On March 20, 2019 the Honourable Mia Amor Mottley, QC, MP, Prime Minister and Minister of Finance, Economic Affairs and Investment., delivered the 2019 Budget Address in the House of Assembly.
As the Honourable Prime Minister Mia Mottley delivered her presentation of budgetary measures on March 20, 2019, she noted that progress was made and key milestones had been attained. These included the approval by the International Monetary Fund (IMF) of the Barbados Economic Recovery and Transformation Plan (BERT); the domestic debt restructuring; and a budget surplus.
The presentation was made against the global backdrop of:
- Brexit which tempered the enthusiasm for travel from the Barbados’ largest source market; and
- The Organisation of Economic Development (OECD) and the European Union (EU) tax initiatives, which catapulted Barbados into converging its tax platforms.
The Prime Minister underscored that stabilisation, growth and transformation are not three separate steps, but rather they are interconnected. Moreover, without growth we cannot spur the transformation of the economy. To this end, the three critical tasks from the government’s manifesto were highlighted:
- Rebuilding our foreign exchange reserves,
- Dealing with debt, and
- Simply helping people to live.
She continued by noting that the foreign exchange reserves have increased from just over BDS$400 million at its lowest point early last year to BDS$1.1 billion as of March 19, 2019, with the expectation of reaching 15 weeks of import cover over the next few days. Deficit financing of current expenditure has ceased, and expensive domestic borrowing swapped for low-cost borrowing from the IMF, the Inter-American Development Bank (IDB), and the Caribbean Development Bank (CDB).
Following the domestic debt restructuring, accounting for approximately 80% of borrowing, the national debt fell from over 170% of Gross Domestic Product (GDP), the third highest in the world, to under 125% of GDP, with the country on target to bring the level of debt below 100% in seven years, and to 60% by 2033. The restructuring of external debt accounting for approximately 15% of borrowing is not yet complete.
Furthermore, the Government of Barbados (GOB) is on track to achieve its target of a primary surplus of 3.3% of GDP for the FY2018/19, having recorded a surplus well in excess of that target at the end of 2018.
In the second phase of the presentation, the Prime Minister took the opportunity to outline numerous measures and initiatives aimed at stimulating the economy and increasing global competitiveness, including the settlement of outstanding tax refunds to companies and individuals for the years 2011 to 2016, and with particular focus on shifting the burden of taxation away from taxing work and production, towards taxing assets and consumption.
Growth in the economy is expected as a result of a number of projects, well advanced in their planning applications, and representing almost BDS$2 billion of investment over the next three years. These projects are in addition to the public sector investment programme, which will help to inject funds into the local economy. There will also be a number of initiatives to mobilise the BDS$9 billion of domestic savings in the banking system, and to provide the opportunity for economic enfranchisement to Barbadians.
Overall the Prime Minister continues with her efforts to overhaul the Barbados economy using a combination of debt restructuring, tax stimulus measures and investment promotion. These measures are all welcomed as we seek to rebuild as a country.