A Grenadian economist at the University of the West Indies (UWI), Dr. Brian Francis is predicting massive lay-off of civil servants in the Spice Isle if the eleven-month old Keith Mitchell-led New National Party (NNP) government continues with its current fiscal and economic policies.
Dr. Francis made the assertion as he appeared on the “Sundays with George Grant” radio and Internet programme.
The senior economic lecturer at the Cave Hill Campus in Barbados of the regional university charged that the Mitchell government is embarking upon the same economic strategy of the current Frundel Stuart administration in Barbados, which has announced plans to retrench 3,000 civil servants by the middle of March.
“If you look at the Grenada situation, our government is going down the very same path the Barbados government has gone down”, he said.
“The strategy that the Keith Mitchell-led administration is following is a finger print of what the Government of Barbados has done”, he added.
According to Dr. Francis, the two regimes have failed in their economic policies to recognise the prominence that is attached to public expenditure much to the detriment of their people.
He alluded to the fact that both Grenada and Barbados rather than taking “serious measures” to reduce expenditure, they have decided to focus on revenue generation by implementing more and more taxes on the backs of their citizens.
He said the Stuart government in Barbados has now sadly found out that “in a depressed economy…. which is precisely the state that Barbados is in, which is precisely the state that Grenada is in, you cannot impose more tax burden on people and expect the economy to grow”.
Dr. Francis, a former Permanent Secretary in Grenada under a previous NNP government of Dr. Mitchell, pointed out that in the economic sphere higher taxes “is all contractionary in nature” and not “growth enhancing” for a country.
He stated that both Barbados and Grenada need to implement strategies that can result in economic growth.
He warned that if the NNP regime “continues along its present path and when you look at what was announced in the 2014 budget as part of the first year of the three-year SAP (Structural Adjustment Programme), it is clear that the focus is on revenue enhancement, and that cannot, will never work, and it has never worked in any country on planet earth”.
“And therefore, if we continue along that path, we are going to end up in the very same situation that Barbados is now facing”, he added.
According to Dr. Francis, what this simple means is that the Mitchell government which campaigned to win the February general elections on the promise of creating more and more jobs, will in the end be forced to send home a number of public officers in order to deal with the terrible financial crisis facing the country.
Dr Francis said: “Irrespective of what the Prime Minister (Dr. Mitchell) or anybody say, (it) will be retrenchment and so we need to change course”.
In presenting the 2014 budget in December, Prime Minister Mitchell in his capacity as Minister of Finance announced a widening of the income tax threshold to take in more middle-income level earners, as well as huge increases in property tax and a US$5 a night tax to be imposed on stay-over visitors at hotels and guesthouses.
The government also alluded to a financing gap of $15EC million each month as expenditure continues to outstrip revenue collections.
Faced with an inability to service the island’s massive national debt of EC$2.4 billion, the Mitchell government is seeking the support of the Washington-based International Monetary Fund (IMF) to get debt relief from some of the international creditors.
Speculation is rife that Prime Minister Mitchell has not signed the much talked about “Letter of Intent” that he promised to do with the fund at the end of November.
The IMF is said to be seeking clarification on some of the revenue-earning measures to be undertaken by the government.
Dr. Francis is adamant that the strategy of the Mitchell government to increase taxes on the backs of the people at this time “is not the route to go to take the country out of its present economic and financial crisis” since taxes are by nature “a contractionary fiscal policy”
He noted that the 15% Value Added Tax (VAT) is being relied upon by government as its main source of revenue and for it to perform well then the people must have a great deal of spending power with disposable income in their hands.
“If you are contracting your base, how are you going to generate more revenue? If you are going to increase tax, you are going to reduce revenue and at the same time reduce growth…. so you have a double jeopardy”, he said.
Dr. Francis is credited with predicting the massive lay-offs in the public sector in Barbados and has also warned that the government in Bridgetown runs the risk of forcing a devaluation of the Barbados dollar with its current fiscal policies.