BRIDGETOWN, Barbados, Friday August 25, 2017 – Whether the Democratic Labour Party (DLP) wins a third consecutive term in office or the Barbados Labour Party (BLP) is successful in forming the next government after the next general elections due next year, Barbadians will have to take some bitter medicine to fix the ailing economy.
That’s according to one of the region’s leading economic experts, Marla Dukharan.
And she has advised the Freundel Stuart administration to determine now whether it will stick with its so-called homegrown austerity programme or turn to the International Monetary Fund (IMF) for help.
The former RBC Group economist told a forum organized by the Institute of Chartered Accountants of Barbados yesterday that it was important to “press the reset button” early in order to end the suffering as quickly as possible.
Once the necessary measures are implemented to reverse the economic woes, the island’s health could be stabilized in three years, she said.
“While I don’t want to use the word austerity . . . it is a fact. It is going to have to happen regardless of which party is in power, regardless of if it is the IMF or a homegrown programme,” she told participants at the forum themed Homegrown or IMF Designed: What Should Barbados’ Economic Plan Look Like?
Pointing to some of the IMF’s recommendations in its last Article IV Consultation, the newly appointed chief economist at financial technology company Bitt Inc said: “The IMF doesn’t tell you that you have to devalue your currency. The IMF tells you ‘this is your problem, these are your policy options, you have to pick your poison. It is going to be poison but you have some leeway as to what you pick.”
“I just want to say that I believe that Barbados can press the reset button now and fix the problems . . . . If Grenada can do it, Barbados can do it. It took Jamaica and Grenada about three years each to get back on a stable path. You have to stop the patient from bleeding and then do the reforms to get the patient healthy again.”
Dukharan reiterated that the longer Government delays implementing the corrective measures, “the steeper the adjustment will have to be”.
She listed high debt, low economic growth, falling reserves and a widening fiscal deficit as key areas that must be addressed, adding that the two to one peg to the US dollar was at risk, given that that there are 7.6 times more Barbados dollars in circulation than US currency.
“This is a very difficult position to continue to hold at a two to one exchange rate. And to solve this, we have to go all the way back to solving the fiscal deficit,” she warned.
Largely agreeing with the IMF’s recommendations, and using Jamaica and Grenada as examples of how an IMF programme can result in positive change, Dukharan said any programme undertaken by Barbados should consist of public sector reform, public consultation, regular communication, accountability and strengthening of the Barbados Revenue Authority in order to improve tax revenues.
“Jamaica is growing, not at the rate they would like to, but they are growing and confidence is coming back and their currency is actually appreciating. Grenada is growing between three and four per cent on average after having two debt restructures and having been [affected] by a hurricane. So I am saying that to say it can be done, even if it is under an IMF programme. The IMF is not as bad as we think or some people like us to believe.” (Adapted from Barbados Today)