Submitted by Kemar J.D Stuart, Director Business Development , Finance and Investment Stuart & Perkins Caribbean
However On September 28th 2022 the Prime Minister of Barbados announced the details in regards to signing another IMF program. Included in this new IMF program is pension reform and reform to state owned enterprises
In the press conference earlier this month the Prime Minister when asked by a reporter she venomously denied that pension reform will be included in this new IMF program but it will be done in the old program which ends september 30th today .
The mention of the credit rating agencies, keeping Barbados’ credit rating at stable is nonsensical as Moody’s already indicated publicly in a release that Barbados will not be downgraded as long as it signs another IMF program. Barbados has not regained access to international capital markets after the voluntary default in 2018.
Prime Minister Mottley said it was difficult to say how deep state owned enterprises reforms would be under the new program . This is a confusing statement as the government circulated a survey previously under the first program asking citizens which SOE’s should or should not be privatized.
The strategy to cut as many SOE’s from government funding is still in place. The strategy is to fund them via a tax or levy or privatization . The PM made reference to urban and rural development which will be merged into one department, she made mentioned of CBC which will be privatized , the BWA will be privatized as the first hint of this plan was when former Water Resources Minister Charles Griffith indicated that government is appointing a 20 man water committee to tackle the water woes. The committee is made up of a list of wealthy businessmen , BWU leader Toni Moore , Director of Finance Ian Carrington who was the IMF press conference , Dr. Clyde Mascoll, as quizzed by myself, admitted on Brasstacks that the government is now seeking to find the right price for water. The IMF in 2007 recommended that to achieve savings and to reduce the amount money government spends on BWA that automatic price increases will address the cost prices imbalance in deliver of water to Barbadians
The PM hinted that she provided an additional 30 Million to BWA instead of increasing prices , as this program progresses the BWA will face a price increase in water rates once the electricity rate increases. Transfer funding to entities such BWA are to be cut as part of the IMF deal and in observation of other countries worldwide under IMF programs saw private water companies emerging when the conditions took their toll on governments , the GAIA is still in negotiations to be leased out
The new IMF program will continue to focus on digitization of the public service as the impact of Covid-19 pushed many economies to focus on delivering services online. The government declared that their policy is to take Barbados into fully digital and cashless society under the original BERT plan
The recent tongue lashing and attack by the Acting PM Santia Bradshaw on government workers who are attached to economic programs such as the Ash program is a bluff to create reasons for the cutting of these programs as a condition of the new IMF program. The programs were always intended to be temporary but were used as tools to hand out jobs for election purposes. That vile tongue lashing was unnecessary when the truth could have been told. In order to bring improvement in the government’s fiscal position all covid related expenses and ash expenses will go. The implementation of a fiscal rule to limit domestic deficit financing will tighten in.
The writing is on the wall as further expenditures cuts in government will see some thousands of government workers laid off under the new program. The wage bill of government which stood around $850million is the one of the main consumers of government funds and the IMF recommended that it should be cut.
As the PM spoke about the UK’s currency devaluation as a reference to Barbados not being as bad as other however the continued borrowing of foreign debt to keep the 2:1 peg avoiding external devaluation comes with measures to implement an internal devaluation which is one of main reasons why prices are so high in Barbados. The internal devaluation comes in the form of government laying off workers and cutting the wage bill, reducing funds allocated to Ministries , reducing and cutting pension monies , placing caps on capital expenditures and overall cutting government provided income. Dr. Kevin spoke of how government is going about the internal devaluation while speaking with Lisa Lord on CBC tv in an interview.
The mention of Barbados having 17 Billion in debt in 2018 vs 13 Billion today is numerically true but disingenuous and misleading because the government simply wrote off $4billion in debt overnight owed to Barbadians overnight in a very draconian debt restructuring and still has not repaid those debt. The CBB lost $1B and still needs to be recapitalized and this is another missed target under the first IMF program , the NIS lost close to $1B , treasury bills were cut to the value of $1B causing Barbados to make world economic history as this action only ever occurred in Russia 1998, Ukraine 1998 and Uruguay 2003 . The last $1B were in overdrafts , government guarantees, SOE debt and arrears. The danger that locals face moving forward is that there is a high chance of another debt restructurìng and reprofiling happening where the bond payments that government promised these creditors are postponed. The likelihood of local creditors being repaid in cash is extremely low and precedence has shown that government can abuse it’s parliamentary majority by using the clause included in the debt restructuring bill which states that only 75% of creditors need to agree to any changes for new debt restructurings.
One last potential abuse of power is the government’s new thirst for compulsory acquisitions of land. Under the government’s passage of the debt settlement bill in parliament persons whose land has been taken under the Land Acquisition Act, section 4 made provision for those persons whose land was acquired by the government to be paid in bonds, this provision also covers all legal claims or outstanding liabilities.
So the question must be asked of government , once they compulsory acquire the properties in St Lawrence Gap will the property owners be paid in bonds according to the law passed via the Debt settlement bill?