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A Problem of Debt

During the just concluded 2016 Estimates Debate former Prime Minister Pwen Arthur in one of a few intelligent interventions shared his perspective on the debt problem. It is no secret Barbados has achieved the ‘ranking’ of one of the highest public debt to GDP countries in the world. In the study- Public Sector Debt in…

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debt_highDuring the just concluded 2016 Estimates Debate former Prime Minister Pwen Arthur in one of a few intelligent interventions shared his perspective on the debt problem. It is no secret Barbados has achieved the ‘ranking’ of one of the highest public debt to GDP countries in the world. In the study- Public Sector Debt in the Caribbean: An Agenda for Reduction and Sustainability published by the Caribbean Development (16 Sep 2015) Barbados, St. Kitts and Nevis, Jamaica, and Grenada – are ranked in the top five – all greater than 100%.

Here is a short video shared with BU that summarizes our plight in simple language.

80 responses to “A Problem of Debt”

  1. chad99999 Avatar
    chad99999

    @millertheanunnaki

    My point to David is that when one member of a household spends, the money is usually lost to the household. So households have to watch their spending, and can only borrow for wise investments with long term payoffs over many years (e.g., building a house, or financing a university education).

    As for escaping the burden of too much domestic debt, don’t you agree that the “solution” is to raise taxes and user fees? Unfortunately, the pampered middle class do not want to hear this.

  2. David Avatar
    David

    @chad9999

    You are correct about a fat and lazy middle-class.

  3. millertheanunnaki Avatar
    millertheanunnaki

    @ chad99999 March 21, 2016 at 8:23 PM
    “The problems arise from wasted funds and unprofitable projects. But if Barbados borrows to improve its human capital or certain parts of its infrastructure, that is good.”

    So what’s new about what you are saying?
    Barbados has been borrowing since Independence and so far has been able to repay. Nothing is wrong with that.

    What is worrying and cause for major concern is when you borrow to finance conspicuous consumption of foreign made goods and services with no corresponding assets either in the form of physical infrastructure or human capital with ‘measurable’ social returns like a healthier citizenry who does not despoil the environment.

    Can you say the borrowing that has taken place over the last 8 years meet the criteria of commonsense other than political deceit of claiming it was done to payoff the debt incurred by the previous administration?
    Doesn’t each loan have to be matched by a mandatory repayment provision call a sinking fund?

  4. millertheanunnaki Avatar
    millertheanunnaki

    @ chad99999 March 21, 2016 at 8:33 PM
    “As for escaping the burden of too much domestic debt, don’t you agree that the “solution” is to raise taxes and user fees? Unfortunately, the pampered middle class do not want to hear this.”

    Isn’t that ‘solution’ a kind of Catch 22 situation?
    Who do you think has been carrying the tax burden? Taxes in whichever form are passed on to final consumers. Businesses are just tax collecting agencies.

    The problem with Barbados is one of living above its means on other people’s money (not punching above its weight as it used to like to brag about).

    The solution (or even partial) is not to increase taxes but to ‘force’ more people and indeed businesses to be more efficient through the reduction of the State as the major provider and allocator of goods and services thereby encouraging ‘private’ citizens, corporate or otherwise to enter the market place to fill the gap left by the withdrawal of the State.

    Parasitic Barbadians need to experience the necessity of earning their living by producing goods and services foreigners would wish to buy in order for Bajans to maintain their ‘sweet’ life.
    As the donkey told the fat pig while being transported to the market: “Sweet Life is Not Long Life”.

  5. Retribution-things that make me go hum! Avatar
    Retribution-things that make me go hum!

    “Pampered middle class” – please!! The middle class are the ones tax to death. Since Froon accidentally became PM, the middle class are now the working poor. I am not in agreement of blaming the middle class for this piss poor government financial errors.

    Politicians and business men like PH can eat steak and wine and dine on Caviar almost everyday of the week, drive the latest cars and shop in Milan. Get fat on bills- Stupse!!

  6. Tron Avatar
    Tron

    @millertheanunnaki

    I agree with you that somebody has to pay the bill for the excessive non-productive consumption and weak working ethic during the last decade.

    I also agree that the next gov. will go the path of least resistance, that is devaluation and/or haircut for local creditors. They will have no other choice, since nobody will borrow Bim any foreign currency.

