Accra Beach (Photo by: Andrew Hulsmeier)
The Minister of Finance and Economic Affairs, the Honourable Christopher Sinckler delivered the much anticipated Government’s Financial Statement and Budgetary Proposals on Tuesday, August 16, 2016. The following are extracts of the Minister’s presentation. The Minister declared that two key realities have emerged:
- The Barbados economy has finally started to turn around with growth resuming, unemployment declining, and potential investment expanding.
- While some setbacks have occurred in our fiscal consolidation processes it cannot be denied that the economy has made significant progress from the worst positions we were in.
The Minister noted that there was still significant work to be done to forge a faster rate of economic growth, supported by a more secured foreign exchange reserve position and by a fiscal deficit at a rate lower than that of GDP expansion to reverse debt growth while ensuring that government can sustain the provision of an acceptable quality of social services.
The Minister stated that Government had established the following priorities for the planning period 2016 – 2018:
- Improving the foreign reserves position through continued disciplined fiscal policy and enhancement measures for higher earnings of foreign exchange;
- Accelerating GDP growth to reach at least 2.5 percent by the end of 2017;
- Further reducing the fiscal deficit by addressing both expenditures and revenues so that by 2018 the deficit will be no higher than the rate of growth of the economy
- Through the attainment of actions 2 and 3, stabilizing the national debt by 2018 and thereafter reducing it; and
- Preserving access to key social services provided at the highest quality and financed in a sustainable and credible manner.
The Minister reported that the Barbadian economy continues to be restructured and diversified by incentivizing and financing the growth of new sectors such as alternative energy and cultural industries.
In his view, the current reserves position in Barbados is more than adequate for the country’s needs. This is supported by the Central Bank’s second quarter review of the Barbados economy which showed that for the first six months of this year the economy utilized approximately $3,083 million of foreign exchange while recording inflows of $3,040 million notwithstanding the delays in the start-up of major private and some public sector projects.
For small, vulnerable and highly open economies like Barbados, the most important economic variable is that of the capacity to earn, save and ultimately retain foreign exchange.
Principal concerns at this stage as described by the Minister:
- debt levels are way too high and still climbing;
- the fiscal deficit is still too large and must be better controlled;
- as a result of the two variables above, growth levels are being seriously restricted as the fiscal space cannot be found to assist in further unleashing growth; and
- because of a combination of all three of the above, the social development system is increasingly being compromised as the cost of sustaining it becomes more challenging.
The fiscal deficit at the end of fiscal year 2013/14 was near 12% of GDP. By the end of fiscal year 2014/15 the deficit was reduced on a cash basis to 5.8%. However, the gains being made were lessened by the servicing of major debt service payments relating to Barbados Agriculture Management Company and Barbados Water Authority, resulting in a deficit of 6.9% on a cash basis in 2015/2016.
Based on information from the Accountant General, current revenue for the period April 1 to June 30th, 2016 was $602.6 million, an increase of $32.5 million or 5.7% more than the amount recorded for the corresponding period during 2015. The amount was $15.2 million less than originally projected. Total expenditure for April to June 2016 was $1,038.3 million compared to $1,006.6 million in the corresponding period for 2015. The original projection for the period was $1,050.8 million.