Today’s announcement that Barbados sovereign credit rating has been downgraded to BB+/B from BBB-/A-3 is unfortunate. There is no consolation that we have been bundled with several European countries who have earned junk bond rating.
Dr. Frank Alleyne made a statement which resonated with the BU household on the weekend. He opined that a major problem driving our public debt is structural. He suggested successive governments have not addressed the problem. They preferred instead to be politically expedient. BU prefers to focus on a reality that in the boom years we did not solidify our economic fundamentals. One clear example was building out an economy with no concern to diversify our energy base. Another, we encouraged rampant consumption expenditure fed in the 1995-2007 period especially.
What is unfortunate is that with a general election on the horizon, the opportunity for serious public discussion and earth moving decisions will not be top of mind for government. What we have though is partisan political chatter now that Barbados has attained junk bond rating. The opportunity for government to distil the arguments has now gotten even more difficult. BU must harp on the point that the government has to be coherent and cohesive in the way it articulates its strategy i.e. what it has achieved to date, in the near term and what it hopes to achieve.
BU commends the government – some missteps notwithstanding – for introducing reform in the energy sector at a time when the fiscal space for doing so is as narrow as it has ever been. BU has posited many times that in boom times one must prepare for the bust; we did not. Unfortunately there is a dearth of leadership and consequently a lack of vision. Where Barbados finds itself today is as a result of all the myopic policies on the last 20 years.
What BU regrets most after listening and reading the commentary which followed the S&P downgrade and Governor Worrell’s press conference is that we have a opposition party in waiting which has not had to do much to regain popularity. BU remembers during the boom time questioning the former government’s expansive strategy of debt accumulation through off balance sheet transactions.
Many have started to question if the boom period of the late 90s up to 2007 was manufactured. We have all been following the news with horror how reputable banks have rigged LIBOR rates. We have also been following the story about oil price rigging, again by reputable entities. It maybe of interest that many of these malpractices occurred in the period of 2003 to 2005, at the height of the boom years which Barbados enjoyed.
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