    Public debts are good, if you get credit for free or very, very low interest and invest it into infrastructure etc pp, but not, if it is done to pay for the holiday of public servants and for 10 % interest per year. Even a three year old child gets a better loan than this in North America or Europe.

    However, the present gov. will not act on this issue anymore. Two more years are lost with vagabondish infrastructure, without growth, childish promises, politicians shouting like trolls and stories about nepotism in public life.

    We need a leader who tells the citizens on TV: During the last ten years, you folks consumed above weight. Party is over. Face the reality that Barbados is now on the economic level of Jamaica and some African nations.

  7. Artax Avatar
    Artax

    Alvin Cummins March 21, 2016 at 7:16 PM #

    “@ARTAX: WHAT IS THE ROLE of Home Helpers?”

    @ Alvin Cummins

    “As currently instituted, the Home Help Programme ensures that older persons have their needs met in the environs of their homes and are able to interact directly with their care provider and maintain community contact.”

    So what is your point? However, before you answer, perhaps you should avail yourself to the following information which was taken from the 2014 Auditor general’s Report:

    6.123 Based on an assessment of the staff complement of the NAB, these FIFTY (50) ADDITIONAL POSTS of Home Helper have been CREATED WITHOUT the PERMISSION of the Ministry of Civil Service. The National Assistance Board was able to finance these positions by requesting, through its parent Ministry, increased funding for substitutes in the estimates of expenditure and this funding was provided by the Ministry of Finance.

    Conclusion
    6.124 Cabinet decisions set the policy direction of the Government on matters, and state agencies are expected to carry out those decisions. The National Assistance Board EMPLOYED MORE PERSONS that it WAS AUTHORIZED to, by retaining persons in posts that should have been transferred at the closure of its Housing Programme as directed by the Cabinet. It also did not follow the Ministry of the Civil Service is guidelines for creating new posts but UNILATERALLY INCREASED its STAFF COMPLEMENT. Consequently, the Board EXCEEDED its ALLOTTED STAFF COMPLEMENT by FIFTY-THREE (53) posts.

  8. chad99999 Avatar
    chad99999

    Barbados should never devalue the currency. The result would be inflation and financial ruin for pensioners.
    We also need to extract as much as we can from tourists, especially since our marketing agencies have spent heavily to build up our image as an elite destination for rich Europeans and Canadians. Our tourism objectives are best served by keeping the value of the Barbados dollar exactly as it is now.
    That is why I say the best way to reduce debt and curtail conspicuous consumption by the pampered classes in Barbados is to raise income taxes, sales taxes and excise taxes on luxury goods, including cars, wine and tobacco products.

  9. Bush Tea Avatar
    Bush Tea

    How does this work Chad?
    When someone demonstrates that yours is a simplistic and mistaken view …are you gonna disappear from the blog again…?

  10. Gabriel Avatar
    Gabriel

    The Barbados dollar is pegged to the US dollar.As a result Barbados experiences fluctuations in its currency value in synch with the movement of the US dollar.I posit the view therefore that the US dollar should be the currency of the realm,in Barbados.

  11. Well Well & Consequences Avatar
    Well Well & Consequences

    Alvin…I am not, nor was I ever politically inclined….a requirement of being a politician is, you have to lie continuously, even if a lie is not required and the truth will suffice, so too being a yardfowl requires constant lying, deceit and pretense….I was never good at blurting out lies when it’s much easier and less complicated to tell the truth.

    So, I will never qualify either as a politician or yardfowl…ya have to blurt out too many lies like if ya afflicted with Tourettes Syndrome…that is not my cup of tea…I like to remember the last words I said.

  12. Artax Avatar
    Artax

    chad99999 made some very valuable comments, especially as it relates to incurring debt for productive and unproductive purposes.

    Whereas debt incurred for capital investment generates cumulative employment and income growth with minimal debt growth; debt for consumption generates compounding debt growth with minimal employment and income growth.

    However, we have not examined the long term fiscal imbalances of islands with small open economies, such as Barbados, arising, for example, as a result of an aging population (i.e. unfunded liabilities arising from aging).

