Statement By The Leader Of The Opposition, Ms Mia A. Mottley, QC, MP On The Central Bank’s Press Release On Performance Of The Barbados Economy For The First Quarter 2013
April 11, 2013
Following the Central Bank Governor’s release yesterday, it is significant to note that an economy which six weeks ago was being described, night after night, as stable, and Government’s finances which were equally being described as stable are now both clearly shown to be on the wrong track according to the Central Bank Governor’s latest Release on the First Quarter for 2013.
Indeed the Government’s fiscal situation is worse than its own worst case scenario that is predicted in its Medium Term Fiscal Strategy. This is a serious matter of concern for all.
I cannot believe that the same Governor who made the comments yesterday is the same Governor who spoke today and in a simple way for all Barbadians to understand. You cannot at once tell us yesterday that the Medium Term Fiscal Strategy needs to be brought back on track and then today tell us that you are on the right track. The bald reality is that yesterday the Governor introduced new language into our discussions by calling on a Medium Term Adjustment Strategy but yet today says that the economy is on the right track and that we know what sectors will lead the way.
The stark fact is that none of the productive sectors is performing. Tourism is down, in fact tourism is earning for the country five hundred and fifty million dollars less than it was in 2007. Sugar is earning half of what it did in 2007. Other non-sugar agriculture is down. Manufacturing continues to decline this year and international business is down yet again. The glaring reality in terms of government’s fiscal situation is that the Government of Barbados is earning one hundred million dollars less in revenue than it did in 2007 but is spending five hundred million dollars more in current expenditure and at the same time spending a hundred and fifty million dollars less in building out in capital expenditure for future Barbadians to earn from.
This economy is in serious trouble and is need of national reconstruction as a matter of urgency. What is clear is that we are still yet to hear a plan from the government. In fact the Governor’s statement yesterday made it clear that the Medium Term Fiscal Strategy has failed and that neither he nor the Government for that matter, have placed anything for Barbadians to hang their hopes on for the future. We believe that as a matter of urgency it cannot be business as usual and that the country needs to know what the way forward is.
The Governor relies on the estimates of expenditure for this year that project a deficit of 5.3% but has not yet told the country that those estimates of expenditure under provide for the UWI by almost sixty million dollars, that they do not provide for the Queen Elizabeth Hospital at its current needs, they have given the QEH one hundred and forty five when it needs near 200 million. They have not provided for the Barbados Water Authority that now needs a government subvention to support itself and in fact is in serious arrears to the Barbados Light and Power by, I believe, almost ten million dollars. They do not provide for National Housing Corporation that has been relying purely on central government funding to operate and similarly they have under provided for the Transport Board. When we take into account all of those statutory boards that have been underprovided for it is clear that expenditure will increase beyond that which is projected.
At the same time it is also clear that unless the productive sectors are earning again and unless the non-tradable sectors like construction and the wholesale and retail sector are performing strongly, in other words people have money in their pockets to spend. Unless the domestic economy picks back up in the immediate future, government’s revenue which is largely dependent on economic activity, will not improve, bearing in mind that VAT, excise taxes as well as personal and corporation taxes are down.. What is worrisome and at least the Governor has admitted that is that we are now spending one in every four cents in paying interest in Barbados, a situation that is twice as bad as it was in 2007.
So in a very real sense we are borrowing to pay interest as well and we feel that the government ought to have used the opportunity of the estimates last month to put measures in place to address this worrisome situation. Having failed to do that, we cannot wait until the middle of the year to hear what is the government’s plan to resuscitate growth in tourism, in manufacturing, in agriculture, in international business, in construction and indeed to recognise that unless you bring back growth to those sectors you cannot stabilise the Barbadian government’s finances in terms of its revenue. At the same time until the government changes the terms and conditions with which is it dealing with the statutory boards even if they have not voted the money, the liability for the level of expenditure is still there and the government of Barbados will still owe the money. And in all of this, there is no mention as to how we are going to resolve the CLICO situation which would equally add to government’s expenditure and debt situation.
The last thing that I would want to comment on today is that government continues to rely excessively in the last year on short-term financing particularly through Treasury Bills, and Treasury Notes which are essentially thirty-day and a hundred and eighty-day instruments which means that it is exposing the country to a significant roll over risk. In simple language, that a person can determine at anytime once the debt comes up in thirty days or a hundred and eighty-days that they no longer want to continue financing the government and this has led as we know in the last few years to an excessive reliance on the national insurance scheme as well which even though the government is not counting it in the debt nowadays technically its wrong because the national insurance scheme is not the central government of Barbados and indeed the legislation makes it clear that it is an independent entity with Directors having a fiduciary responsibility to protect the pensions of future Barbadians.
April 10, 2013