$436 M fix for the Barbados economy
by Shawn Cumberbatch
Barbadians will have to contend with nearly $436 million in “robust” austerity measures over the next year and half as Government moves to fix its “deteriorating” finances and search for economic growth.
Jobs losses have not been ruled out with retrenchment contemplated as “a last resort”, but there will be no new employment in the public sector and civil servants will likely have reduced work periods, $42 million in monies allocated to the University of the West Indies have been cut, forcing Bajans to pay tuition fees, the reverse tax credit is being reduced, and there are increased taxes items on items ranging from cigarettes and garbage to lottery winnings.
In a three-hour delivery of his fourth Financial Statement and Budgetary Proposals in the House of Assembly this evening, Minister of Finance Chris Sinckler said it was “absolutely necessary” for the Freundel Stuart Administration to take such a “serious course correction”.
There will be a $196 million cut in expenditure between next month and March 2015. Of this amount $88.7 million will be cut between next month and March next year.
Additionally, Government will institute measures to increase revenue by $114.8 million between next month and March 2015, $36 million of this between next month and next March.
“While the fiscal adjustment programme will be done over a period of 19 months, most of the measures taken will continue to have some effect over the medium term (2013-2020). It should also be noted that some actions will be temporary, while others will extend beyond the 19 months’ time frame. The main intention is to rein in the deficit and gradually move it downwards towards more acceptable levels,” he said.
“On the revenue side, the main goal is to institute revenue measures aimed at stabilising our declining revenues, but done in a way that shares the burden among all members of the society so as to lessen its impact. Again, some of these impositions will be temporary, lasting only for the adjustment period of 19 months, while others will carry over until further notice or such time as fiscal balance is achieved. These measures are estimated to earn a total of $150.9 million over the 19 months.
“On the expenditure side, the measures aimed at reducing current expenditure by $285 million over the adjustment period target some of the expenditure areas most known to consume large amounts of government revenue, such as personal emoluments, subsidies and transfers, grants to individuals and organisations, specific areas of procurement and tax expenditures,” he added.
Specific expenditure cuts announced by sinckler were:
* A $140 million cut in transfers and subsidies ($38.1 million between next month and March and $101.9 million between next April and March 2015): to the University of the West Indies ($42 million), Queen Elizabeth Hospital ($35 million), Sanitation Service Authority ($30 million), Transport Board ($15 million ), Barbados Agricultural Development and Marketing Corporation ($12 million), and National Conservation Commission ($6 million.
* A $30 million reduction in the $121.7 million provided in this years Estimates for temporary employees.
* A $60 million cut in overall transfers to state entities ($23.3 million between next month and March and $36.7 million between April and March 2015)
* A $20 million cut (five per cent) on money spent on goods and services ($7.8 million between next month and March and $12.2 million between April and March 2015).
* A $20 million cut in the $29 million allocated for acting allowances/substitutes this year ($7.8 million between next month and March, and $12.2 million between April and March 2015).
* A $15 million reduction in the reverse tax credit between next month and March 2015.
This was in addition to revenue raising measures, including a 0.7 per cent municipal solid waste tax to raise $49.3 million between next month and March 2015, a $25 million cut in discretionary waivers on import duties and excise tax ranging from zero to 100 per cent, a temporary consolidation tax on people earning $50,000 and over to raise $42.1 million ($15.5 million between next month and March and $26.6 million between April and March 2015), a 25 per cent increase in excise tax on tobacco products to raise $9.9 million ($3.6 million between next month and March and $6.2 million between April and March 2015).
Also being implemented was a 15 per cent tax on lottery winnings $1,000 and over to raise $7.9 million in revenue ($2.9 million between next month and March and $5 million between April and March 2015), a 15 per cent tax rebate on new cars to raise $13.9 million ( $3.7 million between next month and March and $10.2 million between April and March 2015), a 0.20 per cent tax on commercial bank assets to raise $38 million ($14 million between next month and March and $24 million between April and March 2015.
Sinckler said Government had designed the expenditure adjustments “to limit the potential for major job losses in the public service, through instructing line ministries and statutory entities to use retrenchment as a last resort, while preferring to institute creative programmes for work hours/days/week reductions among staff”.
He also announced that on top of the current Government apparatus, a new Fiscal Adjustment Implementation and Monitoring Team would be established to oversee the fiscal programme.
Sinckler said Government would also be pursuing a number of growth strategies including given the Barbados Tourism Authority $100 million more for marketing and promotion, buying the closed Silver Sands Hotel, instituting a $125 million special road building programme, helping other key sectors including international business, and facilitating a number of other infrastructural projects in partnership with the private sector.
The state is also borrowing a $200 million Fiscal Policy Base Loan from the Inter American Development Bank and raising an unspecified sum on the international capital market. Sinckler expected all of the measures to give the foreign reserves a $700 million boost.