Caribbean Islands Role of Government
In general, the Barbadian government has taken a strong stand
against government interference in the operation of the national
economy. During his second term as prime minister, Barrow favored
a minimal role for government in managing economic enterprises and
emphasized the supportive nature of the government in promoting the
development of the economy. Nevertheless, government spending has
been a major tool of economic growth. The government has conducted
its economic policy by employing fiscal and monetary measures and
by supporting the social and productive sectors of society with
public sector investment. Public sector investment, however, was
also inextricably linked to outcomes of fiscal policy.
In fiscal year (FY--see Glossary) 1986, the government
introduced fiscal policies aimed at enhancing the purchasing power
of the private sector. Tax concessions to individuals and
businesses were expected to stimulate the economy and minimize
demand for wage increases, whereas increased consumption duties
were designed to regulate consumer activity. Indirect taxation was
to offset the loss of direct revenue from income and business tax
concessions.
By late 1986, however, it was clear that the realigned tax
structure would cause a large deficit. In December 1986, the CBB
recorded a 118-percent increase in the national deficit compared
with the previous year. The increase stemmed from the government's
inability to control capital expenditures and public wage
increases. Such control was a necessary precondition for the
success of the new fiscal policy.
In the mid-1980s, analysts raised concerns about the potential
effects of the Barbadian deficit. In spite of gains in aggregate
productivity, the budget imbalance could not be corrected, and
increased foreign borrowing appeared to be imminent. International
concerns revolved around Barbados' ability to meet debt payments in
the near future, as well as its ability to finance the public
sector investment in the out years.
Although fiscal policy was a dominant economic tool of the
government, monetary control played a relatively significant role
when compared with operations of other Eastern Caribbean islands.
The government coordinated economic policy with the CBB, rather
than allowing it to develop a completely independent program. Their
mutual goal was economic stability for the island, which implied
controlling the money supply so that credit markets remained
nonvolatile yet were sufficiently liquid to meet the demands of a
developing economy.
Government influence over the economy was exercised more
directly through public sector investment, which was developed and
coordinated in conjunction with the five-year economic development
plan. Historically, Barbados has concentrated public investment in
three areas: economic infrastructure, such as roads and ports;
social infrastructure, including health, education, and housing;
and productive sectors, particularly agriculture and tourism. Funds
for the 1986-88 period, which coincided with the last two years of
the 1983 five-year economic development plan, were allocated mostly
to transportation; the social sector received 26 percent of capital
outlays, however, split mostly between health and education
programs. Agriculture and tourism received a combined total of 30
percent of investment funds available from public sources.
Infrastructure constituted almost 36 percent of the total
public sector investment for that period, which was reflected in
the excellent communications and transportation networks that were
available in the late 1980s. The Barbados Telephone Company
operated an entirely automatic system of 75,000 telephones.
Tropospheric-scatter links to Trinidad and Tobago and to St. Lucia
and a satellite ground station operating with the International
Telecommunications Satellite Corporation (INTELSAT) Atlantic Ocean
satellite provided high-quality international service. The
government-owned Caribbean Broadcasting Corporation broadcast from
the capital on 900 kilohertz and had FM service at 98.1 megahertz.
Two commercial stations also broadcast from St. George's, Grenada,
on 790 kilohertz and 90.7 megahertz. Evening television service was
available. The Nation and the Barbados Advocate were
the local daily newspapers.
Transportation infrastructure was good and comprised almost
1,500 kilometers of paved roads, a major international airport, and
a deep-water port. One highway circled Barbados, and numerous other
roads crisscrossed the island; buses served most towns. Grantley
Adams International Airport, on the southern tip of Barbados,
handled direct flights to points in North America and Western
Europe. Bridgetown boasted a manmade deep-water port, which was
completed in 1961 and expanded in 1978. The island had no railroads
or inland water transportation.
In 1986 informed observers estimated that the next five-year
plan would allocate additional capital to productive sectors
(tourism, agriculture, and manufacturing) in the form of direct
credit. This would take place at the expense of reduced investment
in physical infrastructure. Because many of the road projects were
scheduled for completion within the decade, a reallocation toward
sectors that would directly assist national economic development
was considered necessary to enhance the overall performance of the
economy.
Foreign sources of capital, which from 1982 to 1986 had
included loans or grants from development banks and government
agencies, composed 40 percent of the public sector investment
budget. This figure was expected to increase to 50 percent for the
1986-88 period, a situation that could further exacerbate a growing
foreign debt repayment problem.
Data as of November 1987
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