Economy Faces Serious Macro Economic Challenges Says Governor Haynes
The fear of Barbadians who have followed the performance of the local economy for the last ten years had their fear confirmed by Governor Cleviston Haynes today when he delivered the Economic Review for the last quarter of 2017.
After TWO terms the policies of the incumbent government continue to fail to jolt the economy back on a sustainable growth path. Given the structure of the Barbados economy the one indicator that points to failed economic policies is the sinking foreign reserves. Governor Haynes confirmed that the foreign reserves have now reached a crisis level of 6 weeks import cover and continue on a downward trend. The IMF Article IV Consultation Report for 2017 also highlighted the falling reserves, ‘... current account balance continues to narrow but international reserves are falling‘ and the opening paragraph of the Central Bank Report, ‘During 2017, the Barbados economy continued to face significant macroeconomic challenges associated with declining international reserves, weak public finances and the need for the implementation of measures that create a platform for sustainable growth over the medium-term’.
To stoke concerns of Barbadians about the current economic state of the country, Economist and former minister of finance in Greece, Yanis Varoufakis cautioned local authorities that the Barbados economy is in need of an urgent fiscal adjustment- he recommended a reduction in the size of public sector, debt restructuring and a mild but significant devaluation with some type of inflation targeting. BU is not qualified to say if to devalue or not- clearly we need to address government spending, increase productivity in the country especially in the export sector, address debt servicing challenges and a dose of private sector investor confidence. How will a devaluation attack these systemic problems we have failed to effectively address in the last two decades?
The fear of the BU household is the certain knowledge of how an incompetent government commingled with a disengaged citizenry will antithetically respond with a general election weeks away .