The government of Barbados is finding a quick fix for a larger economic problem – the fiscal deficit.
A deficit which one senior economist believes is “holding back the economy”.
“Printing money is a short-term measure to make up for the shortfall in government revenue, because without it social services might collapse, there would be problems, but it is not a sustainable long-term solution. It is a clear message thet you need to fix the deficit. The deficit is just too large!”
Stating such to Loop News was the Dean of the Faculty of Social Sciences Dr. Justin Robinson.
He explained,
“It [printing money,] helps with stability and certainty in the economy in the sense that if the [Central] Bank didn’t do that, then the government couldn’t pay its bills, the civil servants might not get paid, sanitation, healthcare, any number of bills that the government owes might not get paid. So clearly if those don’t get paid, it’s destabalising,
“But, there are also dangerous with printing money in and of itself in the sense that that money goes into the economy, it is spent and because so much of what we spend is imported, it can have a foreign impact on the foreign exchange reserves.
“But the more fundamental problem is that if you are printing money, it sends to me a clear message that the deficit is too large. What the government’s bills relevant to its bills plus borrowing are not enough so you need to make adjustments to your spending.”
The Economist said that this is not the way of the economic situation, in which Barbados finds itself today.
Therefore following the Economic Review released by the Central Bank last Tuesday, he added:
“I would say for me the most pressing issue is that the government needs to put all of its efforts behind getting the fiscal deficit down to a sustainable level which will bring back confidence, help with the foreign reserves and support the recovery that is beginning to happen.”
On that note, he was pleased with the growth expressed in the Review.
“The real economy is growing again, we would have been happy with a higher growth rate but certainly a growth rate of more than one percent is welcomed after all that has gone.”
He was speaking to Loop News in an interview conducted at the University of the West Indies, Cave Hill campus.
