In a key chapter, Amo-Yartey and fellow IMF economist Joel Chiedu Okwuokei highlight several ways governments can reduce their debt, including consolidating public finances for example, cutting budgets and eliminating off-budget spending ; eroding the value of local currency debt through inflation; privatizing state-owned corporations or utilities; or restructuring or defaulting on debt.
Robust economic expansion, which enables countries to grow faster than their debt, is another alternative. All the prescriptions present formidable challenges. Many Caribbean countries have fixed or rigid foreign exchange regimes, precluding central banks from inflating away government debt without risking a currency crisis.
Moreover, the authors note that while privatizing state-owned enterprises reduces debt, it can do so at the expense of losing a productive asset. Additionally, selling utilities or other state-owned companies is politically unpalatable in most Caribbean countries, where powerful unions can block privatization proposals. And fiscal consolidation is politically risky, especially in a down economy. The size of the adjustment is one roadblock.
Many Caribbean governments already raise 20 to 30 percent of GDP in tax and other revenues; more may cause tax fatigue or inhibit growth. Structural reductions in current expenditures, although typically the most politically difficult for countries to implement, achieve the most successful, lasting fiscal consolidation, Okwuokei concludes in another chapter. In their survey of cases of large debt reduction from to , Amo-Yartey and Okwuokei found that half of the time countries reduced their debt through a combination of fiscal consolidation, growth and higher inflation.
In the other half of cases, governments restructured their debts or defaulted, implying a high frequency of loss to creditors. This is not a surprise. The retired economics professor is concerned by what he sees as a lack of Government strategy for structural transformation and economic growth. We cannot say the government has not been warned, over and over again, even if they only like tunes that play to their rhythm. Cut out the foreign exchange mantra and concentrate on economic development. Let us start with the moral perversity first: the government has just reneged on its obligation to retail bondholders in one of the biggest examples of daylight robbery this side of Tombstone.
This is snake oil salesmanship. This is slaying the ground for theft. Will the investments be underwritten by the government? Who will be the borrowers? Members of the Social Partnership? If there are businesses waiting for funding, why cannot the banks fund them? That is what banks are for? This is but another bogus idea and another reason why BERT will fail. It is badly planned and is bad economics.
And it is a further reason why to criticise the government will be seen as treason. Government prefers foul-mouthed, vulgar hysteria to reasoned argument. Mottley has indicated that several avenues were being created for Barbadians to invest their earnings instead of keeping them on bank and credit union accounts. One of those measures would involve the Financial Services Commission FSC creating a regulatory regime to create new types of investment funds for small investors such as platforms for crowd financing and peer-to-peer lending, she said.
On the crowd-financing platform, small investors would invest equity in new projects while small investors would lend collectively to borrowers. At least 30 per cent of the ownership of those companies would be made available to investors. This plan, she said, was still in the very early planning stages and her administration would be working with the Barbados Light and Company to iron out the details. During the Budget speech, Mottley had announced that a unit trust corporation would be established along the lines of a similar entity in Trinidad and Tobago.
Look also at what is happening to small businesses owed by Government they have to take a 15 percent cut to get money anytime soon owed to them. In addition those who had Government savings bonds were fleeced as soon as this Government got settled in. Economic growth is slowing and public debt remains high across the world. Meanwhile, demographic changes and technological advances are reshaping the global economy. What should policymakers do?
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In the new Fiscal Monitor, we argue that they can take a long-term view to foster higher and more inclusive growth. This requires better allocating spending, creating more room in the budget, and improving tax policy. Interest payments on debt also crowd out spending on education, health, and infrastructure, which are all investments that help a country grow for many years to come. Each country will have to identify an appropriate strategy to make room in its budget to help the economy during the next downturn. Countries with high debt will have to increase revenues or curb excessive spending.
This is especially relevant where current economic growth exceeds long-run potential growth, as in the United States, or where borrowing costs are high and financing needs are large, such as in Brazil and Italy. Yet, these countries should maintain investments in education, health, and infrastructure, either by reprioritizing spending or broadening the tax base, for example, by removing tax exemptions and improving tax administration.
Where financing is less of a concern, such as in Germany and Korea, policymakers could increase investment in infrastructure or education to support the economy in the near term, and foster inclusive growth over the next few decades. The shift in demographics along with new technologies are having a profound impact on economic growth and the distribution of incomes and wealth. These trends also impact public finances. For example, in advanced economies, whose populations are rapidly aging, we project that age-related public spending, such as pensions and healthcare, will consume a quarter of GDP by To make progress toward achieving the UN Sustainable Development Goals on infrastructure and public services, these countries will require additional public spending.
What can countries do to adapt to these global trends and reduce their debt? They can pursue smarter and more agile policies to facilitate change. This means upgrading fiscal policy on three fronts. Shift spending First, countries should shift spending toward growth-enhancing investment in infrastructure, education, and healthcare, while cutting wasteful spending, such as inefficient energy subsidies.
