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Governor DeLisle Worrell Publishes How to Stabilize and Grow Small Open Economies

Dr. DeLisle Worrell, Governor of the Central Bank

A Joint Caribbean Group met recently with senior members of the International Monetary Fund (IMF) and World Bank. The Managing Director of the IMF Christine Lagarde of the IMF will remember the meeting for the sharp exchanges which are reported to have occurred with the Governor of the Central Bank of Barbados DeLisle Worrell.

Forgotten in the hullabaloo is the fact that Governor Worrell presented to the two international financial bodies a paper which is worthy of national, regioanl and international discussion titled, Policies for Stabilization and Growth in Small Very Open Economies.

72 responses to “Governor DeLisle Worrell Publishes How to Stabilize and Grow Small Open Economies”

  1. David Avatar
    David

    The document reads interesting. Now if only we could get our media practitioners to distil what the Governor is saying for its publics.

    The Governor is building a case for protecting our foreign reserves and on the other side of the equation building out forex earning capacity.

    Given our large appetite for consumption and large import food and oil bill,it is a discussion which must be had.

  2. Carson C. Cadogan Avatar
    Carson C. Cadogan

    I nominate Dr. DeLisle Worrell for Managing Director of the IMF.

  3. Marlo ray Avatar
    Marlo ray

    Gov. Worrell needs to develop policies that will lead to economic growth in Barbados. Theoretical papers are no help to long suffering Barbados.

  4. millertheanunnaki Avatar
    millertheanunnaki

    @ David:

    That case for a ‘balanced ‘equation of forex savings and earnings has been built out and argued since the days of Sir Courtney Blackman and is the ongoing economic model of fiscal and financial management for all small open tourism-dependent economies like Barbados. Nothing new or earth moving here; just a repeat of old hat.

    When can we expect to hear the Governor’s report on the country’s performance for the 9 months of the year?
    Can we look forward to hearing that the country is expected to exit recession since both the UK and USA are doing the same? Can we expect a growth forecast of 3% in the coming months with forex growing as a result of a more than 20% increase in exports according to Dennis Kellman’s spin on things?

  5. David Avatar
    David

    @Marlo Ray

    How are policies executed? Don’t you think the Governor’s exposition is derived from years of being a central banker?

  6. David Avatar
    David

    @Miller

    Not sure you show be so quick to dismiss the Governor’s position. Even the Deputy Managing Director of the IMF concedes that the Governor’s paper is worthy of discussion. Why are Barbadians not discussing this matter and showing the Governor some support?

  7. millertheanunnaki Avatar
    millertheanunnaki

    @ David | October 29, 2012 at 8:03 PM |

    Listen David, these people like the Deputy Managing Director are international economic enforcers-to protect the interests of international lenders- with finesse and political acumen and will not show open disrespect or disregard to those trying to punch above their weight. They have heard what Dr. Worrell is saying many times before. Unlike the Governor who- behind the backs of the rating agencies and IMF (but in full public earshot)- criticized the management of these Finance institutions just back in July. He was made to grovel for this lack of discretion on his part and was only entertained to deliver his paper as part of his penitence to let him know who is in charge. Maybe that kind of diplomacy is foreign to most Bajans.

    There is absolutely nothing new about what is contained in the governor’s paper copied from many before him. Ask Winston Cox if you doubt me!

    What we want to hear how is the country going about saving forex and building up forex earning capacity. Specifics and fiscal implications for a consumption oriented economy are what we want to hear. Alternative energy yes; but what are we going to do about the BLP multimillion dollar investment in generating capacity based on the importation of fossil fuels?

  8. Observing(...) Avatar
    Observing(…)

    @DAvid
    worthy of read, but, doesn’t it simply present an alternative economic view to a broader problem?

    Also, to what degree can “aggregate demand” be adjusted without the hint of “austerity measures”? a rose by any other name….

    Lastly, fiscal policy (vis-a-vis focusing on particular indicators) is seen as the silver bullet.

    No mention of stimulating economic activity or productive capability?

    And what about the dependence on the leadership of the sectors that earn or save foreign exchange?

    Where does this plan stand (or fall) when those sectors falter?

    Just observing enlightening discussion and debate

    “To be conscious that you are ignorant is a great step to knowledge.”

