Editorial | How Jamaica can help Barbados

We suspect that Mia Mottley hasn't asked, but we, nonetheless, suggest that Prime Minister Andrew Holness offer the Barbadian leader Jamaica's technical help, and other support, in crafting and managing what will inevitably be a tough and painful economic recovery programme.

Jamaica not only has experience in this area, but has, in recent years, achieved, across political administrations, more than a modicum of success in its own project, which this newspaper believes it is obligated to share with its Caribbean Community (CARICOM) partners, many of which face fiscal challenges.

In that regard, it may be timely, in the face of Barbados' situation, for CARICOM leaders, when they meet in Jamaica next month, to place on their agenda mechanisms for more robust cooperation and exchanges at the technical level beyond the policy issues normally covered in get-togethers by their finance ministers and central bank governors.

In other words, it may be useful for CARICOM to formulate a framework for member states to call on the hands-on fiscal management expertise of each other during, as well as before, the onset of economic crises. Indeed, many of the issues faced by CARICOM countries are similar.

In Barbados' case, it hasn't recovered from the rut into which most regional economies fell at the onset of the Great Recession and global financial sector fallout of 2008. Institutional memory seemingly failed Freundel Stuart's administration, which seemed unaware of, or to have forgotten, the lessons left by an earlier Democratic Labour Party (DLP) government faced with a fiscal dilemma in the early 1990s. Like Jamaica in earlier times, it dithered on making the hard choices on a sustained basis.

Ms Mottley, with the cushion of her party's massive electoral victory, is clearly willing to spend some of her political capital on this crisis. She has called in the IMF and this week, in what seem to be preconditions to an agreement with the Fund, unveiled, a mini-budget with more than US$151 million (J$19.69 billion) in taxes, which translates to around three per cent of GDP.

Promise to balance budget

The prime minister also promised to balance the budget - now running a deficit of four per cent of GDP - in three years and to begin to aggressively pay down the country's debt, which, when arrears are taken into account, she claims to be 171 per cent of GDP. Most previous analyses placed the debt, including obligations to the National Insurance Scheme, close to 140 per cent of GDP.

But whatever the true debt ratio is, it is clearly unsustainable. This is a matter with which Jamaica has experience dealing. Ms Mottley has started on the risky route of unilateral default on foreign-interest payments, perhaps with the assumption that any penalty from the market will, at least partially, be mitigated by the signal that Barbados is on the way to gaining the imprimatur of the IMF.

Foreigners, though, are more likely to be assuaged if they feel that domestic creditors, with whom Ms Mottley has initiated talks on restructuring, are part of the burden-sharing. Jamaica has done two of these over the past eight years. We possibly have lessons to pass on to Barbados on how such restructuring, as well as international buy-backs of debt, at deep discounts, was achieved.

Ms Mottley has moved to revive the social partnership regime that worked well during the crisis of a quarter of a century ago, but she might still want to hear how the Jamaican Government, over several years, even as it runs a primary surplus of upwards of seven per cent of GDP, has been able to maintain consensus around the reform project. In that regard, the workings of the Economic Programme Oversight Committee, especially in its earlier formulation, should be of interest to Ms Mottley.

Ms Mottley possesses among the sharpest intellects in CARICOM. She, we believe, is capable of focusing on Barbados' problems and those of CARICOM. It would be worth Mr Holness' while to work hard for a partnership with her.