Minister of Finance the Hon. Chris Sinckler yesterday tabled his long-awaited Budgetary proposals before Parliament. The proposals have come some 22 months since the last Budget in August 2013. During that period there was the IMF Article IV consultation in December 2013 and a Ministerial Statement in December 2014. Yesterday’s Budget presentation provided the Minister with an opportunity to provide an update on the results of the Barbados Home Grown Fiscal Stabilization and Economic Revitalization Programme, as well as course–corrections that may be required. He highlighted the following achievements of the programme:
- at the end of March 2015, reserves were 16.1 weeks of imports of goods and services, up from 14.7 weeks at the end of 2014;
- the fiscal deficit which stood at 11.8% of GDP at March 2014 is now down to 6.6% of GDP; and
- the foundation for future growth has been laid through specific initiatives in key sectors such as Tourism, Energy, Agriculture, International Business & Financial Services, Telecommunications and Housing.
In introducing this year’s Budget, the Minister noted that while the Home Grown Fiscal Stabilization and Economic Revitalization Programme had resulted in the fiscal deficit being cut in half, the job was not yet done and it was still necessary to get the deficit down to more sustainable levels. This year’s Budget sought to close the fiscal gap primarily by introducing new revenue measures.
While projected expenditure savings were only $30m, there were $205m in additional revenue measures proposed. According to the Minister, in total these measures are expected to result in a fiscal deficit of 3.5% to 4% of GDP on an accrual basis.
The additional revenue will be raised from a variety of sources including:
|Mobile Airtime Excise
|VAT on Gambling
|Sweetened Beverage Tax
|Gov. user fees
|SSA Tipping Fee
The Minister also outlined a number of structural adjustments necessary to drive competitiveness and productivity. These include facilitating or investing in a number of major capital projects, reducing the costs of doing business, creating a more enabling environment through legislative reforms, protecting and enhancing food security and reforming our tax system.
One of the most critical areas addressed by the Minister is the structural decline in our revenue base at a time of growing inefficiencies in the public sector and increased demand for free services. He noted that the options include reduction of expenditures, increased taxes, new funding models for activities now funded by government or a combination thereof.
Regrettably this Budget does not address a reduction in expenditures in a meaningful way and instead primarily focuses on reforming the tax system to achieve revenue growth for Government. In addition, while we commend the proposed reforms for governance and merger of State Owned Enterprises (”SOE”), the budget presentation was short on specific expenditure targets for these SOEs which the Minister acknowledges have become a heavy financial burden on the central government.
In respect of the country’s debt, the Minister noted that Barbados has an enviable record of re-paying monies the country has borrowed and that it will continue to honour all debt obligations as they become due. He flatly rejected any notion of debt restructuring, choosing to instead focus on accessing lower cost financing alternatives particularly for government’s capital works programme.
The Government will also pursue a policy of divesting assets that lend themselves to private investment. An example cited is the Government-owned hotel properties known as Gems of Barbados which are in an advanced stage of divestment.
Finally, while constrained on the disclosure of information in light of the Court process, the Minister indicated that the CLICO matter was moving towards a satisfactory resolution which would avoid the negative impact for policyholders if the company was to be liquidated.
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