    – Benjami Disraeli –

  9. David Avatar
    David

    @Observing

    Are you not ignoring that the Governor posit that our small open economies have structural problems exacerbated by the fact we have a high import bill? Also the point that our nion tradables soak up forex generated from tradables? We have a problem but we hate to admit it.

  10. Carson C. Cadogan Avatar
    Carson C. Cadogan

    Taken from Facebook

    “The World Bank and IMF should be hauled before the ICC for inflicting economic hardship of countries. Dr Worrell tell her to wheel and come again. If Christine Lagare could not help France as Finance Minister you mean she wabt to come and destroy little Barbados”

  11. Observing(...) Avatar
    Observing(…)

    @david

    Does fiscal policy solve the same said structural problems that got us and keeep us here?

    As you said, in presenting solutions it’s best to openly admit the uncontrollable problem, as well as the extenuating problem which emerges from the “best solution.” Only then. Can a country with its own economic realities and culture. Discuss/debate/discourse on the best way forward for us.

    Have to add though, worrell’s strategy may not apply to other small open economies who’s economic frameworks are different to ours.

    Just observing

  12. David Avatar
    David

    @Observing

    But he intimates on p15 that the solutions must be country specific:

    “Growth strategies for SVOEs are by necessity country specific, and depend on the production structure and composition of the foreign exchange sector, and the sources of the country’s comparative advantage.”

    In summary this is what he says:

    “This paper has attempted to explain, with respect to debt, that the most sensitive indicators of fiscal sustainability are the ratio of external debt service to foreign earnings, and the rollover risk on foreign currency loans. It has also argued that expansion in the small very open economy is sustainable only if led by the sectors that earn or save foreign exchange.”

  13. Carson C. Cadogan Avatar
    Carson C. Cadogan

    A Stellar Record of Failure: The IMF and Jamaica

    While the economic fates and futures of entire nations hinge on arbitrary indicators such as investor confidence and credit ratings, is Jamaica better off with the IMF or without it? Jamaica’s current economic situation is, to be blunt, bleak. Thus controversial questions must be raised over whether or not the IMF is actually providing the kind of help that Jamaica actually needs.

    In most other professions, a 30-year track record of failure in the single task assigned to you would not normally result in a renewal of your contract. But with the IMF in Jamaica, this is exactly the case. The CEPR report does not mince words.

    “Jamaica offers a stark example of the long-term costs that an excessive debt burden can impose on a developing country, especially when the interests of creditors are prioritized over the needs of the country as a whole,” it reads.

    http://www.thehabarinetwork.com/a-stellar-record-of-failure-the-imf-and-jamaica

  14. Carson C. Cadogan Avatar
    Carson C. Cadogan

    “According to the IMF, in 2011, Jamaica’s debt burden was 126 percent of its gross domestic product (GDP), making it one of the world’s most indebted nations. In addition, for 2011, Jamaica had the highest debt interest payments of any country in the world, calculated as a percentage of GDP. The report continues:

    This exceedingly large debt burden has effectively displaced most other public expenditure; debt servicing has taken up nearly 50 percent of total budgeted expenditures over the last four fiscal years while health and education combined have only been around 20 percent. This situation is very problematic for a country of Jamaica’s income level, which should be able to invest in infrastructure and human capital, as well as have the financial flexibility to respond to frequent natural disasters and other external shocks.

    As it stands, the implementation of the IMF’s current austerity measures in Jamaica have played a key role in intensifying the stagnation of the economy. “Although real GDP growth was positive in 2011, the economy remains below its 2007 level,”

  15. Carson C. Cadogan Avatar
    Carson C. Cadogan

    “While a share of the blame no doubt hangs on the actions of the government of Jamaica, the country’s Prime Ministers and their governments have had little room for independent or autonomous policy making outside of the constraints of the IMF. By and large, Jamaica has followed the rules set forth by the international institution, and Jamaica has had increasingly fewer and less powerful tools to draw revenue from. Due to this, the government now relies on grants and unsustainable borrowing to keep the economy going.

    The long string of bailouts in Europe have not gone unnoticed by Prime Minister Simpson-Miller, who in a March interview with Bloomberg, remarked that “If they could give a bailout like Greece, lord have mercy, you would see Jamaica grow and flourish.”

