Barbados economy ends year on high
Caribbean L 12 ife, Jan. 4–10, 2019
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By George Alleyne
Though not yet close to its
glorious days of a buoyant economy
with massive amounts of
foreign exchange and a bubbling
GDP, Barbados entered 2019 on a
high because it successfully took
steps away from the precipice of
disaster.
Midway last year government’s
foreign reserves stood at, $221.5,
barely enough for 7.2 weeks of
imports of essential items such
as petroleum products.
The international benchmark
for reserves coverage is
12 weeks.
Additionally, growth in the
economy for the six-month period
had fallen by six per cent and
the GDP stood at $5.573 billion.
So dire were circumstances of
the time that central Bank governor,
Cleviston Haynes, stated,
“the economy remains vulnerable
to external oil price shocks
and no significant improvement
in growth for 2018 is anticipated”
.C
ontrasting that gloomy picture
at June 30, 2018, the Barbados
government ended the year
holding $522 million in foreign
currency.
The year-end GDP figures are
not yet in but as of September it
had jumped to $3.82 billion.
Also, in November the island’s
credit rating upgrade received its
first upgrade in about 10 years,
from New York-based rating
agency Standard and Poor’s.
These encouraging figures
prompted Prime Minister Mia
Mottley to say, “every Barbadian
will wake … New Year’s
Day, hopeful and confident of a
brighter tomorrow.”
The six-month turnaround
in Barbados’ economic outlook
appears more impressive when
consideration is given to the circumstances
met by the new Mottley
government when it came to
power in May.
The Mottley government met
a debt level that had grown from
$3 billion to $7.5 billion, and
public debt as a proportion of
national income was as high as
171 percent of GDP.
Payments on some of that
debt were due within days of the
new government taking office.
Facing an almost impossible
monetary situation the administration
swiftly suspended all
international debt payments, set
up machinery to renegotiate a
repayment schedule with local
creditors, and sat down for talks
with the International Monetary
Fund.
The Fund approved government’s
‘Economic Recovery and
Transformation Plan’ and injected
the first loan of $290 million
at a concessionary interest rate
of one percent.
This IMF action gave the
greenlight for other international
agencies such as the Inter-American
Development Bank and the
Caribbean Development Bank to
follow-suit with.
But this came with pain for
Barbadians because entrenched
in government’s plan that met
international approval was
reduction of the bloated public
service staff count, and cutting
the number of state-owned
enterprises, all of which contributed
to a mammoth monthly
wages and maintenance bill.
Between September and
December some 1,500 persons
of an estimated total 24,000
public servants were laid off in
the first phase of the plan.
The blow of this retrenchment
is being softened by offering
laid-off workers first pick at
government contracts, and a
$15 million fund was put aside
for those who need retraining
for employment.
Government responded to
mainly European Union pressure
by levelling its entire corporate
tax base to a range of
one to 5.5 per cent.
This dramatic reduction
in its corporate tax from as
high as 30 per cent in some
instances has made the island
more attractive to international
businesses, on which the island
appears set as the vehicle to
take it to full economic recovery.
“The journey is far from over.
Indeed, we are still climbing out
of the hole,” Mottley in her sixmonth
report to the nation.
But the returns so far were
good enough for her to confidently
say, “Barbados is on the
road again. Barbados is this
evening, punching once again,
above its weight division.”
Barbados Prime Minister. Mia Mottley. Photo by George Alleyne