    It is a known fact that Barbados’ has an aging population. The current expansionary fiscal policy has coincided with rising, and largely unfunded, age-related spending, including health care costs (QEH, polyclinics, psychiatric care, district hospitals and government owned and government subsidized retirement homes), social services provided by agencies such as Welfare Department, National Assistance Board, Poverty Alleviation Fund, the Urban and Rural Development Commissions.

    This rapidly aging population presents Barbados with the prospect of increased future costs that are not entirely recognised in current budget projections. For example, there has been a significant increase in the abandonment of senior citizens at both the general and district hospitals; their upkeep has to be undertaken by the state. Also, there are several individuals who have not properly prepared themselves for retirement, and will often depend on the state for financial and other support. These factors, as well as the services that are already being provided by government, will ultimately incur additional costs/debt to the tax payers of this country.

    Although debt arising from the above examples may be categorized as “debt for consumption purposes,” it is inevitable because funds are not readily available to pay for these pre-existing obligations.

  13. NorthernObserver Avatar
    NorthernObserver

    @Gabriel
    if you visit any local Realtor site, you will note ALL the prices are already in $US.
    @chad 999999999
    the majority of the newer debt is mostly local, not all. This actually restricts the island, because, while sovereign debt is unsecured, and foreign debt holders would walk away with their tails between their legs in the case of insolvency, it would render local lenders similarly insolvent (read the NIS et al)

    The @Tron proposal is popularly called “austerity”.

    The greater issue is when debt reaches current levels, and given the revenue vs expense projections, even if one was to ignore all debt payments, both servicing costs and and principal repayments, chances are, one is still in deficit, though closer to balancing.

    Cutting expenses is never politically desirable.

    Have you ever met a hard core gambler? The mentality is tomorrow will be his/her day, this bad luck streak must end. This unfortunately is how the current group played the game…the international economy must improve, and that will lead to increased tourist and offshore business and growth elsewhere. That will lead to increased revenue which will cover rising costs. What has happened is the costs have risen faster than estimated, with minimal growth in revenue. The gov’t has found itself picking up most of the slack.

    The double whammie, which Greece faced, is even when they instituted austerity as per Tron’s suggestion, they still couldn’t balance the budget, so the debt kept growing. So enter some novice, who convinced the population he could scrap austerity and return Greece to greatness. We have seen he was a dreamer.

  14. Bush Tea Avatar
    Bush Tea

    Thank you NorthernObserver

  15. Artax Avatar
    Artax

    @ NorthernObserver

    Spot on analysis.

  16. Bush Tea Avatar
    Bush Tea

    Debt, even for productive purposes, should be a last resort that is utilised with great care, and should be liquidated with utmost alacrity.
    Friendly, low cost loans such as international development support (and loans from Mom for university) are attractive ways to accelerate development, but even these should be strategic in nature and repaid promptly.
    Any damn child still heavily indebted to Mom fifty years after ‘independence’ needs to have their ass kicked ..and their assets seized…. Such ‘beneficiaries’ should, by that time, be assisting THEIR OWN children and grands with developmental loans…. not borrowing from Mommy… and CERTAINLY not borrowing from Credit Cards or Easy Cash….

  17. CHAUCER Avatar
    CHAUCER

    @chad99999
    Bdos is overtaxed and you want to imposed more taxes

  18. CHAUCER Avatar
    CHAUCER

    @chad99999
    Bdos is overtaxed and you want to impose more taxes

  19. David Avatar
    David

    Never thought the day would come in Barbados when some would be debating the merits of deficit financing. The reality of it all came home recently when the government and cohorts were bleating gleefully about the concessionary rate received on a loan from China to construct Sam Lords Castle.

    >

  20. balance Avatar
    balance

    “Sinckler subsequently APOLOGIZED, which caused Ellis to say he admired him for being man enough to come to the public and admit he was wrong.

    Look, the man admitted in a public forum that he was wrong and Mottley was correct, and you have now decided to jump into the fray trying to convince BU otherwise.”

    I do not know what in Mr Sinckler’s action could cause admiration from Mr Ellis when Mr Sinckler categorically denied on the floor of Parliament knowledge of the increase of which he was a part and only apologized when a document was circulated categorically proving that he had lied.

