Reform for Prosperity

The harsh reality of an underperforming economy in the aftermath of the global financial crisis, decreased foreign reserves and the absence of a practical fiscal programme from Government, coalesce to create a challenging environment for doing business in Barbados.

It is against this backdrop that Dr. Delisle Worrell, former Governor of the Central Bank, recently delivered the keynote address at Annual General Meeting of the Small Business Association.

During his presentation Dr. Worrell referenced the May 2017 Financial Statement & Budgetary Proposals, and outlined that due to an increased level of expenditure on wages and salaries by 8.4%, the overall fiscal deficit had also increased to 7% of Gross Domestic Product. Mr. Worrell posited that in order to reduce the deficit, considerable funding was needed, however, due to Government’s poor credit rating seeking external funding was difficult. This was compounded by an environment where there was a loss of confidence by domestic investors. The resultant outcome was funding of the deficit by the Central Bank which subsequently led to a worrying decline in foreign reserves and an overwhelming taxation burden on citizens.

The former governor suggested that the Barbados economy had but one clear issue that had deterred sustainable growth and that issue was the poor performance of the public sector. “Tourism, the main engine of the economy, had recovered strongly; international business was holding its own; the production of renewable energy showed immense promise; a spirit of enterprise was abroad, and the private sector was dynamic with great potential that could lead to a prosperous future. This potential, however, was clouded over by the poor performance of critically important segments of the public sector, and the fact that Government expenditures were much higher than tax revenues could support” he stated.

Despite these circumstances Dr. Worrell proposed an alternative fiscal programme which would achieve a restoration of Government savings, stabilisation and reduction of the debt to GDP ratio and initialisation of growth of private investment, entrepreneurship and sustainability. The key elements of this strategy as outlined by the seasoned economist were;

1. 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.
2. As part of that package, job cuts of about 1,500 per year in the public service over three years, with separation packages to be funded by seeking financial support from international financial institutions.
3. A cut in transfers to state-owned enterprises of 10 per cent per year over three years.
4. An aggressive programme of divestment of carefully selected public assets.
5. Temporary freezing of all public works, except those funded by foreign finance.
6. Final approval and start of major works on all tourism projects envisioned for 2017.
7. Undertaking negotiations with the IMF, IDB, CDB and other official and international institutions for financial support for a five-year programme of structural adjustment, the centerpiece of which would be conditionalities on the implementation of fiscal reform.

Dr. Worrell drove home the point that that his alternative fiscal programme was not intended to be socially disruptive or damaging to individual livelihood, but one of quick results and substantial improvement in the confidence and creditworthiness of the Barbados economy, if the reform programme was adequately funded.

Dr. Delisle Worrell’s full publication of “The Barbados Economy: Road to Prosperity” can be found on his website http://www.delisleworrell.com.