Fiscal crises in Barbados: comparing the early 1990s and the post-2008 crises

ABSTRACT

This paper discusses the fiscal crises experienced in Barbados in the early 1990s and then again following the Global Financial Crisis of 2008. In doing so, it presents the vulnerabilities faced by a Caribbean small island developing state (SIDS), seeking to navigate the Global Political Economy. Such small states face a complex mix of vulnerabilities to external occurrences which can be exacerbated by domestic efforts to manage social bargains and by the smallness of their economies. The case of Barbados brings out some of these complexities by presenting the fiscal crisis of 1991 that led the country into an IMF programme but that kept intact popular domestic expectations of a stable currency and of the maintenance of a respectable social safety net. During its twenty-first century crisis, Barbados has avoided going to the IMF (as of March 2017) but the debt situation has been precarious. The post 2008 crisis raises questions about whether an IMF programme should be pursued and also about whether, with or without IMF assistance, the popular expectations of maintaining the currency peg and of state funded social programmes can be continued. This paper addresses these issues while comparing the economic crises of the two periods.

KEYWORDS:

• Barbados
• Caribbean
• SIDS, debt crisis
• structural adjustment
• IMF

Notes

1. UNDP, “Briefing note for countries,” 2.

2. World Bank, World Bank Country and Lending Groups.

3. Beckles, “Radicalism and Errol Barrow in the Political Tradition of Barbados”; Marshall, “At Whose Service? Caribbean State Posture, Merchant Capital and the Export Services Option.”

4. Wigglesworth, “The Caribbean’s ‘Silent Debt Crisis’.”

5. Hinds Harrison, “Caribbean Islands, protests against IMF.”

6. The More Developed Country (MDC) label was used to describe Barbados, Guyana, Jamaica and Trinidad and Tobago in Caribbean Free Trade Association (est, 1968) and in the Caribbean Community (est. 1973). See: Axline, “Integration and Development in the Commonwealth Caribbean,” 955.

7. Worrell et al., “Economic Resilience with an Exchange Rate Peg,” 4.

8. Fashoyin, Fostering Economic Development, 1.

9. Fashoyin, Fostering Economic Development, 1; Worrell et al., “Economic Resilience with an Exchange Rate Peg,” 4.

10. Worrell et al., “Economic Resilience with an Exchange Rate Peg,” 4.

11. Fashoyin, Fostering Economic Development, 2; Blackman, “The Barbados Experiment,” 5.

12. Fashoyin, Fostering Economic Development, 2; Worrell et al., “Economic Resilience with an Exchange Rate Peg,” 4.

13. Howard, Dependence and Development in Barbados, 26–30.

14. Goddard, “Panel Presentation,” 2–3; Sandiford, “Statement by Former Prime Minister of Barbados,” 1, 4; Hinds Harrison, “Caribbean Islands, Protests Against IMF.”

15. The monetary policies included raising the Central Bank’s discount rate; requiring that commercial banks hold more of their deposits in government securities; and a ‘temporary global credit standstill’. See: Fashoyin, Fostering Economic Development, 1; Worrell et al., “Economic Resilience with an Exchange Rate Peg,” 5, 12.

16. Goddard, “Panel Presentation,” 3–4; Fashoyin, Fostering Economic Development, 20–21, 32; Trotman, “The Social Partnership Ten Years On,” 12, 14.

17. Fashoyin, Fostering Economic Development, 19–20; Trotman, “The Social Partnership Ten Years On,” 6.

18. Howard, Dependence and Development in Barbados.

19. Barriteau, “Structural Adjustment Policies in the Caribbean,” 146.

20. Barriteau, “Structural Adjustment Policies in the Caribbean,” 146–147.

21. Ibid., 146.

22. IMF, Barbados: Staff Report for the 2013 Article IV Consultation, 4.

23. Ibid., 5.

24. During fiscal year 2009/2010, the government adopted the accrual method of public accounting which has meant that although the 1991–1993 period may appear similar in terms of the flagging levels of economic activity, it may be difficult to compare the two with full accuracy.

25. Edward, “No to Debt Restructuring.”

27. As previously stated, some of this change could also possibly be connected to the change to accrual accounting standards.

35. CIA, The World Factbook.

36. Central Bank of Barbados, Online Statistics Database.

38. IMF, Barbados: 2016 Article IV Consultation, 4.

39. Ibid.

40. “Another Downgrade for Barbados”; “Regional Rating Agency Downgrades Barbados.”

41. “First S&P, Now Moody’s: Another Downgrade for Barbados”; “Another S&P Downgrade”; “Moody’s Downgrades Barbados’ Bond and Issuer Ratings.”

42. Stanley, “Barbados- A classic case of a ‘fallen angel’.”

43. “Moody’s Downgrade No Surprise – Stephen.”

44. Government of Barbados, “Draft Estimates of Revenue and Expenditure 2017–2018,” 408.

45. Government of Barbados, “Draft Estimates of Revenue and Expenditure 2017–2018,” Appendix C.8.

46. Sinckler, “The 2013 Financial Statement and Budgetary Proposals.”

47. Hinds and Montoute, “Global Forces and the Continued Role of Caribbean Trade Unions.”

48. Edward and Best, “NUPW: Time to Pay”; King, “CTUSAB: Time to Discuss Public Sector Wage Increase”; Thangaraj, “15 Per Cent Salary Increase”; Mounsey, “NUPW Boss Vows to Keep Pressing for Pay Increase.”

49. “At a Glance: Finance Minister’s Statement on the Barbados Economy.”

50. “Govt Reveals Private Buyer of Island’s Sole Oil Terminal.”

51. Edward, “FTC Oil Probe”; “Give us a Terminal, Too!”; Madden, “Oil Terminal Sale Now in FTC’s Hands”; “BNTCL Decision Not Final, Says FTC.”

52. “Hello Wyndham, Goodbye Hilton.”

53. Mounsey, “Not so fast! Comissiong to Bring Court Action Against Hyatt.”

54. Alleyne, “Jones Dismisses Talk of IMF Arrangement”; Edward, “Sinckler not Going to the IMF”; Evanson, “Stuart: IMF not on Agenda.”

55. Walker, “Go to the IMF, says Owen Arthur”; Alleyne, “Bajans Feeling IMF Pain, but no Gain – Arthur.”

56. “Pressure Mounting on Central Bank Governor”; Fieser, “Ultra-High Yield Club Gets a New Member as Barbados Bonds Slump.”

57. IMF, St. Kitts and Nevis: 2016 Article IV Consultation, 4, 21.

58. IMF, St. Kitts and Nevis: 2016 Article IV Consultation, 4.

59. IMF, St. Kitts and Nevis: 2016 Article IV Consultation, 8–13.

60. Kentikelenis; Stubbs and King, “IMF Conditionality and Development Policy Space, 1985–2014.”

61. Chwieroth, “Professional Ties that Bind.”

62. Alleyne, “Bajans March to Show Disgust”; Brown, “‘March of Disgust’ Just the Beginning; “Mission Accomplished.”