Sep 2016 Financial News

CDB president issues warning to Barbados

Sep 22, 2016

BRIDGETOWN, Barbados, Sept 21, CMC – President of the Barbados-based Caribbean Development Bank (CDB), Dr Warren Smith, is warning the Barbados government that it needs to deal urgently with the island’s worsening debt situation

In an interview with the online publication, Barbados TODAY,  Wednesday, Smith is suggesting that “front end adjustments” were urgently needed to correct the economic slide.

He described the island’s overall fiscal position as “unsustainable” and cautioned that if left unchecked, it would do untold damage to the local currency.

The Jamaican-born economist said that Barbados should consider privatising a number of state entities including the Grantley Adams International Airport (GAIA) and the Bridgetown Port.

“Long gone are the days when governments need to be involved in things such as airports and seaports. We do not believe that these types of investments need to continue to be in the hands of government,” Smith said, acknowledging there would be political consequences arising out of the sale of these perceived crown jewels.

He used the case of Jamaica where the government divested the Sangster International Airport in Montego Bay.

“Foreign investors have come in, they have pumped money into the expansion of the airport, which is now promoting the growth of their tourism industry,” Smith said, noting also that the recently privatized Port of Kingston was now attracting large investments.

But he told the Barbados TODAY that in the case of Barbados there was room for both domestic and foreign investment in GAIA and the Bridgetown Port, noting “these are opportunities to relieve the fiscal burden that the Governments face, so that you can put your priority on other things”.

The CDB head divestment was urgent since it placed the island’s fixed exchange rate under threat.

“I am not saying that you are at threat at the current time. What I’m saying is that if these things are not addressed ipso facto you are going to find yourself in a position where you might not be able to maintain a feature of your economic model that appears to be of very great value to Barbadian authorities and to the Barbadian people. So fiscal rectitude is key.

“We need to have it and we can’t be in a situation where, for a protracted period, we are running fiscal deficits that are unsustainable, that have implications for debt and ultimately for the overall strength of the economy.”

Smith also suggested that the Freundel Stuart government could do away with the state-owned Caribbean Broadcasting Corporation (CBC) saying it could find other mechanisms for getting its message out.

In response to Minister of Finance Chris Sinckler’s suggestion that many state entities were highly indebted and therefore would not be attractive for divestment, Smith was adamant that privatization was among a raft of options that could be pursued, even though he acknowledged that the decision was not his to take.

“At the end of the day the options that you choose to pursue must put you in a position where you get your fiscal house in order, address your indebtedness,” he said.

Smith also expressed support for the government’s “absolutely vital” fiscal consolidation programme, saying it was moving in “the right direction”, even as he stressed that the measures were simply not enough.

However, he said while the CDB had no difficulties with the policies being pursued, “the pace of adjustment is where we might have some difference with the Government
of Barbados.

“If you look at where the debt trajectory is going, it is very worrisome,” he told Barbados TODAY, adding that in order “to be able to bring that growth of sovereign indebtedness to a halt, and put it in the other direction where it needs to go, we need to address the fiscal [situation]”.

Smith however also emphasized the need to address growth.

“It is a two-dimensional kind of response. So that yes, the fiscal adjustment programme is absolutely vital; if you don’t address it all sorts of unfortunate things are going to unfold. So that has to be high priority,” he warned.

 

Source:
Barbados Today
Wednesday September 21, 2016, 10:25 pm AST

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