Economy must be diversified

“A crisis is a terrible thing to waste.”

That’s the view of President of the Democratic Labour Party (DLP), Verla De Peiza, who in a statement released yesterday in response to the Central Bank’s Report on the First Quarter, put the case for the diversification of the economy as well as a reduction in the Cabinet. The DLP President said that while successive administrations pursued economic diversification it was done with little success, but there is now a perfect opportunity that should be capitalised on.

“This is the moment to spend time, money and effort cultivating a new economy, designed to be less flamboyant, but more able to withstand external shocks. And cultivating, as agriculture needs to be a bedrock of our sustained and sustainable future development – remembering always that agriculture is dependent on water security,” she stated.

Her comments came as she noted that for the foreseeable future, because the country cannot get access to grant aid, we will have to depend on credit in order to get out of the “hole” we are in. This, she noted, is all occurring against the backdrop of our tourism industry being in need of life support.

“Our foreign exchange levels look buoyant, but how much of that is resting on the laurels of borrowed money as opposed to earnings? This question is answered both by the recent Central Bank of Barbados Review of First Quarter 2020 and the substantive Prime Minister’s address to the nation 24 hours previous. The Governor was the one who broke the news of this Administration’s intention to remain focused on its 2033 goals, while the Prime Minister confirmed an ongoing campaign to secure additional loan facilities from international financial institutions.

This while admitting that the IMF [International Monetary Fund] loan so far has been applied solely to shoring up foreign reserves,” she said while referring to the Central Bank’s report.

De Peiza lamented these answers are “troubling”, and raise a few important things to consider. She said that with depressed revenue receipts and an increased debt portfolio, it is imperative that the country know the plan to build out capacity to repay present commitments, including the internal debts payments due in 2023. Likewise, she is questioning whether there will be another round of domestic debt restructuring and what is needed from Government to move the country in a different direction.

“The acknowledgement by the CTO [Caribbean Tourism Organisation] in a recent webinar that their product likely will not recover in either the short or medium term, also gives the perfect opportunity to explore alternate sources of revenue. This is in direct contradiction of IMF and S&P [Standard and Poor’s] predictions, which suggest a rebound in tourism as early as next year. But is this too optimistic, based on an appreciation of the economic shocks still reverberating around the world? And the more likely scenario underscored by the Governor that ‘the world is likely to be a different place’?” she further queried.

In that vein, De Peiza maintained that it is vital that the response plans are based on an accurate diagnosis of the issues, maintaining that Government and the Central Bank should provide best and worst case analyses and the expected response in each situation. Her comments came as she warned that the COVID-19 crisis has “exposed the soft underbelly” of the Barbados Economic Recovery and Transformation programme of financing for state-owned enterprises. She warned that entities such as the Queen Elizabeth Hospital, the Barbados Water Authority and the Barbados Tourism Marketing Inc., will likely make a call for the diversion of budgeting finances, as is proposed for the National Insurance Scheme.

Meanwhile, on the matter of the Cabinet, she said the “top-heavy policy administration structure” currently in place needs to be critically examined.

“There is praecedent locally and internationally of Members of Parliament making financial sacrifice in harsh economic times, but this is a conversation that is diverted every time it is raised anecdotally. So now we raise the issue frontally. There have been calls as well to trim the fat of Cabinet numbers and to justify the numerous consultants, few of whom are ever heard,” she suggested.