A leading political economist is warning the Government that Barbadians may soon suffer structural adjustment fatigue under the current International Monetary Fund (IMF) programme and that alternative concessionary financing may be necessary.
As a matter of fact, head of the Sir Arthur Lewis Institute of Social and Economic Studies, (SALISES) Dr Don Marshall suggested that while Barbadians are prepared to bite the austerity bullet, the current mood indicates that patience is wearing thin even though the programme is in its early stage.
“The reality is that the measures and the austerity are hard. Barbadians are prepared like Kittians, Grenadians and Jamaicans to give it a go. However the political leadership as well as the political ruling elite will be wise to take note of the domestic mood and the capacity for adjustment fatigue,” Marshall told Barbados TODAY.
He therefore contended that Government must seek to buffer the possible social fallout by pivoting to other sources of concessionary financing such as China.
“We are right now in a four-year arrangement that requires us to perform at levels of permanent surplus target, in terms of our budget, of six per cent. They [IMF] have asked us to sustain that six per cent for the majority of the four years as a pre-condition for assessing any further loans from the IMF and other support institutions. We have to be in a position now with the Chinese monies on offer to be able to leverage globalization much wiser,” said Marshall
The political economist argued that the global financial order is much broader than what the “IMF would have the region believe”, noting that there is a shift towards China, as the Asian nation is emerging as another pillar for alternative financing.
“We must not shut off this option but look at it, see what loans we can gather. We have to note that it provides you with the fiscal space to do things and make critical decisions. Certainly in Barbados' case I would recommend that just after we meet certain targets that we should look to diversify our reliance from the IMF and associated agencies and move towards lending coming from China at this point,” he said.
He noted that like any other lender the Chinese lending would come with some conditions. However he argued that these conditions were less onerous than those imposed by the IMF.
“There is evidential research from Peru to Brazil and some small island Pacific states that this lending has helped. Vanuatu has benefited from this, having emerged from very devastating cyclone and hurricane to reach levels of development thanks to Chinese lending,” Marshall pointed out.
The UWI lecturer asked to square his position against the fact that action taken under the IMF-approved Barbados Economic Recovery and Transformation (BERT) programme, has earned positive feedback from two credit rating agencies.
Earlier this month, regional ratings agency, the Caribbean Information and Credit Rating Services Limited (CariCRIS), upgraded Barbados' local currency rating to CariBB with a stable outlook, up from CariD, while projecting economic growth of about one per cent this year. The upgrade came two months after the New York-based Standard & Poor's (S&P) raised its long- and short-term local currency sovereign credit ratings on Barbados to 'B-/B' from 'SD/SD' (Selective Default).
However Marshall made it clear that these measuring sticks do not paint an accurate picture.
“If you are in an IMF program, you're joining a particular elite idea and agreement about how these economies ought to run. The credit rating agencies are part of that consensus. So I'm not surprised by the upgrades and so on. You could impress creditors but not voters. You could impress party supporters, but you may not really impress a citizenry,” he explained.
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