  16. Observing(...) Avatar
    Observing(…)

    @david
    That’s my point in essence. Every country must adapt/adjust to suit the extent of the recession on their circumstance and their actual realities

    On same p.15 he mentions “tastes, technologies, new products and new competition driving the prices of non tradeables”. If we admit that our non-tradeables soak up the forex generated by tradeables, shouldn’t a future driven economy aggresively seek to leverage the higher value of non-tradeables by utilising its comparative advantage in technology, alternative energy, services and ingenuity/innovation?

    We’re talking about it a lot now recently but imho we’re not truly creating the environment for this structural adjustment to suitably complement the fiscal policy thrust. “One hand can’t clap”

    Even by the Governor’s word the two MUST go hand in hand.

    Just observing

  17. Clone Avatar
    Clone

    You Barbados Labour Party supporters are becoming sickening.
    Here it is that an educated Barbadian who not only worked at our Central bank of Barbados for many years under the BLP but also at the IMF is being vilified for writing a paper in defense of small open economies having a different strategy from resource rich countries. No it is all about politics.

    Yet you jump and raise your hands when your borrow and spend leader said he would put money back in the hands of Barbadians by removing the 2.5% from the vat and a hosts of other give backs.

    Those policies lead us into the trap. This time it will not be that easy because a lot of that Ponzi money is no longer available for a construction boom or the buying of villas.

    Most of our money ends up buying foreign goods which require foreign exchange.
    Not one journalist asked how he can give back so much and where will he get that revenue to support all the social services that Bajans expect to be paid for.

  18. Observing(...) Avatar
    Observing(…)

    @clone
    Why is It that when we debate or delve into a policy or solution we are labelled “hacks”?

    Sometimes the best diamond comes from years of tension. Ideas for national development are birthed from the early disagreements of intelligent and common sense men. Arthur’s suggestions deserve a good shellacking too but that’s for another thread or when the manifesto comes out. I won’t bother to remind you of the impossible goodies also promised in a particular pathway to progress.

    Just observing

  19. David Avatar
    David

    @Observing(…)

    Commenters need to realize they have the ears of the politicians and make good use of it by dissecting the issues. The vacuous back and forth sometimes does nothing.

  20. Carson C. Cadogan Avatar
    Carson C. Cadogan

    Update on the Jamaican Economy
    Jake Johnston and Juan A. Montecino

    This shows how the IMF medicine is killing the patient.

    http://www.cepr.net/documents/publications/jamaica-2012-05.pdf

    Someone once told me that Jamaica problems with the IMF can be laid at the feet of a former BARBADOS PRIME MINISTER.

  21. millertheanunnaki Avatar
    millertheanunnaki

    @ Carson C. Cadogan | October 30, 2012 at 7:39 AM |

    Which former PM? LES or OSA?
    LES had the greater experience with the IMF so he must be the more likely candidate to advise the Jca government on how to deal with the IMF.

  22. David Avatar
    David

    Interesting to note that Professor Persaud agrees with Worrell and NOT the IMF. Came out in a VoB interview with David Ellis.

  23. Carson C. Cadogan Avatar
    Carson C. Cadogan

    millertheanunnaki | October 30, 2012 at 7:45 AM |

    You are getting warmer!

  24. Carson C. Cadogan Avatar
    Carson C. Cadogan

    can you remember which one used to work for michael manley?

  25. Prodigal Son Avatar
    Prodigal Son

    At 9.26 in the morning, are you not supposed to be working for the taxpayers’ monies and not on BU pushing a DLP agenda that is going no where! OMG!

  26. Carson C. Cadogan Avatar
    Carson C. Cadogan

    During the 14 year mis rule of the Barbados Labour Party, the Government of Jamaica should have insisted that the Government of Barbados pay down most of its debt because of the poor advice of one of the members of the Barbados Government.

    Instead of flooding Barbados with Guyanese we should have encouraged Jamaicans instead.

    We owe Jamaica not Guyana!!!

  27. millertheanunnaki Avatar
    millertheanunnaki

    @ Carson C. Cadogan | October 30, 2012 at 9:31 AM |

    Yes I do remember tass the graduate attached as a lowly trainee economist in the Jca Ministry of Finance & Planning.

