Fri | Apr 19, 2019

Worrell outlines plans to revitalise Barbados economy

Published:Tuesday | June 5, 2018 | 12:00 AM
Barbados Prime Minister Mia Mottley.

Less than 24 hours after Prime Minister Mia Mottley said that her new Barbados Labour Party (BLP) administration would be suspending payments due to domestic and external creditors, a former Central Bank governor, believes he has an answer to the island's financial problems.

The dismissed Central Bank governor, Dr DeLisle Worrell, in a statement sent to the online publication Barbados TODAY, urged the government to trim the public service by as much as 1,500 jobs and reduce subsidies to state-owned entities.

He says that the most precious assets the government possesses in facing the current foreign exchange crisis are its long-term exchange rate peg and its unblemished record of servicing its debt in full, and on time.

"Government must preserve these assets at all cost. The key to doing so, as I have publicly advocated, is to cut the public service by approximately 1,500 jobs and to reduce subsidies to government-owned entities by 10 per cent, in the first instance," Worrell said.

"If this is done, I calculate that government will be able to meet its debt obligations in full, relieve pressure on the foreign exchange market, and balance the fiscal current account," he said, adding that there would be no further need for borrowing from the central bank.

"It is on the basis of this commitment that the government should open negotiations with the IMF (International Monetary Fund)," said Worrell, whose tenure in office came to an end under the previous Freundel Stuart administration, which was swept out of power in the May 24 general election.

Last weekend, Prime Minister Mottley told the nation that the country's debt had been in unsustainable territory for some time.

"The arrears represent an effective default by the previous government to Barbadians," she said, noting that those arrears were BDS$1.7 billion at the end of September last year and that new figures were expected next week.

"We have never taken this type of creditor action before, and our action today is designed ... to ensure that we will never ever have to do so again," Mottley said, hinting at austerity measures ahead for Barbadians.

She said that the new measures to place the public debt on a sustainable footing would be introduced in a ministerial statement in two weeks .

The IMF has since announced that a team, led by Bert van Selm, a former resident representative to Jamaica, would be arriving in Barbados today to assist the island in its plans for revitalising the ailing economy.

Last week, Christine Lagarde, managing director of the IMF, said, "Our ultimate goal is to help Barbados achieve higher living standards and more inclusive growth for the years ahead."