Grow the Economy

“The Spirit of the Lord is upon me, because he has anointed me to bring good news to the poor. He has sent me to proclaim release to the captives and … to let the oppressed go free” – Luke 4:18

It has been reported in the press that since December 3 2013, an International Monetary Fund (IMF) team has met with Government Ministers, the Central Bank Governor, Members of the legislature and representatives of labour, the private sector and academia.

The IMF is the international organization responsible for managing the global financial system and for providing loans to its member states to help alleviate balance of payments deficit problems. In this context, the IMF is often regarded as providing the lender-of-last-resort function.

If a country has to access IMF loans of this nature then there is usually a consideration of devaluing the currency of that country. The negative consequences of the devaluation of the Barbados dollar which has been pegged at a fixed rate to the US dollar since1972 has been carefully and continually articulated in the press. I note one such report in the July 22 2012 edition of the Barbados Advocate by John Blackman “In 1991, when the country was experiencing harsh times, the international monetary agencies recommended devaluation of the Barbadian dollar. To his eternal credit, former Prime Minister, Sir Lloyd Erskine Sandiford saved Barbados by flatly refusing to lower the exchange rate of his country”.

That writer opined that “devaluation is a continuum rather than a one-off policy. It seems like a boulder on a mountaintop for millions of years. However, once disturbed, it crushes down the mountainside carrying everything in its path until it reaches a bigger obstacle or settles at the bottom of the valley. It will never return to its lofty position on yonder mountain peak…”

It has been reported that the IMF team, which left the island of Friday Dec 13, has put forward a number of recommendations that the Barbados Government should undertake in order to lower its widening deficit and avoid the need for a devaluation of the revered Barbados dollar. The Barbados Minister of Finance announced in parliament that in order to reduce expenditure there will be a retrenchment programme in the civil service and statutory boards as well as selected salary reductions in order to reduce the budget significantly. It has been reported that the IMF is in agreement with this strategy.

In a business context, if a business is not profitable there are a few options open to redress the situation. The business can increase revenue, reduce expenditure, increase productivity or combinations of the three. If these options fail then the business dies and disappears from the economic landscape. Similarly, in a government context, the government can increase revenue, reduce expenditure, increase productivity or combinations of the three. If these options fail then the country dies.

The measures recently proposed by the Minister of Finance is focussed on reducing expenditure but with the immediate consequence of a number of people being removed from a job with reduced ability to support their families and contribute to the circular flow of revenue. The government must also take three other important initiatives: (1) creatively develop the existing pillars of the economy such as agriculture, creative industries, financial services, manufacturing (selected), renewable energy and tourism; (2) be creative and establish an incentivised driven enterprise development environment for entrepreneurs in the making, start-up entrepreneurs with growth potential, investors and policy makers (this can also encourage the retrenched individuals to march freely into enterprise development) to grow the economy and increase its taxation revenue and decrease the balance of payments deficits; and (3) increase the productivity, through incentives, of those left in government employment.

These will all require funding which the government itself will not be able to provide because of its current impecunious state. There is no shortage of ideas from which we can derive innovative products and services to export to the global market. There is no shortage of management expertise in the world. There is no shortage of investment funds in the private sector and in the Diaspora, surely there is enough expertise around to exploit this opportunity.

We just need to adopt this vision and garner the will to proceed. The expertise is there, the technical models are there let us embrace the vision and turn it into action.

Only three weeks ago Dr. Victor Gooding, Barbadian Olympian and Senior Satellite Systems Scientist at Telesat Canada, delivered the 38th Annual Sir Winston Scott memorial lecture mounted by the Central Bank of Barbados. He spoke on the topic “View from 45 years North: A Barbadian Living in Canada”. He advised in a televised Discussion Forum the day after the lecture that “the Government should do whatever it has to do to initiate a strategy that would incentivise the private sector to mobilise the expertise, experience and finance in the Diaspora, particularly to assist with financial investment in enterprises as the entrepreneurial revolution develops”.

Melissa Marchand, publisher of Global News Matters which produces the fortnightly Market Dynamics Caribbean, observed that “This is the second time in four months S&P has lowered Barbados’ rating, this time from BB-plus to BB-minus, which is not a horrendous reduction, but we want to keep watching to see how the government responds to their new ratings and how their moves might affect business and individuals in the country and beyond”

Marchand contended the role for Public Private Partnerships, such as exists in Barbados, was definitely worth watching, “particularly in the growth areas of international business, financial services and renewable energy where demonstrable growth can kick start an economic recovery.”

In the latest edition of Market Dynamics Caribbean Barbados’ PPP is referenced.