Barbados is experiencing its most severe economic challenges since World War II.
Prime Minister Freundel Stuart made this assertion at the opening ceremony of a one-day National Private/Public Sector Consultation on the Economy, at the Hilton Barbados today.
He pointed out that up to now, Barbados had managed to stave off the worst effects of the economic and financial crisis which had “bedeviled the world economy over the last five years”. He added that Barbados’ economic history showed that when the major trading partners from the developed world were doing well, “we do well, and when they are challenged, we feel the negative impacts of their challenges”.
Mr. Stuart said that the test now was to reduce the fiscal deficit, and that it was imperative to do all that was required to ensure that the foreign exchange earning sectors were “restored to vibrancy and that we save foreign exchange”.
The Prime Minister contended that a fiscal deficit was not “totally undesirable”, but rather its size was a cause for concern. Calling for a “laser-like focus on cost effectiveness”, he said that the major challenge confronting Government was?? determining a policy choice that “finds the right balance between fiscal consolidation and a sustained economic expansion that is led by the foreign exchange earning sectors”.
Acknowledging that Government debt had risen “sharply both in absolute terms and as a percentage of GDP”, the Prime Minister said that Government had been able to hold other expenditure reasonably stable over the last five years, and had tried as far as possible to restrict increase in expenditure to debt service costs.
“The Government is conscious of the negative impacts on the economy that are induced by a high debt to GDP ratio. Barbados’ debt to GDP ratio has been trending upwards over the last 35 years. The fracture in the global financial architecture occurred at a most inopportune time, when several small developing economies in the sub-region had commenced the process of fiscal consolidation. There can be no doubt that fiscal consolidation in small economies such as Barbados is best undertaken during a period of sustained buoyancy in the global economy,” he said.
Prime Minister Stuart stressed that as a result of the size of government all concerned needed to exercise great care to craft a fiscal consolidation strategy that did not inflict injury on “businesses, the economy and the quality of life of our people”.
The national consultation was designed to produce a framework for a united and effective response to the serious challenges facing the country, and involved senior officials from both the public and private sectors.