Barbados is begging for handouts in the form of debt relief. This is nothing new for countries in the Caribbean region. Indeed, since 2010, St. Kitts and Nevis, Antigua and Barbuda, Belize, Grenada, and Jamaica have all been hit by financial distress and debt defaults. This distress can be laid at the feet of fiscal mismanagement and blunders.
In Barbados, the newly elected Prime Minister Mia Mottley at least had the courage to recently utter a little-known truth. Once undisclosed liabilities are added to the Barbados fiscal tab, its overall debt as a percent of GDP surges from 137% to 175%.
A bleeding budget and fiscal deficits have resulted in Barbados’ mountain of debt. The biggest source of the bleeding has been transfers to state-owned enterprises (SOEs). The largest expenditure category in the budget are “transfers”, with a whopping 60% of the total transfers going to SOE zombies.
There is only one proven way to stop the budget bleeding caused by the SOEs. Barbados should privatize its zombies.