A Cabinet Minister says it is an “absolute necessity” that the country’s debt crisis be addressed, as it is at present “seriously undermining” not only the fiscal consolidation efforts of the Government, but economic confidence and growth in this country.
Member of Parliament for St. Philip West and Minister of Agriculture, Food, Fisheries and Water Resource Management, Dr. David Estwick made the comments in the House of Assembly on Thursday night. But, even as he signalled his support for the 2016 Financial Statement and Budgetary Proposals, he again voiced his concern about the continued pursuit of an austerity economic policy to effect debt and foreign exchange reserves sustainability.
The outspoken Minister’s comments came as he suggested that even though the measures introduced between 2013 and 2016 did achieve some results, being able to reduce the wages and salaries bill to the Government and reduce the transfers in subsidies on the current account, he said they also significantly increased the attendant short term and medium term debts, as well as the interest charged on those debts and as a result the total debt stock, both domestic and foreign also rose. He told the Lower House that as a result of that he is predicting that it will continue to have an impact on economic performance and consumer spending.
“In recessions of the 70s, 80s, 90s and 2001, investor confidence in Barbados remained solid and this was manifested Sir through continued strong appetite to subscribe to and take up Government’s savings bonds. Mr. Speaker this trend was reversed in 2014 and the last 11 series of savings bonds issued had a very poor uptake. Therefore it was my contention then that the Central Bank would be forced to continue its aggressively open market activity. Mr. Speaker this is precisely what has been happening and what has continued to happen, that is the reason why one has had a $1.3 billion increase in total net lending to the Government directly through treasury bills uptake and direct credit from the Central Bank itself,” he said.
Estwick explained that these problems have been building up for many years, noting that under the cash accounting system, state owned enterprises were allowed to manage operating deficit and debt costs off book, which he charged artificially kept the Central Government’s fiscal deficit looking better than it was. But turning his attention to the introduction of accrual accounting system, which started in 2007, he said the then new Democratic Labour Party Government had to bring all the expenditures incurred by Government to book, which he said caused the current account deficit to balloon. This, he maintained cannot be blamed on the DLP Government.
“It is not a simple matter that this Administration is faced with, the challenges were being built up over a long period of time and as a result of that, how one goes about managing this particular set of challenges requires a completely different approach to some of the approaches that are being used within the Caribbean and internationally,” he said.
With that in mind, the Agriculture Minister offered up some approaches which he suggested should be considered to address such things as the high debt services, high debt stock and high fiscal deficit. In particular, he said the way forward for Barbados should be to look more at refinancing and debt restructuring. He acknowledged it is not an easy process, given there is no international architecture to manage it, as he pointed out that agencies such and the International Monetary Fund (IMF), Moody’s and Standard and Poor’s have opposing definitions for such things. However, he noted that the IMF and the International Capital Markets Committee are working together to establish a central framework that would be used for all debt restructuring. (JRT)
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