IMF praises Barbados Government actions, gives contradictory recommendations and says it’s all out of control anyway…

As our friend Amit at Pull! Push! blog says, “IANAE – I am not an economist”, so I’ll leave the in-depth analysis of the IMF’s latest press release and former Prime Minister Owen Arthur’s recent rant to folks who know more than I do. (Like Living in Barbados who lives and breathes economics.)

That said, I’ll publish yesterday’s IMF press release about Barbados and make a few totally uninformed comments by an ordinary person who has in the last year seen their cash savings go to nothing. It didn’t take much for Shona and I to go from comfortable to living from day to day. Some serious car repairs and helping out someone in worse shape than we are for a month when they lost their business was all it took to empty the bank account. With the increases in food especially and some other must-haves, our savings aren’t going to return anytime soon.

Here are a few observations about the IMF press release…

IMF Praises Barbados Government

This is the standard opening for any IMF press release. The guys who work at the sharp end of the IMF are no fools. They know if they don’t go with this “Praise the Government” opening, the next time they stay at the Hilton someone will pee in their soup. Really.

The first rule of life is “Always treat the kitchen staff and food servers with respect.” Some folks take a long time to learn this vital life rule, but like I said – the working folks at the IMF know what it means when the waiter asks, “Sir, is the soup salty enough?”

Contradictory Recommendations

The IMF says “More taxes, more broadly applied” AND “raise the private sector’s willingness to invest in Barbados.”

Once again, IANAE, but I’ve always believed that more taxes equal less willingness to invest in Barbados.

OK, tell me I’m wrong. I can take it.

Reduce Government Spending

Easy for the IMF to say. Fact of life on this rock is that over 50% of the population is on the government payroll in one form or another.

Think about that fact, then couple it with our culture of entitlement, low productivity in both the private and government sectors and the attitude “guvmnt gon fix”.

No Sir… it’s not like the DLP government is engaging in a bunch of spendthrift mega-projects like the BLP did. The DLP Thompson government was left with a broken infrastructure because Owen Arthur, Mia Mottley and the gang blew it all during the good years and ignored the basics.

Like water coming out of taps.

So the IMF can whine all it wants about reducing spending. There is only so much the PM can do and only so far that he dares to go. That’s a fact.

Owen Arthur says Barbados should spend it’s way to prosperity!

Yup, that’s pretty well what he said the other night at UWI. That’s a photo of Owen talking courtesy of Ian Bourne at the Bajan Reporter.

I’m not sure but it looks like the former Prime Minister needed a bottle of water during his speech. That is water, isn’t it?

Ian Bourne has a first person account and says that Arthur and Mottley are true lovers once more or something like that. If true, I don’t think that Owen was drinking bottled water during his speech!

The big IMF message: It’s all out of control

Ok, you go ahead and read the IMF statement below and see what the members of this great international old boys’ club have to say. Just remember: the folks who are issuing the advice are so closely connected with the ones who caused the current economic meltdown that only conjoined twins could be closer.

Irony defined: Former Federal Reserve Chairman Alan Greenspan says don’t believe things are getting better because they aren’t.

And that is the way I see things from near Grape Hall on a sleepy Saturday morning.

Statement by an IMF Mission to Barbados
Press Release No. 10/66
February 26, 2010

Marcello Estevão, chief of an International Monetary Fund Mission to Barbados, issued the following statement today in Bridgetown, following a five-day staff visit:

“Barbados has been severely affected by the global economic crisis. In particular, the deep global recession has curbed tourism, affecting related activities such as construction and trade which, in turn, depressed aggregate demand and raised unemployment. As a result, economic activity contracted significantly in 2009 after remaining broadly stagnant in 2008.

“Despite these hardships, policy moves and other developments have limited the adverse effects of the crisis. International reserves are at comfortable levels, among other things thanks to a successful foreign debt placement last year and the SDR allocation. In addition, authorities implemented measures to alleviate the impact of the crisis on the population. However, as a result of these measures and, more importantly, of the economic cycle, the fiscal deficit surged, and the public debt now stands above 100 percent of GDP.

“Looking forward, while economic activity in Barbados will improve as the world economy gradually expands, the recovery’s timing is quite uncertain. In particular, significant improvements in labor market conditions in major developed countries will likely lag the rebound in economic activity and curb international travel. Despite this uncertain outlook, the high level of public debt limits the room for further government spending. Moreover, the high degree of openness of the Barbadian economy limits the impact of changes in government spending on domestic economic activity.

“Against this backdrop, fiscal consolidation seems to be the appropriate strategy. Reducing government spending, increasing tax collection efficiency, and broadening the tax base would support the exchange rate regime and improve the government’s balance sheet. Moreover, credible and sustainable measures can actually raise medium-term growth, as better debt dynamics and lower pressure on external reserves would raise the private sector’s willingness to invest in Barbados. Thus, the authorities’ intention to push forward a medium-term fiscal consolidation strategy is very welcome.”

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16 Comments

Filed under Barbados, Offshore Investments, Politics

16 responses to “IMF praises Barbados Government actions, gives contradictory recommendations and says it’s all out of control anyway…

  1. the hood

    Hate to say it but I’ll say it anyway………….I TOLD YOU ALL SO! Doesn’t surprise me one bit! Look out for another % cut in wages/salaries, job losses, vehicles repossessed, home foreclosures and mental hospital commitment!
    When will they ever learn?

  2. LOVE

    Well folks I am elated that the IMF experts gave our esteemed leader, David Thompson and his dynamic team exceptionally high marks for their handling of this countries economic , social and political affairs.

