Barbados economist warns that IMF help 'is only option'

The Barbados government must seek immediate help from the International Monetary Fund if it wants to salvage the economy, the country's former central bank governor has warned.

In a letter written three months after he was removed as the government's chief economic advisor, Delisie Worrell that IMF intervention was the only choice for the Freundel Stuart administration.

The nation is plagued by rising debt, dwindling foreign reserves, high public spending and falling revenues against the backdrop of major downgrades by international credit rating agencies.

Stressing that the island had to act now to safeguard its two-one peg to the US dollar, Worrell warned that job cuts in the public service must be a plank of any restructuring exercise.

He said that the IMF “can assist in designing the reform process to increase efficiency through the employment of higher levels of skill and the appropriate use of new technology, with no permanent diminution in the quality of public services”.

The economist chided the government for failing to take corrective action to halt the slide in foreign reserves, again raising concern about continued financing from the Central Bank, unchecked spending and the slow pace of public sector reform.

“The most pressing economic challenge Barbados faces today relates to the excess of public sector spending over tax revenues, and the unsustainable level of borrowing from the Central Bank," he said.

“Reduced government spending and forceful measures for public sector reform are the key to arresting foreign reserves losses and securing the exchange rate anchor."

The economist, who was sacked shortly after he publicly scolded the government for spending more than it earns, again stressed that Barbados must bring its earnings in line with its spending.

“In order to restore confidence and secure the peg, decisive action is needed to reduce Government’s ongoing expenditure to the amount of tax revenues."

His IMF call comes on the heels of similar views shared by noted economists, former Prime Minister Owen Arthur and Royal Bank of Canada’s group economist Marla Dukharan.

Both Arthur and Dukharan have said Barbados’ move to the IMF was almost inevitable.