BRIDGETOWN, Barbados, Wednesday January 31, 2018 – An international economist is suggesting devaluation of the Barbados dollar as a viable option to hoist the island from the “fiscal cliff” on which it now stands.
Economist and former minister of finance in Greece, Yanis Varoufakis, said that based on his information about Barbados’ position, “there is no doubt that there is a need for fiscal and structural adjustment”.
His recommendation was to “reduce the size of public sector employment, but combine this with debt restructuring and a sensible, mild but significant devaluation which is accompanied by maybe some type of inflation targeting”.
Varoufakis cautioned Barbados not to make the mistake of Greece, and countries such as Argentina and Mexico, by “trying to preserve the peg while using austerity effectively in order to take the full blast of the adjustment”.
His suggestions were given in his contribution to a webinar discussing economic solutions for Barbados. However, one of the other panelists, former governor of the Central Bank of Barbados, Dr DeLisle Worrell, instead recommended his “medicine” of “two imperatives” to return the island to growth: cut Government expenditure sufficiently to eliminate the current account deficit; and institute fundamental structural reform to ensure internationally competitive delivery of public services.
Worrell was fired from his job last year, amidst concerns about the Central Bank’s repeated printing of money to shore up Government’s finances. He has since repeatedly declared his commitment to seeing the Barbados economy regain a strong footing.
He again expressed concern yesterday about the level of Government spending on current operations, noting it exceeded tax revenues by “almost 20 per cent”. The economist warned that after almost a decade of overspending, the Central Bank was in danger of running out of foreign reserves.
Worrell shared the main elements of a seven-point strategy to address the two “imperatives” which he saw as necessary for growth.
They included Government undertaking negotiations with international lending agencies like the International Monetary Fund to finance a five-year structural adjustment programme, with conditionalities on the implementation of a comprehensive programme for public sector renewal.
Worrell also proposed there be final approval and start of major works on all tourism projects that were to have started in 2017, as well as an aggressive programme of divestment of carefully selected public assets.
Part of the reform package was job cuts in the public sector of about 1,500 per year for three years. (Barbados Nation)