For example, gradually removing fuel subsidies, while protecting the most vulnerable, could provide up to 4 percent of global GDP in additional resources for countries to invest in people and growth.
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Focusing more on policies that foster lifelong learning and continuous upgrading of skills are also important in a more digital and automated world. For example, Singapore offers training grants to all adults throughout their working lives, and the Netherlands offers tax deductions for workforce training. Curbing corruption would also help raise additional resources and reduce waste, as we show in Chapter 2 of the Fiscal Monitor.
Create more room in the budget Second, steps to improve public financial management and raise revenues could create more room in the budget. In advanced economies, better management of government financial assets could yield up to 3 percent of GDP a year in additional revenue, as shown in the October Fiscal Monitor. Emerging market and low-income developing economies should raise their revenue collection. For example, sub-Saharan African countries could raise, on average, 3 to 5 percent of GDP in additional revenue over the next five years if they improve the efficiency of their current tax systems.
Improve tax policies Third, advanced economies should return to more progressive income taxes, which will help reduce inequality. Most also have room to raise revenue significantly from taxing inheritances, land, and real estate. Also, governments should cooperate to reform taxation of large multinational corporations, in particular digital ones. This would help raise revenues, including for low-income developing countries, by limiting profit-shifting and global tax competition.
These actions would help raise long-term economic growth, which is a key ingredient to reduce the burden of high public debt. They would also spread economic benefits more widely within and across countries, and restore the public trust in institutions necessary for economic stability.
Is this biting the hand that feeds you, or simply being ungrateful or is it desperation? Or is it blaming others for your own incompetence? At a panel discussion here on Friday, Mottley argued that the international financial institutions had unfairly categorised some developing countries, shutting them out from accessing concessionary funding for critical projects to aid in their development and protection of the population.
But the Prime Minister and Minister of Finance used the forum to deliver a broadside against rich nations which have been pressuring hers as they compete for international financial services and business domiciles with low corporate taxes. The Prime Minister said she feared that Barbados could become a low-income country should it be hit by a natural disaster, though pointing out that the country still had access to funding from the Caribbean Development Bank and the CAF for climate change-related projects.
But she said Barbados needs huge funding for improving its sewerage systems, putting overhead cables underground and for replacement of the piping system for water, among others. The comments come in the wake of declarations by the Organisation for Economic Cooperation and Development OECD , the Paris-based club of industrialised nations, that Barbados is an uncooperative tax haven. Below is a good example of the DLP failing to learn anything from the drubbing it got in May of last year. Instead of going back to basics and re-learning how to govern, the new leader is coming out with the same, old, tired rhetoric that means nothing.
First , she must surround herself with a team of young, dynamic spokespeople learn from the UPP , all with specialist areas of responsibility. The leader must also show they understand the issues facing the nation, not with sound bites for an unappreciative press, but in an ongoing conversation with the nation.
In short the leader must show that the party has turned a new page. So far they score a three out of ten.
Even as it urges the rest of the world to do more to boost global growth, the U. Those tensions have had a primary source over the past year: Tariffs introduced by the U. The U. Federal Reserve — in case the U. What happens elsewhere in the world economy may matter more for the U. Economic policy makers from outside the U.
At an event on the sidelines of the IMF meeting on Thursday, Mark Carney, the governor of the Bank of England, bemoaned the fact that a global economy that just a year ago was in the midst of an upswing driven by robust trade and investment now appeared uncomfortably reliant on consumer spending as a result of the trade tensions.
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There were some optimists in Washington last week. A newly dovish Fed and signs the U. Another example of punching above our weight. Has this been thought through. Foreign direct investors want transparency, clarity, a legal system that works, and speed of execution, none of which exists in contemporary Barbados.
Is she also taking advice and ideas from the leading accountancy firms, those that are up to their necks in scandals over auditing? When not separate out accountancy from auditing? Barbados is positioning itself to be a global hub for the conduct of commerce, says Prime Minister Mia Mottley. In an update on her recent trip to Canada and the United States where she met with key players in the commercial sector, Mottley said they attended meetings in Montreal, Toronto, Washington and Miami. Speaking at a media briefing at Government Headquarters on Thursday, the Prime Minister said that in Canada they met with all the major accounting firms, tax executives, and banking officials associated with Canadian banks here and insurance executives.
Mottley explained that discussions were held with the accounting firms and tax executives to inform them about changes to legislation governing the international business sector last December. For months Beto Marron faced a terrible dilemma: he could pay his rent and rapidly rising utility bills, or he could put enough food on the table for his family of four.
He could not afford to do both. The decision was made for him when he was kicked out of his home on the outskirts of Buenos Aires late last year, forcing his family on to the streets. When will this nightmare end? Since then, an abrupt jump in inflation has unleashed an alarming rise in poverty that is far greater than officials and markets had expected. Inflation, now running at more than 50 per cent annually, played a key role in pushing the poverty level up to 32 per cent of the population by the end of That is about the same level as when Mr Macri took power in Although it had fallen to That could force Argentina to seek more foreign debt to cover the fiscal deficit than originally expected — to a point where its debt burden could become unsustainable.
