In piloting the amendment to the Local Loans Act in Parliament this week, Minister of Finance Chris Sinckler said it was a reality of governing small countries with resource constraints that Government would at times be unable to meet commitments for demands, provision of goods and services and the orderly management of the country based on the resources it brings in from taxes and impositions. “So it is a necessary requirement that facilities be put in place to allow for borrowing for various purposes, – “In this case, this is entirely domestic” – Barbados Today
It is an old public relations ploy –use the noise in the market to minimize the impact of a negative message.
BU will leave the deep dive analysis and the implications of government raising the debt ceiling under the Domestic Loans Act by $1 billion to $7.5 billion to the economists. However, it is fair to conclude if government sees the need to increase its capacity in 2016 to carry MORE debt a fair conclusion to make is that we have a problem. Do you need a reminder that Barbados is already ‘sinking’ under the weight of existing debt, one our children will have to repay? Also worrying is the fact Barbadians have not seen value for the debt accumulated in a relatively short period. No wonder the private sector is alarmed.
In the United States and other developed countries the public feels comfortable knowing there are independent sources with a commitment to critique public policy. Whether it comes from university academics, think thanks, journalists et al, there is no shortage of alternative analyses from where the citizenry is able to be adequately informed in those countries. In Barbados critical and independent analysis on financial issues is sorely lacking. The problem exist although the country has benefited from a heavy investment in education under successive governments.
We accept the discussion about Barbados debt profile must be contextualized under domestic and foreign. Some pundits have shared the view that the raising of the domestic debt ceiling is a response to the IMF thumbs down to government borrowing from the central bank read printing of money. We should not forget the ‘’deal’’ the central bank made with commercial banks to reduce the minimum interest rate to be able to manipulate demand for Government Savings Bonds. This sleight of hand move has largely gone unreported by the media and local pundits – Wild Coot the exception. It has been reported the move has yielded 100 million in bond sales so far.
Barbadians must become more active in discussions about the state of the economy. How can we leverage the free education we have received to distil the issues devoid of political claptrap? Why do we feel comfortable hearing the government’s position followed by the counter by the Opposition and vice versa? Are we not capable of generating alternative views to help to inform a dispassionate assessment and conclusion?
The two questions Barbadians have to ask and answer:-
- Are government policies helping to grow our foreign exchange revenue?
- Are government policies helping to strengthen our local infrastructure and the ability to meet financial commitments in a timely manner?
Barbadians should keep a wary eye on a soaring US dollar and the price of a barrel of oil. Savings from low oil price has been a lifeline for the Barbados economy by reflecting positively on forex reserves. A strong US dollar might negatively impact tourist demand in key tourist markets like the UK and Canada. A recent Bloomberg report – Barbados Leads Bond Rout as Dollar Peg Means Pricier Sunbathing highlights how exogenous factors will continue to impact our small open economy. How will Barbados respond to the new normal? Enlightening leadership is required.