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Finding the inspiration to write this week’s article was quite challenging. Not being one who lacks for ideas, these past two weeks played out in a way that I found rudimentary. For example, what hasn’t been said about the estimates that hasn’t been said already? For years in fact. Now since 2018, the primary and clear issue many economists and public policy analysts have pointed out is how public sector programmes are to be funded - in reality. This is challenging, continually, as governments only have two options in which they can operate if their policymakers take a bird’s eye view. Basically, governments can choose to tighten their purse strings or, spend what they have or haven’t earned.

High-debt burdened small island states (SIDS) are not blessed to have the best of austerity. No country does for that matter. It means then that all governments either have to encourage spending or investment. The battle is whether they would encourage themselves or the private sector and/or households to do that. Ironically, again from a bird’s eye view, there are two determining factors for all SIDS. These tend to be:

  1. The amount of debt the government will undertake in order to meet its own normal day-to-day activities and to support projects in the wider economy,
  2. The confidence that households, businesses, and civil society have in their country.

The first factor influences the second factor even to the point of inflation on goods and services in a country. Inflation in Barbados, for the most part, is imported but a significant part of it still is due to regressive tax policy. The point I make is that if the government sets about revenue raising measures, vis a vis taxation especially, in a country where times are tough then expect a further decline. According to the CIA World Fact Book, approximately 84.2 percent of economic activity in Barbados is due to household consumption. This data is pre-Covid 19. I’m willing to reckon that dependency has risen since the end of the pandemic.

What this factor categorically states is that greater numbers of available jobs and salaries are the key factors to economic success in the country. Government policy is supposed to promote this as a priority. To its credit though, I would be the first to say that our post-2018 government has promoted such intent better than any I’ve witnessed in the past 25 years. What is missing, however, is clear; the government saying the right things at all times without favourable execution is the leading reason why it seems as though most of this promise has fallen through.

While I agree that having the government award more capital works contracts to the private sector is a useful short term growth tactic, it is hardly ever a sustainable strategy unless you have the capability to offer tax breaks. We haven’t had that true leeway in over 17 years in my estimation. Time after time, projects begin inexplicably late and finish even later in light of many cost overruns. Look no further than in any Auditor General’s Report to support such. That issue has silently turned away substantial local and foreign investment. All the while, the country has entered all manner of economic programmes aimed at also preventing this very behaviour within the public sector. What makes it worse is that we still haven’t hit the debt targets we needed to.

Admittedly, we have known from 2018 that getting our debt under control (around 60 percent of GDP) was going to take a long time as the government chose not to be austere. We also cannot dispute the economic havoc as a result of the global shutdowns during the COVID-19 pandemic. However, the goal posts with which we measure success in fiscal accounts change inextricably to seemingly soften the effect of the same debt. We, for example, no longer use the term fiscal deficit to describe how much more the government has truly spent over its revenue.

The fact that most government performance, past and forecasted, is measured using current surpluses and deficits indicate that a blind eye to debt will catch us by surprise. It has done so continually since the pandemic ended. Plainly put, I haven’t been convinced for a while that the estimates truly casts our debt situation and our implementation deficit disorder as major and real constraints on our development. I applaud recent attempts to deal with some civil and societal matters such as our potential population decline. Certainly, I will speak more to this in the near future.