PwC East Caribbean has published its newsletter on the Barbados Budget, titled Reality Check, as both the private and public sectors look for greater relief and transparency on the measures necessary to address the current account deficit, low foreign currency reserves and high debt levels.
The newsletter, accessible to all, was led and co-written by David Prestwich, Tax and Legal Services Leader for PwC in the Caribbean, Ronaele Dathorne-Bayrd, Corporate Services Leader for PwC in the Caribbean and Oliver Jordan, Advisory Partner, PwC East Caribbean.
Speaking today (12 June 2018) at the PwC sponsored Barbados Chamber of Commerce and Industry(BCCI) Budget Breakfast, where the newsletter was officially presented and discussed by members of the private sector, Prestwich said: “It’s fair to say that the Prime Minister didn’t duck the difficult issues facing the country in the mini-budget which she presented to Parliament on Monday, 11 June 2018.”
“We’ve set out within the newsletter a summary of the Prime Minister’s comprehensive plan designed to encourage positive economic activity. Overall, the plan maybe somewhat ambitious but its aim is to put the country back on the road to recovery through promoting growth, restructuring public debt and closing the fiscal deficit this year. It is hoped that the country will be running a fiscal surplus in three years’ time.” Prestwich added.
In further analysing the budget, Mr Prestwich noted that the Prime Minister has not yet outlined the specific actions that may be taken to support the International Business sector against the recent wider international pressures. However, Prestwich acknowledged that the Prime Minister wished to refer to a report from the private sector task force established to deal with international business issues and he added that “as this is only phase one of a three-part strategy, we are hopeful and eagerly await the steps needed to support the international business sector. We are also encouraged by Prime Minister Mottley’s announcement that there will be an additional Bds$60million in tax revenue expected from international business structures that have been recently established.”
Other significant insights within PwC’s newsletter addressing the Prime Minister’s “mini” budgetinclude:
- The Prime Minister’s announcement that public debt is to be brought to more sustainable levels through negotiation with domestic and external creditors is welcomed. PwC would however caution that these negotiations should be handled with sufficient consultation to avoid creating undue fallout, especially within the local financial services sector.
- Reform of State Owned Entities (SOE) has been the subject of several studies and recommendations, including one most recently by PwC, given the size of annual transfers from Central Government. PwC commends the Government for the decision that during the next 90 days the funding for three SOEs, the Barbados Tourism Marketing Inc. (BTMI), the Barbados Tourism Product Authority (BTPA) and the Sanitation Service Authority (SSA) willbe completely independent of the consolidated fund. In addition, the plan includes the partial removal of funding for the Queen Elizabeth Hospital from the consolidated fund. We urge Government to stay the course and pursue the subsequent phases of SOE reform which could include mergers as well as possible divestment, and commend them for the intent that any such actions will be taken only after suitable dialogue with the social partnership and the country as a whole.
- PwC welcomes the decision to review the governance arrangements of the BTMI and BTPA with a view to transfer lead responsibility of these entities to the private sector for ownership and management by October 1, 2018. PwC sees this recommendation as one of the more innovative approaches in the Budget address and we think it provides a foundation for generating even further growth in the tourism sector.
- PwC agrees with the Prime Minister’s assertion that developing a sustainable long-term financing approach for health care in Barbados is vital given our demographics and high levels of non-communicable diseases.
- As recommended by the Caribbean Development Bank, improved human development is one of the critical elements for sustainable growth. The announced initiatives to address the quality and cost of education available in Barbados would seem to suggest Government’s focus on supporting the nation’s young people and their education.
- The agreement of a 5% wage increase in the public sector for 2018/2019 is an excellent example of the spirit of collaboration between the new Government and labour given the economic challenges that have been identified.
In an overarching observation, PwC is encouraged by the new Government’s close collaboration with the social partners as this lays the necessary foundation to assist with the successful implementation of the proposed 3-phase Economic Recovery and Transformation programme.