“Of Competence, Confidence and Credit Ratings” by Khaleel Kothdiwala
On 14 July 2021, Barbadians were treated to the welcome news that Moody’s Investor’s Service had maintained Barbados’ credit rating and that its outlook for our economy remains stable.
This comes in spite of the precipitous decline in real GDP due to the impact of the COVID-19 pandemic, decreased government revenue coupled with growing calls on expenditure, elevated levels of borrowing as a result and other realities and continuing challenges with some macro-economic fundamentals.
But Moody’s has given its authoritative imprimatur to the argument that the impressive work done by the Government of Barbados between 2018 and the onset of the pandemic has put the country in a sufficiently comfortable position to be able to keep our heads above water despite the successive catastrophic shocks.
Per Moody’s, “prior to the pandemic, Barbados had made significant progress towards addressing the root causes that led to the sovereign default in 2018. The Government had achieved high primary surpluses and implemented structural reforms to reduce fiscal vulnerabilities”.
They also point to the IMF’s five positive reviews of our reform efforts and general performance to undergird their confidence in government’s ability to right the economic ship of state. In essence, this Administration’s management of the Treasury both before and during the pandemic has been the essential ingredient to the country’s continued survival.
It is an interesting coincidence that this statement of confidence has come nearly nine years to the day that another rating agency, Standard and Poor’s, downgraded Barbados’ credit rating on 17 July 2012, one of 23 downgrades that this country endured under that Administration.
On that occasion, S&P noted that Barbados’ economic fundamentals continued to weaken and “the fiscal stance remains qualitatively weak, as rising debt, off-budget spending, and contingent liabilities (in particular, CLICO) demonstrate”. They indicated that a continuing worsening of Government’s position would place pressure on the currency peg leading S&P to further downgrade our credit rating, which they of course were forced to do several times up to 2018.
Recall the differences between these two occasions. In 2012, we continued to struggle to get out of the slump of recession, but there was no catastrophic COVID-19 pandemic, ashfall or Hurricane Elsa. The country recorded anemic growth in 2012, but certainly better than the pandemic-caused 18% contraction in 2020. Unemployment was projected to peak at 12% in 2012, but certainly better than the very high rates of unemployment recorded since the pandemic, primarily due to a shuttered tourist industry.
The former Administration no doubt faced a tough economic wicket, but we realize now that none can compare to that being endured by the Mottley Administration at present.
The last administration sunk this country to its lowest depths, took our debt-to-GDP ratio to the third highest in the world, drained the foreign reserves, presided over the social disintegration of our nation, and generally brought us to the brink of collapse.
Contrastingly, this Administration:
- has increased the number of buses and regularised the bus schedule,
- kept garbage trucks on the road,
- constructed a state of the art isolation facility at Harrison Point,
- supported thousands of families every month through the Adopt-a-Family programme,
- kept this country clean even after unprecedented ashfall and hurricane damage,
- brought the foreign reserves to unprecedented high levels,
- is constructing sustainable housing for working people,
- procured thousands of testing kits and associated medical supplies at a time of high levels of international demand, such that any person can request a test on demand, a reality unknown to many in other developing nations,
- offered grants to micro and small businesses during the national pause and
- continues to pay for Barbadians to receive health care and for their children to go to school.
All of this and much more in the most difficult of times, yet the international financial institutions and rating agencies remain confident in our government.
How does this happen and what accounts for the difference in outcomes between the last administration and this one? Is it sound management, pragmatic solutions, visionary leadership or focus on the task at hand?
I tender that a combination of all four embodied in this Administration has been decisive in getting us to the point we are. There are no doubt challenges presently and more to come, requiring us to be both cautious and bold in response. But that we have come this far is proof positive of what is yet possible together.
- Khaleel Kothdiwala