They understand the trade-offs. It may not be all bad. In their defence, officials point out that poverty statistics do not reflect qualitative advances such as improving access to jobs by making social programmes more efficient; new drains for 2. Clifton Hall, St John man is fed up of asking for help with fixing his one bedroom wooden structure which is in dire need of repair.
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The St John resident is asking for help to restore his Clifton Hall home which is falling to pieces. Is there a social element to BERT? Do we have social workers? What about the constituency member of parliament? Does middle class Barbados care? Is Barbados a failed state? Galaxy Digital Holding Ltd. The Central Bank of Barbados must operate as an independent institution working in the best interest of the people, Minister in the Ministry of Finance Ryan Straughn declared in Parliament today.
Very good idea. Let us see how this plays out. Presumably Straughn has made, or will make, this recommendation to Cabinet. Let us see if it gets through. Finance ministers and central bank governors from the countries agreed Thursday to strengthen the framework amid growing concerns about emerging economies awash in speculative money due to accommodative policies around the world.
It is important that countries receiving support be able to choose the currency they want, Japanese Finance Minister Taro Aso told a news conference. China has been active in lobbying for greater international use of the yuan. Chen Yulu said. Southeast Asia also shares the desire to reduce foreign exchange risks with the dollar and promote local currencies.
The Chiang Mai Initiative was established in following the Asian financial crisis of to prop up weakening currencies by letting countries exchange local money for the greenback to prevent capital flight. The countries will also revamp contracts, currently limited to two one-year renewals, in scrapping the three-year maximum on swaps. President Donald Trump attended, did not take such a stand against protectionism. In plain English this means the White Oaks talks are not going well. Watch this space. What about White Oaks?
Or have we forgotten? The longer White Oaks draws out this negotiation the more they earn. This is a perverse agreement. Prime Minister Mia Amor Mottley last night rolled out the initial plans for a new-look City, saying revitalising the capital would be the first and most important thing on her agenda now that the economy had been stabilised.
Is this the extent of the government new urban regeneration plans as one insider hinted a few days ago? We have already heard about the plan for a hotel corridor from Hastings to Batts Rock. We want to see the blueprint, the plans in full and not just lots of words.
We also note that there will be acre social housing mainly for public sector workers alone; what about poor people working in the private sector, or not working at all? Until the sources of financing for these projects, especially the Hyatt Cinderella, are revealed in light of BERT, then only fools and horses will be drinking from that fountain of make-believe offering promises of comfort. Here is some more PR. Talks are continuing, but the propagandist in chief is claiming White Oaks has saved Barbados. Who did the due diligence on White Oaks? Controversial debt restructuring firm, White Oak Consultancy, has saved hundreds of public sector jobs and if it had been hired by the previous government, could have saved Barbadians a tremendous amount of pain.
In to , you [Erskine Sandiford-led DLP government] sent home and cut salaries by eight per cent. In , when we met here, the Dems had already sent home Your Government has said no, we are not putting workers on the frontline of change in this country and we would ask the people who were making profits in the banks to bear the burden. Instead, she argued Government had gotten a good bargain. Meanwhile, in an extended attack, Attorney General, Dale Marshall accused the previous administration of neglecting to hire the company nearly 10 years ago in when White Oak introduced itself to the then DLP administration.
He said letters were also written to government in and to the then Prime Minister Freundel Stuart and Sinckler respectively, but both were ignored. White Oak came in and assisted this Barbados Labor Party administration and saved us a billion dollars a year in interest payments. Marshall also defended government amid accusations of a lack of transparency in choosing White Oak consultancy in the absence of a tendering process.
A company with an impeccable record and we made the decision at our first cabinet meeting. White Oak is saving us a billion dollars a year and their fees are millions of dollars. Quot e. If there are promises we will find out soon enough. Should the taxpayers expect another iteration of the redesign of this project in the coming months? How about the old General Hospital property? Opposition spokesman on International Business and Trade, Manufacturing and Commerce Bruce Hennis says the Barbados economy is moving in the right direction, but he said there is still cause for concern. She […].
It said that during the forum, […]. Having fallen from glory, the Barbados economy stood at the edge of a precipice at the beginning of , requiring urgent resuscitation and emergency surgery to save it from total collapse. But with a general election looming, politics almost automatically became the focus of the day, even amidst burgeoning calls from various groups for urgent […]. Despite taking several hits over the years, including a fall off in sales due to economic conditions and the introduction of similar type retail shops, Chairman and Managing Director of Shopsmart Wallace Griffith said he remained committed to Barbados.
Shopsmart started out as the first membership only warehouse type shopping on the island 18 years […]. The Barbados Government gets top marks from the International Monetary Fund for its efforts to restructure the economy. Contact us today! Nothing or no one is too big or too small for us at Barbados Today to highlight.