  21. balance Avatar
    balance

    .”124 Cabinet decisions set the policy direction of the Government on matters, and state agencies are expected to carry out those decisions. The National Assistance Board EMPLOYED MORE PERSONS that it WAS AUTHORIZED to, by retaining persons in posts that should have been transferred at the closure of its Housing Programme as directed by the Cabinet. It also did not follow the Ministry of the Civil Service is guidelines for creating new posts but UNILATERALLY INCREASED its STAFF COMPLEMENT. Consequently, the Board EXCEEDED its ALLOTTED STAFF COMPLEMENT by FIFTY-THREE (53) posts.”

    And by how many votes did Mr Blackett win ? It is ironic that this padding of the employment register occurred around election time. Vote buying it seems in a different form.

  22. Well Well & Consequences Avatar
    Well Well & Consequences

    Lol…thank heavens for Mom…

    There are too many pimps for journalists on the island…real journalists are not political pimps.

  23. millertheanunnaki Avatar
    millertheanunnaki

    More terrorists’ attacks in the heart of Europe . Brussels the seat of the EU is under siege.
    The ISIS soldiers have really left the Trojan horse and well ensconced in the cities of Europe.

    Expect a massive right wing reaction that can lead to civil unrest along racial/religious lines leading to further economic dislocation.

  24. Bush Tea Avatar
    Bush Tea

    @ Miller
    Expect a massive right wing reaction that can lead to civil unrest along racial/religious lines leading to further economic dislocation.
    ++++++++++++++++++++++++++++++
    You are given to understatements today aren’t you….?
    …Expect significantly increased restrictions on international travel (read REDUCED tourism)…
    …Expect a new hard line on the mass movements of immigrants into Europe… perhaps even mass deportations – causing even more resentment…
    …Expect a tightening of borders…

    The temperature is rising at ALL levels, but of course there are those of us who will argue that “least-squares linear regression trends” show that we have not really gotten any worse… 🙂

    A top Bushman once said…
    “When you see a cloud coming in from the west, you immediately say, ‘There’s going to be a storm,’ and that’s what happens. When you see a south wind blowing, you say, ‘It’s going to be hot,’ and so it is. You hypocrites! (b bowls 🙂 ) You know how to interpret the appearance of the earth and the sky, yet you don’t know how to interpret the present time?”

  25. Well Well & Consequences Avatar
    Well Well & Consequences

    Lol…good one Bushman.

  26. Tron Avatar
    Tron

    After Brussels: Trump is rising. Blitzkrieg in America.

  27. Well Well & Consequences Avatar
    Well Well & Consequences

    Trump is a slimy opportunist, he is shameless and will use any excuse to create strife for those whom he hates.

  28. Gabriel Avatar
    Gabriel

    Forget not that Trump is German and fancies himself another Hitlerite whipping up the
    Wasp working class with the Hitler salute and Hitler pledge.In place of the moustache,there is the hairstyle.

  29. Well Well & Consequences Avatar
    Well Well & Consequences

    Tony Best in New York sums it up quite nicely, in this excerpt taken from his article.

    “But the message from Wall Street was clear. “The problem is that we still have not brought the fiscal deficit down to a level that people [on Wall Street] are comfortable with,” observed the Governor

    The bottom line is that Barbados is far from being out of the woods and will not emerge from its economic troubles unless and until the Government tackles the deficit head-on. That would mean carrying out the restructuring of state enterprises, reducing the waste and boosting efficiency, all promises the Government made a few years ago but did not complete.

    What’s clear from all of this is that Barbados is far being out of the economic woods. Too many Cabinet ministers and others are wasting time talking about what they inherited from the previous administration instead of solving the problems on their plates in 2016.

    They often ignore that after eight years in office, they can’t hold onto what they found in 2008 as a reason why today’s challenges exist. The political “statute of limitations” has run out on the things they may have inherited.

    See more at: http://www.nationnews.com/nationnews/news/79200/headlines-worrell-york-update-economy#sthash.EdGlfw8V.dpuf

    Ha-ha….ha

  30. NorthernObserver Avatar
    NorthernObserver

    You didn’t include my favourite comment by the CBB Gov…..”We are not a tax haven. We do not exist to enable people to avoid paying taxes in Canada or wherever activity originates.” The Canadian people certainly do not see things that way?

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