Nor entirely unexpectedly, and almost simultaneous with an IMF statement recommending strong measures to deal with a continuing, major fiscal deficit, the Government of Barbados has announced a series of financial and economic measures, the severity of which must undoubtedly have surprised the population.
Perhaps, the most shocking policy measure has been the decision to lay off 3000 public service workers between now and March 2014, of which only 500 will result from natural retirement. For the remaining government servants, there will be a freeze on increments, and from the beginning of next year, Members of Parliament will take a ten per cent pay cut, and the travel budgets of ministries will be cut by fifty per cent.
These measures, initiated by a government of the Democratic Labour Party (DLP), now under the leadership of Prime Minister Freundel Stuart, will certainly have reminded Barbadians of a not dissimilar period twenty years ago, when the a DLP government then led by Erskine Sandiford, had to adopt similar measures that led to the demise of the government in the subsequent general elections. And given that background, it has not been surprising that the present government appears almost to have been forced to proceed now with the measures, following the IMF’s recommendations though not formally presenting them as such.
The measures would also appear to indicate that the imposition of a Value Added Tax as a means of stabilizing government revenue has not been a sufficient measure, in the face of past and projected diminishing revenue from the tourism industry, to permit an appropriate balancing of the country’s revenues. Instead, observers and international advisers have taken the view that public expenditure has been just too large to be supported by current or projected revenues, and has virtually forced the government to do what is thought necessary to be done.
An intimation of what has now transpired was indicated to the Barbadian public when, for the first time since the establishment by Errol Barrow’s DLP government, fees were projected to be introduced by the government for higher education, and in particular, for attendance by Barbadian nationals at the University of the West Indies. In spite of protest, the government has held firm on this issue, it being now suggested that this was one of the measures intended to satisfy the IMF that the administration was serious in coming to terms with current difficulties.
To some citizens, the introduction of higher education fees, indicated that a DLP government, usually described as a social democratic one, was reducing its commitment to a substantial role for the public sector in advancing the development process. And indeed, it will have thrown members of the electorate back to the last general elections of February of this year, when the Barbados Labour Party, then led by Owen Arthur, had proposed the diminution of the public sector through a process of privatization, in order to reduce the financial burden on the state.
In what came to be a narrowly contested election, some observers held the view that the electorate was convinced by the DLP’s willingness to largely retain the public sector as it was, and cast its support for the ruling party. And in that context, the Barbados Labour Party, now led by Mia Mottley, has not hesitated to suggest that the commitment to essentially maintain the current levels of expenditure was something of a gimmick, given the government’s knowledge, at the time, of the state of projected revenues, vis-à-vis public expenditure.
The recent statement by the IMF, indicating the necessity for severe financial measures, suggests that the government has been under extensive pressure from that quarter to reduce the role of the state in the economy as the quickest way in which to bring financial expenditure down. And in effect, it would appear that the government has succumbed to the pressure as it has appeared that projected revenues will indeed be insufficient, absent any support from the IMF itself.
In that regard too, Prime Minister Stuart has probably come to the conclusion that with just over four more years to go before he is constrained, in constitutional terms, to face the electorate again, it is best to take the plunge with severe measures now, rather than later.
Twenty years ago, when Prime Minister Erskine Sandiford led the government and felt constrained to take severe measures, an eventual consequence was his own resignation, with the DLP being compelled, in short measure, to face the electorate and eventual defeat in 1994. That circumstance resulted in the election of the Barbados Labour Party led by Owen Arthur, and a nearly fifteen year reign for that party.
Today’s DLP leadership will be pondering the possibilities of a dissatisfied electorate now carefully watching the effects of the new policy measures as time goes on, and considering whether the government really has skills to do take the country through what will be, in effect, an IMF programme, without reducing the role of the state to such an extent that large portions of that electorate will feel constrained to seek to ride another horse.
Only time will tell. But it is likely to be the case that the BLP will be pondering the possible policy alternatives, though that party will also be wondering whether, depending on how long the government retains its own confidence, there will be many policy options left as long as the IMF is, in practice, still holding the reins.
