Worried about the country’s worsening fiscal situation, a leading economist is urging the Government to get moving on the adjustments and incentives outlined by Minister of Finance Chris Sinckler in his most recent Budget.
Economist Ryan Straughn today warned that as long as the country’s fiscal deficit continued to widen, there would be high levels of uncertainty among local and foreign investors.
Straughn, immediate past president of the Barbados Economic Society, told Barbados TODAY: “A lot of that is in part due to the fact that the Government has not executed a credible plan for fixing its fiscal problem.
“No one will invest significantly where there is uncertainty, and uncertainty from the position of the Government [and] how that will play out with respect to the [foreign] reserves management.
“You are asking for people to bring in foreign funds now where they have no idea if the Government is actually going to fix its fiscal problem, which impacts the foreign exchange problem. Therefore, should you need to take your money out, you may have difficulty in doing so now. So I think it is a very hard economic climate to operate in whether you are a local investor or foreign investor in Barbados,” Straughn explained.
The major move, he maintained, was for Government to cut expenditure and quickly implement policies that would encourage economic growth.
Government’s expenditure for the first nine months of this year was reduced, “but by only $23 million, and the fiscal deficit widened by $117 million”, according to the September Central Bank of Barbados report.
It also revealed that the country’s foreign exchange reserves had declined to $1 billion, a fall of $447 million since December 2012.
Straughn said while he did not think it was too late for the Freundel Stuart administration to implement the adjustments and incentives outlined in the August 2013 Financial Statement and Budgetary Proposals, he believed those measures should have been taken years ago. These included a number of new tax measures, an immediate freeze on all new hirings in the public service, and a substantial cut in subsidies to the University of the West Indies.
Government had also announced special incentives to spur growth in the tourism and international business sectors, major restructuring of the agriculture industry and domestic subsidies to aid out manufacturing and to reduce the cost of energy.
Straughn said businesses continued to be constrained by slow policy implementation, which left them unable to plan adequately.
“In terms of the tax policies in Government, you have to be able to plan ahead with some level of certainty. The private sector is doing their part but it is difficult to plan,” said Straughn.