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CDB warning to Barbados : Get debt act together

BRIDGETOWN, Barbados, Wednesday September 21, 2016 – President of the Caribbean Development Bank (CDB) Dr Warren Smith has sounded a stern warning that Barbados was not yet out of the proverbial economic woods by a long shot. In fact, so worried is he about the country’s worsening debt situation that he suggested “front end adjustments” were urgently needed to correct the economic slide.

In a frank interview with Barbados TODAY, Smith also described the island’s overall fiscal position as “unsustainable”, while cautioning that if left unchecked, it would do untold damage to the Barbados dollar.

With that said Smith did not shy away from the dreaded “p” word – privatization –, naming Grantley Adams International Airport (GAIA) and the Bridgetown Port as “naturals” for divestment.

“Long gone are the days when Governments need to be involved in things such as airports and seaports,” Smith argued.

“We do not believe that these types of investments need to continue to be in the hands of Government,” he added.

While acknowledging there would be political consequences arising out of the sale of these perceived crown jewels, he said Barbados was not unique in that regard.

In fact, the Jamaican-born CDB president gave the example of that country’s divestment of its Sangster International Airport in Montego Bay, saying, “foreign investors have come in, they have pumped money into the expansion of the airport, which is now promoting the growth of their tourism industry”.

Smith also made reference to the recently privatized Port of Kingston, which he said was now attracting large investments, while stressing that air and seaports were “a means towards an end”.

In Barbados’ case, he emphasized that there was room for both domestic and foreign investment in GAIA and the Bridgetown Port, while pressing home his argument that “these are opportunities to relieve the fiscal burden that the Governments face, so that you can put your priority on other things”.

The CDB head insisted that Government would not be adversely impacted if the Port’s ownership and operation were in private hands, adding that in Barbados’ case the situation was urgent, since it placed the country’s fixed exchange rate under threat.

“I am not saying that you are at threat at the current time. What I’m saying is that if these things are not addressed ipso facto you are going to find yourself in a position where you might not be able to maintain a feature of your economic model that appears to be of very great value to Barbadian authorities and to the Barbadian people. So fiscal rectitude is key. We need to have it and we can’t be in a situation where, for a protracted period, we are running fiscal deficits that are unsustainable, that have implications for debt and ultimately for the overall strength of the economy.”

In addition to both ports, Smith suggested other state-held assets could be sold off, including the Caribbean Broadcasting Corporation. He argued that Government could find other mechanisms for getting its message out.

In response to Minister of Finance Chris Sinckler’s suggestion that many state entities were highly indebted and therefore would not be attractive for divestment, the regional banker zeroed in on the Transport Board, saying it would have to undergo a process of reform to reduce the current burden on the state.

However, Smith was adamant that privatization was among a raft of options that could be pursued, even though he acknowledged that the decision was not his to take.

“At the end of the day the options that you choose to pursue must put you in a position where you get your fiscal house in order, address your indebtedness,” he said. (Barbados Today)

Courtesy: Caribbean 360

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