adding that in Bar­ba­dos’ case the sit­u­a­tion was ur­gent since it placed the coun­try’s fixed ex­change rate un­der threat. “I am not say­ing that you are at threat at the cur­rent time. What I’m say­ing is that if these things are not ad­dressed ipso facto you are go­ing to find your­self in a po­si­tion where you might not be able to main­tain a fea­ture of your eco­nomic model that ap­pears to be of very great value to Bar­ba­dian au­thor­i­ties and to the Bar­ba­dian peo­ple. So fis­cal rec­ti­tude is key. We need to have it and we can’t be in a sit­u­a­tion where, for a pro­tracted pe­riod, we are run­ning fis­cal deficits that are un­sus­tain­able, that have im­pli­ca­tions for debt and ul­ti­mately for the over­all strength of the econ­omy.”

In ad­di­tion to both ports, Smith sug­gested other state­held as­sets could be sold off, in­clud­ing the Caribbean Broad­cast­ing Cor­po­ra­tion. He ar­gued that gov­ern­ment could find other mech­a­nisms for get­ting its mes­sage out.

In re­sponse to Min­is­ter of Fi­nance Chris Sinck­ler’s sug­ges­tion that many state en­ti­ties were highly in­debted and there­fore would not be at­trac­tive for di­vest­ment, the re­gional banker ze­roed in on the Trans­port Board, say­ing it would have to un­dergo a process of re­form to re­duce the cur­rent bur­den on the state. How­ever, Smith was adamant that pri­vati­sa­tion was among a raft of op­tions that could be pur­sued, even though he ac­knowl­edged that the de­ci­sion was not his to take.

“At the end of the day the op­tions that you choose to pur­sue must put you in a po­si­tion where you get your fis­cal house in or­der, ad­dress your in­debt­ed­ness,” he said.

Smith ex­pressed sup­port for gov­ern­ment’s “ab­so­lutely vi­tal” fis­cal con­sol­i­da­tion pro­gramme, say­ing it was moving in “the right di­rec­tion” but stressed that the mea­sures were sim­ply not enough.

While the Bank had no dif­fi­cul­ties with the poli­cies be­ing pur­sued, he said, “the pace of ad­just­ment is where we might have some dif­fer­ence with the Gov­ern­ment of Bar­ba­dos. If you look at where the debt tra­jec­tory is go­ing, it is very wor­ri­some,” he told Bar­ba­dos To­day. He sug­gested that in or­der to be able to bring that growth of sovereign in­debt­ed­ness to a halt, and put it in the other di­rec­tion where it needs to go, “we need to ad­dress the fis­cal [sit­u­a­tion]”. The lead­ing re­gional econ­o­mist also em­pha­sised the need to ad­dress growth.

“It is a two-di­men­sional kind of re­sponse,” he said. “So, yes, the fis­cal ad­just­ment pro­gramme is ab­so­lutely vi­tal. If you don’t ad­dress it, all sorts of un­for­tu­nate things are go­ing to un­fold. So that has to be high pri­or­ity.”

Pri­vati­sa­tion was a ma­jor is­sue in the cam­paign lead­ing up to the Bar­ba­dos 2013 gen­eral elec­tion, with the in­cum­bent Demo­cratic Labour Party (DLP) ac­cus­ing the Bar­ba­dos Labour Party (BLP), led at the time by for­mer Prime Min­is­ter Owen Arthur, of plot­ting to sell state as­sets.

Since the elec­tion, which saw the DLP re­turned to of­fice, Sinck­ler has spo­ken about di­vest­ing some as­sets, and an­nounced in April the sale of the Bar­ba­dos Na­tional Ter­mi­nal Com­pany Lim­ited was all but com­plete, with gov­ern­ment sim­ply “wait­ing on the cheque” to con­sum­mate the deal. Noth­ing has been said of that deal since.

Arthur, mean­time, has be­come more vo­cal and adamant that there is no way out of the chok­ing fis­cal sit­u­a­tion other than to sell off some state as­sets, while se­nior Bar­ba­dian econ­o­mist in the Min­istry of Fi­nance in On­tario, Canada Car­los Forte told Bar­ba­dos To­day last De­cem­ber that the Fre­un­del Stu­art gov­ern­ment should shed some of the “statu­tory dead weight con­tribut­ing to the cur­rent eco­nomic drag”.

In his mid-year eco­nomic re­port, gov­er­nor of the Cen­tral Bank of Bar­ba­dos Dr Delisle Wor­rell said the fis­cal deficit had reached $204 mil­lion, and that debt owed to pri­vate fi­nan­cial in­sti­tu­tions, in­di­vid­u­als, busi­nesses and the Cen­tral Bank was equiv­a­lent to 108 per cent of gross do­mes­tic prod­uct at the end of June.

As the Bar­ba­dos gov­ern­ment strug­gles to bring the fis­cal sit­u­a­tion un­der con­trol, it has sent home over 3,000 civil ser­vants and has im­posed sev­eral taxes in the course of the now two-yearold aus­ter­ity pro­gramme. Just last month Sinck­ler used his Bud­get ad­dress to an­nounce a two per cent Na­tional So­cial Re­spon­si­bil­ity Levy, as well as higher bank charges, amidst much out­cry from in­ter­est groups.

CDB Pres­i­dent Warren Smith de­scribed the is­land’s over­all fis­cal po­si­tion as “un­sus­tain­able” while cau­tion­ing that, if left unchecked, it would do untold dam­age to the Bar­ba­dos dol­lar.

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