This first budget provided all of us with the Government’s priorities during economically challenging times. They evidently consist of sustaining both people and businesses for as long as possible, while giving them bitter medicine with a smile.
To be fair, this was the stated priority of the last administration during their budget speeches, but their medicine was unpopular, and delivered with a frown. What a difference a smile makes. We must now continue working as before, and see whether the planned revenues will meet their targets.
Once the Prime Minister made that fateful decision to pursue the austerity option, the best that we could hope for was that the pain would be spread equitably. In the current economic circumstances, the Prime Minister must be congratulated for a responsible effort. It is not a sustainable solution, but it does carve out enough of a breathing space to enter binding negotiations with the IMF – which is their plan.
Despite the salary increases for public workers, it seems that households will generally have much less disposable income with this budget. That is not a criticism, since one would expect to have less disposable income in an austerity-based budget. If the Prime Minister can convince the IMF that this is the outer limit of austerity, then she would have done exceptionally well in managing an austerity-based solution.
Now that the bitter medicine has been administered, and given their preliminary discussions with the IMF, the Government needs to tell us how long we are expected to keep taking this medicine. Prior to the general elections, the austerity duration normally mentioned was between 5 and 15 years. Knowing the duration will allow people and businesses to assess planned spending risks.
If we are to remain on-board this ship of austerity for close to 5 years, then couples may consider deferring a new house mortgage for 5 years. However, if it is closer to 15 years, then a couple with a new mortgage can better assess the foreclosure risks, and may decide that now is the best time to consider selling their house. A similar assessment may be made for any type of medium to long-term purchases.
If the BLP’s austerity is of a long duration, or if the IMF prescribes severe austerity for us, then the Prime Minister is well-advised to seriously look at Solutions Barbados’ non-austerity plan, which provides a surplus of over $1B in the first year without austerity. It has been published on SolutionsBarbados.com for the past 3 years, together with the implementation plans, so that any administration can start implementing the plans at any time.
Grenville Phillips II is a Chartered Structural Engineer and the founder of Solutions Barbados. He can be reached at NextParty246@gmail.com