    Do you remember who was figuratively in charge of this country’s financial affairs between 1991-1994 while the IMF occupied an office in Bay St.?

  28. Carson C. Cadogan Avatar
    Carson C. Cadogan

    It is a dangerous thing to fall into the hands of the IMF.

  29. Carson C. Cadogan Avatar
    Carson C. Cadogan

    We speak so much about Caribbean unity, yet one caribbean country is in an IMF strangle hold and we do nothing to help the Jamaican people.

    There is no suffering so easy to bear as our neighbor’s, right?

    In spite of being not the richest location in the World Caribbean governments could have come together a long time ago and assisted Jamaica with its tremendous IMF problem.

    We can still do it , but I doubt that will happen. Every Caribbean country should contribute to a fund which could be used to bail out the Government and people of Jamaica.

  30. Carson C. Cadogan Avatar
    Carson C. Cadogan

    They are our brothers and sisters!!!

    It is the least that we can do!!!!

  31. millertheanunnaki Avatar
    millertheanunnaki

    @ Carson C. Cadogan | October 30, 2012 at 9:35 AM |
    “Instead of flooding Barbados with Guyanese we should have encouraged Jamaicans instead.”

    So they came under the present administration and how were they welcomed? With open arm or with a finger up their honey pot testing for the quality nectar that attract the real dirty druggie bees like you Carson. Or should we say the real carrion carriers like you Carson.
    Go tell your fellow stinking Bajan men to leave the Guyanese and Jamaican honey pots alone and stop making the Bajan women real jealous and angry.
    We will expect your damned lying party to saddle this country with millions due to Ms Myrie to be settled under the future BLP administration. Alternatively you can withdraw from the CCJ and tell them to piss off. One from 3 leaves the Guyanese.

    You blasted racist! What have Guyanese and Jamaicans done to this country that is so bad? Why don’t you stop levying such vile condemnation on fellow Caricom brothers and sisters? Who, by the way, are not white like the BLP campaign manager. Why not call for the banning of -or restrictions placed on- the Trinidadians who own the majority of the local large businesses?

  32. Carson C. Cadogan Avatar
    Carson C. Cadogan

    Thirteen billion dollars of vat revenue during the last administration.

    Barbados could have contributed at least a billion dollars alone to help Jamaica.

    But what did we do?

    Millions of dollars in the Greenland dump.
    Millions of dollars in Gems of Barbados.
    Three quarters of a billion dollars in cost overuns.
    seven hundred million dollars in a prison
    God knows how many millions in a new court in White part and justice is still not dispense any better or indeed any faster.
    Three hundred million in world cup cricket.
    And on an on we went with our wastage.

    But not a single cent to help our brothers and sisters in Jamaica. Had we done that the rewards for Jamaica and us would have been tremendous.

    But who cares,right?

  33. David Avatar
    David

    Here we go again. What is the value in these exchanges?

  34. Carson C. Cadogan Avatar
    Carson C. Cadogan

    millertheanunnaki(neitherBnorD)

    You replied just as I thought you would!

    Who give a dammn about Jamaica and its problem, right?

  35. Carson C. Cadogan Avatar
    Carson C. Cadogan

    The problem with you BLP supporters is the fact that Dr. DeLisle Worrell is ahead of his time.

  36. Youngobserver Avatar
    Youngobserver

    As I read this document a couple of issues arise for me.

    1. Whether or not one agrees with the Governor, he is willing to expend a high degree of intellectual effort to try to understand the vagaries and nuances of the Barbados economy. One key question for me is whether or not the IMF exercises a similar level of intellectual effort in trying to understand the Barbados economy.

    2. The governor seems to be caught in the middle. One the one hand the IMF and S&P seem to be calling for more austerity in Barbados, while the opposition is calling for stimulus. Am I correct in interpreting him to be saying that we do not need more austerity because we have adequate foreign exchange, and we should be careful how we stimulate or we risk losing foreign exchange? While he may be right his sales job seems impossible as he really pleases no one.

  37. David Avatar
    David

    There is consensus from the top economists in Barbados that the Barbados economy is burdened by structural problems. Before milk and honey is promised we should bear this in mind.

