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Speed up reforms, IMF economist warns

A senior economist with the International Monetary Fund (IMF) is sending a strong warning to Barbados that it must accelerate a number of critical structural reforms in order for there to be real economic growth in the medium to long term.

Barbadian-born Dr Kevin Greenidge said while there had been transformation in some areas, it had not gone far enough, especially in the areas of trade, financial and tax policy reforms.

“If we can improve our regulatory control [and] quality of our regulations – utility, registering businesses, regulation of banks and financial institutions et cetera – you can almost squeeze almost close to a percentage point in growth,” he said.

Dr Kevin Greenidge addressing the audience at 23rd annual conference of the Institute  of Chartered Accountants of Barbados.

Dr Kevin Greenidge addressing the audience at 23rd annual conference of the Institute of Chartered Accountants of Barbados.

“We need to get started now with structural reform. It takes a while but it gives you the bang . . . where we need to focus our attention – transforming growth on the Government side, making Government more effective, making the rule of law more effective, transforming the fiscal position so that it enable more private sector development that would stimulate the private sector in terms of growth, and continue transforming on the trade and the banking sector.”   

Greenidge encouraged the country to maintain a stable political climate and improve accountability and transparency.

He also recommended the continuation of the reform of the public service and the removal of restriction on the flow of finance, as well as the examination of exchange controls.

Stressing that he was not saying whether it was right or wrong, Greenidge said while the island’s restriction on foreign exchange protects against financial instability it may also “restrict the contribution of the technical growth”.

“It takes time. So if you want to transform the economy, if you want to transform Barbados, you got to start thinking about transforming these things now,” the IMF economist told the 23rd annual conference of the Institute of Chartered Accountants of Barbados at the Lloyd Erskine Sandiford Centre Friday morning. The conference had as its theme, Structural Reform & Growth: What Really Matters?

Zeroing in on Government’s tax policies, and specifically the 17.5 per cent Value Added Tax (VAT), Greenidge suggested that it had the potential to rake in significantly more funds for the ailing economy.

However, he said this would not be possible unless the tax system was more efficient and Government took a second look at the amount it offered in concessions.

“If we get the tax index going up and make the tax structure much more effective you can squeeze another . . . one fifth per cent growth,” he said.

Greenidge explained that a high VAT rate accompanied by “a host of exemptions was less effective than a lower rate with fewer exemptions.

In either case, he advised, it was critical to have effective administration.

The economist said Barbados was not alone in believing that concessions were a critical deciding factor for investors, a position for which he said there was no supporting evidence.

Instead, he said, investors’ primary concerns were the macro framework, the quality of institutions and the return on their investments.

“The direction that countries have to go in transforming is to make the tax system very simple and transparent and effective. If you plug those holes you can have a lower rate [and] a more effective VAT system – people understand what they have to pay [and] they can factor it into their cost,” he recommended.

marlonmadden@barbadostoday.bb

5 Responses to Speed up reforms, IMF economist warns

  1. Loretta Griffith November 12, 2016 at 6:29 am

    My concern, is why impose all these different taxes that are not being policed or collected? Just does not make economic sense to me. It would seem you are just imposing taxation for the sake of imposing when you should be more concerned with collection.

    Instead of putting square pegs in round holes, government needs to employ persons who are efficient and not clock watchers or because a minister send you.

    Persons need to be employed not only on qualifications which are important, but merit too.

    Reply
  2. Alex Alleyne November 12, 2016 at 9:38 am

    Another Financial Hitman.

    Reply
  3. Phil November 12, 2016 at 11:48 am

    We printed a lot more BDS dollars. That means that it will take a lot more local dollars to make purchases. It’s a discreet form of devaluation. Ah lie? All de Dems gon deny dis, but all o’dem know um is de truf.

    Reply
  4. Tony Webster November 12, 2016 at 4:43 pm

    If my best friend and Saviour arrived on LIAT this Wednesday coming, direct from Heaven…and said the exact same thing as Dr. Greenidge….it would have absolutely no effect on those Honourable Folks in the Cabinet.

    At the most, the P.M. might remind Jesus that we have long-ago dis-established the Church and separated them from the executive and the legislative….and he might then extend an invitation to Him, to stick-around and enjoy all the Fifty scheduled Big Bashments.

    Reply
  5. Ossie Moore November 15, 2016 at 12:44 pm

    Mr Webster just lets not think that it will be The Everlasting Savior and Friends talking from the goblet

    Reply

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