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Huge deficit

by Shawn Cumberbatch

dollarsignAnother difficult time is in store for Barbados, with Government’s finances projected to fall short by more than $1.2 billion between now and this time next year.

The good news from the recently re-elected Freundel Stuart Administration today was that it expected to have in excess of $2.6 billion, a seven per cent increase over the current financial year, to spend.

But with its new financial year due to start on April 1, the negative side of the arithmetic was that this would be countered by the estimated $3.8 billion Government will spend over the next 12 months, a 6.2 per cent increase in expenditure.

Details of the large fiscal deficit were outlined in the Estimates of Revenue and Expenditure 2013-2014 approved by Cabinet yesterday and laid in the House of Assembly this morning by Minister of Finance and Economic Affairs Chris Sinckler.

“Estimates for fiscal year 2013-2014 project current revenue at $2.6 (billion) on the accrual basis. On the cash basis, it is projected that current revenue will be $2.5 billion, an amount of seven per cent above the revised estimate of $2.4 (billion),” the voluminous document stated.

“Estimates for the fiscal year 2013-2014, project total expenditure at $3.8 (billion), an increase of 6.2 per cent from the approved amount of total expenditure for 2012-2013.

“The overall fiscal deficit on the Accountant General’s basis is project at $1.2 million or 13.1 per cent of nominal GDP at market prices estimated at $9.2 million. When converted to international financial institutions’ basis, the fiscal deficit is projected at $496.7 million or 5.3 per cent of GDP. On the accrual basis, the net operating balance is negative $413.8 million or 4.5 per cent of GDP,” it added.

While there has been some reconfiguration of Cabinet portfolios following last month’s general election, the Estimates document showed that the Ministry of Education with its additional portfolios of Science, Technology and Innovation, would still be the major beneficiary of state funding in the coming financial year, with a budget allocation of $289.6 million.

This was followed by the Ministry of Health ($259 million), the Ministry of Finance and Economic Affairs ($146 million), the Ministry of Tourism and International Transport ($125 million), the Ministry of Environment and Drainage ($116.5), the Prime Minister’s Office ($104 million), the Ministry of Transport and Works ($88.3 million), the Ministry of Social Social Care, Constituency Empowerment and Community Development ($77.3 million).

Additionally, while Government is expecting to spend $376 million buying goods and services, a near $20 million drop over the last budget, and said it would reduce statutory pay by $2.3 million, this will be offset by other expenses, including the $191.8 million spent on the “other personal emoluments” category, an increase of $45.6 million.

There will also be $205.3 million more spent servicing the island’s debts, in addition to $55.2 million more spent on subsidies and $6.9 million more in grants to public institutions.

As far as the money Government is expected to earn was concerned, however, the unfortunate news was that despite maintaining the 2.5 increased Value Added Tax rate indefinitely, the state was expected to earn just $1 million more from the tax in the upcoming financial year, part of an overall $943.4 million VAT intake.

Other revenue categories expected to fall included $60.8 million less from income tax, $7.1 less from corporation taxes, and $10.1 million less from betting and gaming.

This predicted financial outcome will come on the heels of most recent information showing that up to the end of January Government’s earnings were down and its spending up.

“Current Revenue collected to January 31, 2013 decreased by 5.6 per cent from current revenue for the same period in fiscal year 2011-2012. Current Expenditure to January 31, 2013 increased by 7.3 per cent from current expenditure for the same period in fiscal year 2011-2012. Capital expenditure at January 31, 2013 decreased by 10.7 per cent over capital expenditure for the same period in fiscal year 2011-2012,” the Estimates document stated.

It also gave details on what funds would be given to some of the high profile Government agencies and other entities which receive financial support from the state.

Just like last year, the current Estimates said the Stuart Administration would give the Transport Board a $20 million subsidy, although what was actual spent on that statutory body in the current year was $65.4 million.

The University of the West Indies will get a $71.3 million grant between now and next April, but this allocation is expected to be doubled to $172.4 million in the next two financial years, the document stated.

As for the Barbados Tourism Authority, the agency mandated to market the island’s main money earner, it will receive a $101.7 million grant in budget year 2013-2014.

Another major beneficiary of Government funding, the Queen Elizabeth Hospital, will receive a grant of $190 million, a sum government says will increase to $227.1 million in each of the next two financial years.

The Lower House is scheduled to debate the Appropriation Bill, which encapsulates the Estimates, from next Monday to Friday, after which it will be discussed in the Senate the following week from March 25 to 27.

With Government’s financial year starting on April 1, the law stipulates that the budget has to approved by both Houses of Parliament by March 31 each year.

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