Middleclass the Forgotten Group After ‘Staying the Course’

The newly elected Barbados government took the unprecedented decision on 1 June 2018 to suspend domestic and eternal payments on debt.  Credit rating agencies were predictably swift to respond by adjusting Barbados’ credit rating to selective default (SD).

Even the most ardent of Democratic Labour Party (DLP) supporters would have admitted the economy was in a free fall and the 28 May 2018 general election confirmed the prevailing sentiment. Never in the history of Barbados has a political party fail to win a seat in parliament, the BLP won all but 2 ‘boxes’.

The decision by the government to default resulted in the holders of government treasury notes and debentures taking a LOW haircut with maturities on the investments extended by 15 years. The good news story is that the local debt restructuring – if we accept the official report – has resulted in the national debt shrinking from 170% to 125% of GDP__ government has announced that by 2033 the debt should be 60%.

This blogmaster freely admits the BLP was dealt a bad hand on the 28 May 2018 and some hard decisions had to be taken to stabilize the economy. We can debate the how. The previous Freundel Stuart administration has justifiably earned the label as the worst government Barbados has experienced by a wide margin.

While listening to Senator Caswell Franklyn debating the Debt Holder (Approval of debt restructuring) Amendment Bill 2019 in the Senate this week doing a good job to remind that Chamber the misery government’s austerity policy is having on the poor, it reminded this blogmaster of the forgotten middle earning class. The decision by the government to restructure the domestic debt has impacted this group of persons who were encouraged to invest in government’s gilt edge securities by successive governments. You are reminded that for almost 10 Rh years under the Stuart administration the middle class – the majority with a mortgage, car and education loans – were asked to hold strain.  BOOM the first thing the Mottley government did was to yank a belt that was already fitted tightly around the waist of the middleclass Barbadian.

A middleclass Barbadian should be synonymous with being an educated Bajan. Middleclass Barbadians understand decisive decisions had to be taken by the Mottley government to meet head on the economic challenges facing the country. Here is what this blogmaster does not understand. We have the largest Cabinet in the history of the country and given the current state of affairs in the country several will be elected for a second term. We have a BU commenter who is quick to advise he doesn’t have to read and spell for the BU family.

The following blog retrieved from the BU archives should explain the grouse of this blogmaster.

Unfunded Government Pension a Worry

Fiscal Problem In Barbados ! eb2d17288e33d24ec34a90fd04dca0d0 Dr. Justin Robinson recently shared some interesting information on Facebook, he attempted to breakout government expenditure and revenues – see the presentation, ‘facts on the Fiscal Situation in Barbados last 20 years. A focus on Transfers and Subsidies‘.

Successive governments have been challenged by the size of the transfers and subsidies allocation and it has become more so in the last decade given the fiscal challenges being experienced. Although out of the scope the blogmaster used the opportunity to question the chairman of the NIS about government’s non NIS pension liability. Private registered pension plans AND the NIS receive input from actuaries to inform the level of funding required to ensure they are able to meet future obligations.

It is an open secret the pension plan which covers statutory agencies, members of parliament and other public sector agencies continue to be a significant pension expense for government. From arms distance the fund appears to be ‘under-funded’. This is the interesting point of the exchange on Facebook with the Chairman.

Unfunded Government Pension a Worry

If the blogmaster overestimated the ability of some to understand the thrust of the blog, Hants may be able to read and spell fuh wunnah.

A Heather Cole Column – Post-Colonial Misery

Submitted by Heather Cole

The nine year recession in Barbados has taken a toll on the economy. The government’s policy of trying to tax its way out of the recession has failed. As unemployment continues to rise it appears that industrial development has come to a halt. Foreign reserves are under threat. There is no longer ‘free education’ at the University of the West Indies for students who meet the requirements. The healthcare system is now in shambles and many citizens are struggling to make ends meet.

Unique to today’s situation is the middle class. The large black middle that exists in Barbados was virtually nonexistent during the 1930’s. Government’s homegrown austerity program has had a deleterious impact on this segment of the population. Not only the black middle class has suffered, the entire middle class has been affected. Unemployment amongst this sector continues to rise and part and parcel with that unemployment is the inability to pay mortgages due on their homes. Some will have nowhere to go if their houses are foreclosed on because many of their friends and family are already in the same situation or they have lost the connection to the villages from whence they came and will be unable to find accommodation in the Heights and Terraces. I do not have any figures to estimate the numbers who have been affected but each day brings a new client to Fairness in Action of persons at some stage of loan default.

If a significant portion of the middle class loses their homes, it will be the banks who will become owners of the largest amount of real estate on the island. The banks in turn will sell their debt to some external entity perhaps the rich Syrians or the Saudis. If this occurs, owing a piece of the rock will become a myth like regional unity. Stockpiles of empty houses will be available as the members of the former middle class will be unable to repurchase.

It is indeed a frightening situation to come to grips with. Nine short years ago the middle class of Barbados were enjoying the best of what the island had to offer. No one could have ever imagined that so many persons would lose their jobs, their vehicles, insurance coverage or watch all of their cash in their banks accounts dwindle. Along with all this the prospect for being rehired is dismal.

These luxuries were not available in the 1930’s so they would not have been missed back then. They are the trappings of the middle class that we called progress. Perhaps it would have been wiser to stay in the villages, build a chattel house and as time went by convert it to a bungalow. No mortgages would have been owed to the bank. Unfortunately, we cannot go back so we must deal with the situation at hand.

Someone told me recently that one of the commercial banks is running an advertisement let us make your dream home. In fact they are doing the direct opposite. If the bank repossesses your home especially if you have been paying the mortgage for decades, they are actually killing your dream.

I do believe that the banks in Barbados have a social responsibility to Barbadians. By now they are fully aware of the effects of the draconian policies of the government on the mortgagees. In accessing the situation the banks should have publicized an offer to refinance properties that are in difficulty knowing fully well that there is a cost to each foreclosure process which more likely than not causes the bank loses on its investment. Apart from Financial loses; most banks will suffer from a reputational loss due to the volume and gravity of the current mortgage crisis.

I also believe that more so than the banks that the government which the people elected should have a social responsibility towards Barbadians. Throughout this entire period of economic downturn and the harsh home grown austerity program of retrenchment and high taxation, never once has the government considered using legislation to put measures in place to prevent homeowners from being disadvantaged to the point where they will lose their home. It is highly unacceptable for a government not to have understood the gravity of its actions in the first place and secondly not to react.

During the housing bubble that led to the recession in the US, in 2008, the government stepped in and offered measures that acted as a cushion to prevent many home owners from losing their houses. The share volume of the people in Barbados affected now makes it imperative that the government must step in and assist them.

The late Errol Walton reaped the fruits of the seeds that were planted during the 1930 riots when he proclaimed Barbados as an independent nation in 1966. It is indeed shameful that his party has not only destroyed his legacy of education and healthcare but will also be responsible for the death of the thriving middle class of Barbados.