So what is next?
By now the dust has settled and the public relations machinery has shifted into third gear, many could conclude that Barbados is a brand new island, being raised by the Greek God Poseidon from the watery depths and is being elevated by Chief God Zeus to the heights, which it deserves.
I placed the initial paragraph within the confines of Greek mythology to illustrate the stark conflict between facts and faction and the illusions which have invaded the conversations which have emerged over the past few days.
The revelation that Barbados had reached an agreement with our foreign creditors to restructure our existing debt was welcome news. It is significant but a caveat must centre around several undeniable truths. Chief among this is this country’s love for spending more than it can financially sustain. Also the issue of debt, debt restructuring and sustainable debt management are too complex to just state that our fiscal issues have been solved... simply not true.
The entire process remains confusing to many and has not been fully explained to the public. The public must understand how this 166 square miles was able to place itself under such dire economic circumstances; so let me humbly place the entire sorry spectacle in its proper context.
Many have sought to project and place the blame for the debt challenge squarely under the blame of the previous Administration. I will leave the politicians to litigate that argument, but our debt crisis was not created by solely one party.
For instance, debt is secured when you borrow money from someone or an institution, you sign an agreement to repay the initial loan plus interest. For years, successive governments have borrowed monies for a variety of purposes – either developmental, through capital projects or to pay off other debts. Some have borrowed to prop up our Foreign Reserves.
The transition of Barbados from a developing country at the bottom of the ladder to one of the highest per capita in the world has come with consequences. Loans from banks and other financial institutions have come with tougher more stringent interest rates which have placed this country’s financial arrangements under difficulty. Add to this Barbados’ open economy which faces global financial shocks, it makes for a delicate balance which has to be struck.
Barbados found itself with a perfect financial storm. Low or anaemic economic growth, along with servicing existing debt, coupled with a private sector which had effectively slowed down its domestic investments, placed Government’s financial hybrid of social goods provider and capitalist growth wizard under threat.
Government had to continue to subsidise various sectors within the society. Transport, health care, education and sanitation services continued to be heavily subsidised by the State, yet Government had to find ways to finance its local and foreign debt somehow.
For all the naysayers who criticised the decision back then to pay debt from foreign reserves, rather than enter into tough financial arrangements such as the one this island is currently engaged in, ask yourselves to point to any large scale sustainable investments which would have offset any other choice.
The deal, as announced, was described as giving Barbados ‘breathing room’, in relation to its debt profile. What is does not mean is that Government’s debt has disappeared! The reality is that unless this country earns more, especially foreign currency between now and when the reconstituted debt instruments mature, we will revisit this conversation.
Barbados borrowed monies to pay civil servants on a monthly basis. We borrowed to construct a new prison, Coast Guard headquarters etc, and printed monies under the last Government to keep our heads above water. The latter was panned as being reckless and a threat to our fiscal security, but have we stopped printing monies to pay these debts or are we just printing less?
The irony of the rush to pat ourselves on the back for ‘securing the bag’ for Barbados, has ignored the reality of our predicament and the next steps which have to take place.
Government under the IMF programme has made the commitment to get its financial house in order. Cutting Expenditure is one effort, and the statutory boards are at the forefront of this exercise.
One of those Boards is the Queen Elizabeth Hospital (QEH) and the Government has yet to tell the public definitively if user fees will be introduced to fully finance the operations of the facility. The point was made that a study was being done to access the cost of every procedure and services at the institution.
The new Executive Management changes at the facility, years after the initial change to a Board bear attention. Three new positions have been created to be funded from? When the Board was created the idea was to take the day-to-day operations of the QEH out of the hands of the Ministry of Health but now the new Executive Chairman reports to the Minister... explain that one!
All and all, the reality is that the next steps for this country call for significant economic investment to come to sustain our development. That development cannot be from outside in alone but from the inside to aid growth. But as usual, as the self-praise gets louder, the details of the next steps get quieter. This country was promised a growth plan since May... where is it? Is there a plan for manufacturing, we have the FEED Programme, but will that enable farmers to produce enough to drive the food import bill down? Where is the sugar industry? Are we doing enough to develop tourism, more than just building more hotel rooms? Where does the Sandals project in St. Peter factor in? What about the Sam Lord’s Castle redevelopment? Even Hyatt? What about Four Seasons? Too many ‘crickets’ on these matters of Investment. We need to hear more.