A balancing act? Trying to balance the social and economic fabric of Barbados
The Minister of Finance, the Right Honorable Christopher Sinckler, presented his budget against a backdrop of significant uncertainty in the business community and a lack of investor confidence in Barbados’ sovereign instruments. This budget was preceded by:
- Dismissal of the Central Bank Governor;
- Two further credit downgrades;
- A significant sell-off of Government’s international bonds;
- A major decline in foreign reserves below the precautionary benchmark of 12 weeks; and
- A significant increase in the monetary base or money supply by the Central Bank.
Against this backdrop of uncertainty, Barbados continues to be one of the most highly indebted nations in the region and indeed the world – as measured by our debt-to-GDP ratio. Our economic score card is not great and our current situation is not sustainable for much longer. We have passed the point of indebtedness where other nations within the region defaulted on their debt and turned to the IMF, entering into compromise arrangements with their creditors.
The Minister acknowledged the very serious challenges faced by our country and advocated for what he describes as a “sensible, realistic and appropriate approach to the situation we face”. He catalogued the many issues faced by Barbados and acknowledged that “fiscal prudence must be a hallmark feature of the management of public finances” and is “absolutely critical to the maintenance of a fixed exchange rate”. He cited his highest priorities at this time as the elimination of our fiscal deficit and preservation our foreign exchange reserves. He said, “The fiscal deficit is now public enemy number one”.