  38. David Avatar
    David

    The BLP has promised a lot of giveaways it would be useful to here the how they plan to execute. What are the forex generating initiatives the BLP has on offer? The Governor seems to be planking his position on our ability to protect and grow forex.

  39. ac Avatar
    ac

    And to hear OSA bleaching out obscenities about patching up the old hospital waiting for it to become obsolete and outdated and waiting for another twenty years when the cost of building a new one would be about triple is laughable.

  40. Observing(...) Avatar
    Observing(…)

    @David
    Is this the same Persaud that is got 4 Seasons back up and running so swiftly to help stimulate our economy? If so then I would definitely listen and heed anything he says!

    Also, the structural side of the economy (coupled with the requisite educational and social changes) is the only way to comprehensively make nay gains. Discussion of one without the next is like spinning tot in mud. Milk and honey will fill me til tomorrow morning, then what???

    Just Observing

  41. Youngobserver Avatar
    Youngobserver

    David I just went back and read the S&P report after the downgrade. I can’t help wondering if when S&p says structural issues in the Barbados economy if they mean the fixed exchange rate. I am also wondering if when S&P and the IMF say competitiveness they mean wage levels.

    Are the IMF and S&P saying that the solution to the economic challenges in to remove the structural problem and increase competitiveness by devaluing or floating the dollar and lowering wage rates?

    It would be nice to get some non partisan discussion.

  42. David Avatar
    David

    @youngobserver

    Why should we (Barbadians) have to be questioning definitions from the international agencies at this stage? Our economic policy-makers must be aware?

  43. millertheanunnaki Avatar
    millertheanunnaki

    @ Observing(…) | October 30, 2012 at 10:44 AM |
    “Is this the same Persaud that is got 4 Seasons back up and running so swiftly to help stimulate our economy? If so then I would definitely listen and heed anything he says!”

    Can’t agree more! Until this motor mouth quack achieves his Four Seasons restart mandate for which he is being handsomely rewarded we should take anything coming forth from this source with a pinch of salt and treated as ‘suspect, unreliable and irrelevant’.
    By his actions and outcomes he will be judged not regurgitated hot air spewing forth at luncheon and dinner speeches for which he is paid at exorbitant rates.

  44. Youngobserver Avatar
    Youngobserver

    In Barbados when we say someone or something is “international” we often mean its better. What International agencies say can have a lot of influence on public opinion bout here because they are supposed to be independent and more sophisticated.

    When they say “structural factors” I get the sense that many local commentators latch on that because that interpret that as things like the large public sector, State owned agencies and so on, but IMF and S&P might really just mean the fixed exchange rate.

    When they say “competitiveness” I get the sense local commentators latch on that because they interpret that as things like the spped of the civil service, approvals and so on, when IMF and S&P might simply mean relatively high wage levels.

  45. Carson C. Cadogan Avatar
    Carson C. Cadogan

    millertheanunnaki(neitherBnorD)

    It is mind boggling how swiftly you BLP people turn on each other.

    Not so long ago on this very blog site the BLP supporters were singing the praises of “the same Persaud “.

  46. David Avatar
    David

    @youngobserver

    If true how do we change it around?

  47. millertheanunnaki Avatar
    millertheanunnaki

    @ David:

    I am putting it to you that the Governor is trying to stave off a mandate given by the IMF that the Barbadian dollar must come in line with the currency of the OECS. There is no way that a Bajan dollar can worth more than an EC dollar in this current economic paradigm that will dictate our future economic performance and survival.

    He can dillydally and argue as much as he likes, the die has already been cast. The CLICO debacle will be the bête noir of the Barbados government whether D or B and will trigger a devaluation sooner rather than later

  48. ac Avatar
    ac

    The BLP haven.t giot a clue there only hope is that the illiterate among the masses would belive in their “pied pipper and slash and burn economic policies like talking about having 100million for the clico policy holders and potholing the QEH

  49. Youngobserver Avatar
    Youngobserver

    We need a slightly more sophisticated media, but threads like this on BU are a good start.

  50. Youngobserver Avatar
    Youngobserver

    The nation publishes some lengthy epistles every sunday, lets watch and see how they handle this one.

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