    No doubt confirming that the majority of Barbadians called it right on 15th Jan, 2008.

    Faced with a catastrophic economic recession, which can only be compared with the likes of recent events in Haiti & Chile……..this DLP responsible team of Ministers and advisors have kept the ship of state remarkably well afloat.

    Not one public sector job has been lost…no doubt had they follwed the reckless mumbo jumbo of Owen Arthur & Mia Mottley ……..the scenario would have been shockingly different.

    With Confidence…and God by our People’s side we shall prevail……Long Live the DLP Revolution !

    Barbados has been saved from the reckless BLP despots who still fight over themselves because of their past evil deeds.

  3. Donald Duck, Esq

    love

    Did you not read the beginning of the article above

    Let me remind you

    “IMF Praises Barbados Government

    This is the standard opening for any IMF press release…”

  4. """ FIRE """

    No Sir… it’s not like the DLP government is engaging in a bunch of spendthrift mega-projects like the BLP did. The DLP Thompson government was left with a broken infrastructure because Owen Arthur, Mia Mottley and the gang blew it all during the good years and ignored the basics.

    ———————————————
    This is a lie of gigantic proportions and I wish you and others would stop repeating this LIE

  5. """ FIRE """

    when will they learn ???

  6. ESAF Rum

    That’s not water on Owen’s lectern!

  7. Dennis Jones (aka Living in Barbados)

    @BFP

    You wrote:

    ‘Contradictory Recommendations

    The IMF says “More taxes, more broadly applied” AND “raise the private sector’s willingness to invest in Barbados.”’

    [But what you quote is no where in the IMF statement. What is there is:

    ‘Reducing government spending, increasing tax collection efficiency, and broadening the tax base would support the exchange rate regime and improve the government’s balance sheet.’ In other words, a lower fiscal deficit is needed to support the fixed exchange rate regime. That, and a smaller government balance sheet, are good for investment in Barbados.]

  8. BFP

    Thanks Dennis,

    but doesn’t “broadening the tax base” mean increases in taxes collected? Unless you reduce the tax rate, when you “broaden” the tax base you get more money, right?

    However, “IANAE” and you are!

  9. Dennis Jones (aka Living in Barbados)

    @BFP,

    My main concern was about attributing a statement when it was never made.

    We can argue about what ‘broadening the tax base’ means over time. Yes, more tax collection if nothing else changes, but it can also give the same tax collection if more contributors are identified and pay. (One issue that plagues taxes and fees in Bim is the level of arrears, so that broadening is not trivial in terms of lessening some of the effects of non payers.)

  10. Bad Man Saying Nuttin

    On the contrary Broadening the tax base means increasing the amount of persons caught in the tax net not raising the rate of taxes.

    And as to the standard IMF press release start bullshit. Didn’t you at BFP point out a review in previous articles where they lambasted regulation of the Insurance industry from start to finish? they can be diplomatic but there is no standard sugar coated beginning. Some people always like to mislead. like I said on another blog, Make the time to read the IMF reports yourself. they are online.

  11. Math deficient CQ8

    Bad Man if you increase the amount of persons caught in the tax net and don’t raise the tax rate, you still increase the amount of taxation on a population.

    That is what BFP’s point is. A call by the IMF to “broaden the base” without a corresponding call to “reduce tax rates” is an overall tax increase on the society no matter how carefully you word it. I see BFP’s point and I think they are right.

  12. Bad Man Saying Nuttin

    Of course there will be an increase in total tax collected. Where are you guys living? How else will you reduce the deficit? Its an equation . There are two sides . Either reduce the expenditure or raise revenue. A combination of both is best. So, the objective is to raise revenue by broadening the tax base.

  13. I R A Idiot

    BFP,

    Check out this bit of information reaching me at this time.

    I have been informed that Owen Arthur just submitted his application to join the DLP .

    He he has indicated that such a move guarantees him an opportunity to be heard on the national scene.

  14. Dennis Jones (aka Living in Barbados)

    @ Math deficient CQ8, March 2, 2010 at 4:52 am
    “if you increase the amount of persons caught in the tax net and don’t raise the tax rate, you still increase the amount of taxation on a population.” [Note that what the IMF says, “increasing tax collection efficiency, and broadening the tax base” can mean widening ACTIVITIES and GOODS and SERVICES that are liable for taxes, eg by removing zero rating from certain items, so it could occur without changing the PERSONS caught in the tax net. I only say this for clarity. There are people who escape taxes, say by being in the so-called underground economy, or as noted in one paper today by playing the duty-free scam. They could make contributions and put them on the same footing as tax-paying economic agents. To the extent that they use goods and services paid for by the public purse that additional contribution can be quite important. Data suggest that there is some 30% more economic activity going on in Barbados than officially recorded.]

  15. Hugh

    Dennis, people pay taxes; not corporations or activities or goods or services.

    In the end, people pay taxes. Corporations or activities or goods or services are only conduits for the taxes that the people pay.

    If they expand the tax base without lowering the rate of taxation it results in more taxes being taken from the same population base: Barbados

  16. Dennis Jones (aka Living in Barbados)

    @Hugh,
    “If they expand the tax base without lowering the rate of taxation it results in more taxes being taken from the same population base: Barbados” [No. If activities/goods and services, covered are increased then it’s important to know who buys those. You seem to forget or ignore that tourists and non nationals (including in the form of share holders/owners) are an important part of the tax base. In some areas they may pay more taxes than residents/nationals.]