Greater attention to debt
The Barbados Economic Society (BES) is of the view that Government should give greater attention to quickly lessening the island’s debt while introducing a more targeted taxation policy.
Speaking against the backdrop of the recent IMF staff report, president of the BES, Jeremy Stephen, told Barbados TODAY the association agreed with most of the statements made in that document, adding that the BES did expect the IMF to prescribe some austerity measures.
“So it didn’t fall outside of our expectations. And actually we considered it was fair considering where we are and the effort that the Government has tried to put in. We also do agree to some respect that the retrenchment policy, though necessary in helping to reduce the fiscal deficit, is too short in coming and would better be prescribed over a longer period,” said Stephen.
He said, however, it was believed that the IMF could have done “a bit more with explaining how the growth measures could be achieved; which industries we should probably be focusing on and how long should the Government’s austerity programme last in order to achieve the growth they expect in 2016/2017”.
Stephen said the association acknowledged that Government’s debt was “a bit high” and it should pay attention to cutting wage costs and transfers of subsidy.
“We figure that some attention should be paid towards lessening the debt burden being experienced by Government right now,” said Stephen. “And we figure that a base cut across the board [on expenditure] should at least create enough fiscal space to engender a more confident private sector and a more confident international business sector which is currently being challenged by a lot of exogenous efforts,” he added.
In relation to Government’s taxation policies, Stephen said the BES maintained that taxes should not be increased. He noted that if taxes were increased it would cause the economy to choke and economic growth to further lag.
“So as oppose to a broad base increase in, let’s say, income taxes or broad base increase at this time in the indirect tax rates, we believe the tax policy should be targeted towards the importation of luxury items . . . or items that wouldn’t be deemed as necessity items. We imagine the Government wouldn’t want to burden the workforce,” said Stephen.
He said given the issues associated with competitiveness, some serious consultation should also be considered to drive growth through newer industries particularly those related to renewable energy and logistics as well as tourism.
The BES head said the society did not see the retrenchment process as being disorderly.
The association agreed with the IMF that the Government should operate more independently of the Central Bank, said Stephen, adding that the reasons highlighted by the IMF were clear.
“So all in all we believe the IMF report was clear and at least it did point out very clearly the issues with the current government fiscal consolidation programme and the structural issues inherent in our economy,” he said.