No easy way

‘There is going to be some pain,’ warns Sinckler

Minister of Finance Chris Sinckler is reminding Barbadians that the measures announced in the 2017 Financial Statement and Budgetary Proposals are mainly designed to stop the decline in foreign reserves, which stood at only 10.7 weeks of import or $705.4 million at the end of March.

Sinckler, who is currently under pressure to withdraw his May 30 revenue measures, also reiterated today that his $542 million austerity package was designed to lower the fiscal deficit of $537.6 million, which he acknowledged was still too high and unsustainable, leading to more Government borrowing, including from the Central Bank because of the lower lending appetite of other state creditors.

Stating that Government was not an earner of foreign exchange, Sinckler said the public sector was “a large driver of the deficit”.

“So if you are not earning foreign exchange but you are a major part of the utilization of the foreign exchange then you have to find a way to bring your demand or appetite for the foreign exchange under control, and if that appetite is being driven by a higher deficit you have to get the deficit down as quickly as possible,” he told reporters following the signing of a US$34 million loan agreement with the Inter-American Development Bank for expansion of renewable energy and national gas use on the island.

“So in the context of those objectives, you have to see what are the best measures to adopt. Barbados is a small economy and we don’t have a lot of options. We can’t switch out from external earnings into domestic reliance like an economy like . . . Brazil or one of the bigger economies,” he said.

In an effort to close the fiscal deficit and shore up the foreign reserves, Sinckler announced a whopping 500 per cent increase in the National Social Responsibility Levy from two to ten per cent, introduced a two per cent levy on all foreign exchange transaction and an increase in taxes on petrol in his May 30 Budget.

This has been met by a huge public outcry including from ordinary Barbadians, the private sector, the Opposition Barbados Labour Party and trade unions, all calling for a repeal of the measures, which they say will lead to a rise in the cost of living and will deal a severe blow to the island’s competiveness.

However, Sinckler reiterated today that the measures were put forward after weeks of consultation on a number of different scenarios, proposals, options and measures.

He said they were designed to make the island more competitive, earn more foreign exchange and end the drain on the reserves.

“We looked at all the options and I laid out those in the Budget. Some of them are quite far more draconian than we have chosen, so we have put options on the table and said, ‘what are the ones we are going to pursue?’ And I understand the reaction. Austerity is never easy. It is painful. Nobody relishes or holds a party when they hear there is austerity because it means there is going to be some pain,” he said.

“The question is, if you don’t do that, what are the alternatives? The alternatives are much worse. We can lose jobs, we can continue to lose value in our economy, suffer more downgrades, find ourselves in a position where we can’t pay our debts, social services continue to deteriorate and then we are forced in a position where we have to take even harsher decisions.

“My view is that we have to weigh everything in the balance and see the ones that can achieve your objective with less disruption as possible,” the Minister of Finance said.

With two weeks to go before the controversial tax measures are implemented, Sinckler however left the door open for alternatives.

And he gave the assurance that the Central Bank would “define shortly” how the two per cent tax on foreign exchange transactions would be implemented, a concern raised by the Barbados Bankers Association and other private sector groups.

In response to suggestions from the Barbados Renewable Energy Association that the measures would negatively impact the sector, Sinckler pointed out that the Freundel Stuart administration had made several investments in the sector.

“Why would we do all of that to now come and collapse it?” he asked.

However, he said Government would try to mitigate, as much as possible, the impact of its controversial tax measures.
marlonmadden@barbadostoday.bb

6 Responses to No easy way

  1. Tony Webster June 15, 2017 at 6:15 am

    Not quite knowing the context of the minister’s remakable remarks, one is left to speculate that it was either one of those “man speaking into the mirror” moments… or it just might have been the ZR driver explaining to his inebriated conductor, how dem reach right back into Rocky Gully….wid flat tires…and no gas.

    I am however grateful for the explanation that Government does NOT earn, one red cent of F/X but certianly spends it. To which I might add, that Government (and some S.O.E.’s) yet exercise the capacity, to take out loans in F/X, which of course, have to be repaid in F/X, plus interest also in F/X…just like the latest one now to go thru for the B.T.M.I. I heard the explanation yesterday of the rationale for assuming this fresh F/X obligation, but they key kernel of enlightenment, was somehow missing:evidently, we simply brokes, both in BB$ AND in US$, and in order to keep our tourism alive for another year, AND to top-up our C.B.B F/X reserves, we have no option but to go take out ANOTHER I.A.D.B. USD loan… so hook-up that intravenous F/X… STAT, and this should see us until THE BIG DAY. Effin I wrong, give me a better explanation!!

    Lord, cumfa.

    Reply
  2. Concerned June 15, 2017 at 10:23 am

    What is absolutely amazing to me, is that at a time when the country’s debt to GDP ratio is over 150%, (that means that we owe 1.5 times what the country can produce in output in a year), This government has just added another USD $34 Million in debt from the IADB, for expansion of renewable energy and natural gas use. Now while I agree with expanding renewable energy and natural gas use, did we really, absolutely, have to take this loan now? was there absolutely no alternative, and our backs were against the wall? Was there a crisis of calamity in natural gas and renewable energy that made it compulsory that we take this loan now? It has to be repaid you know. Perhaps not over the term of this government, but it still has to be repaid. It is stunning that a government that is in such deep debt, and taxing its citizens so extensively, continues to borrow more money. When will this borrowing stop? when we are completely bankrupt and devalued? it is apparent to me that this government will continue to borrow money, as if loans don’t have to be repaid, so long as there are lenders willing to lend. The people of Barbados will simply have to pay the consequences.

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  3. Milli Watt June 15, 2017 at 10:39 am

    de man right……….wish this was done over a period of time but this is the crowd we elect because some get a benefit. that said the books got to balance, this crowd going grumble but they know they got to repay. MINISTER HOLD YOUR GROUND or this place looking for more trouble later.

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  4. greengiant June 15, 2017 at 1:56 pm

    Not in support of the Government, but loans from agencies like the I A D B usually has deadlines by which to draw down, so maybe that’s why it had to be taken now, also remember we are short on foreign exchange, and still awaiting projects to commence due to various reasons, so this money can shore up the foreign exchange until those projects are approved and funds made available.

    The sectors that are complaining about the austerity measures know they only need to submit a proposal to the ministry of finance for relief, and if found to be justified, they will get the ease necessary. The tourism sector has sorted their business out obviously. They all knew what contained in the budget, but the problem is the business community wanted government to lay off more workers, that was not done, so they’re protesting. Everybody wants the government to act on their suggestions, but how many people can they listen to. What the minister needs to tell the people is how much these measures will generate monthly, and how much will go towards paying public servants. It will be challenging for me too, but if it reduces the deficit considerably, then I will have to support it, as all I have heard otherwise is criticisms, but no alternative solutions.

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  5. Haskell Murray June 15, 2017 at 2:57 pm

    Marlon Madden check you arithmetic it is 400 % increase not 500% as you stated consistently wrong. All Chris has done is implement a Barbadian solution and not one made in Washington by way of the IMF and we should all be supportive of him.

    What is missing is that he did not go after those people and companies who don’t pay the taxes owed to the government

    Reply
  6. Andrew Simpson June 15, 2017 at 3:45 pm

    Could someone do a study of all these renewable energy loans to see what component is actually spent on RE equipment.
    I fear that much of these funds are being used to pay rents, fossil based electricity charges for air conditioning offices and salaries.
    Seems like every effort is actually being made to dampen sustainable development, possibly in order to contain short term foreign exchange outflows.
    Has anyone actually benefitted from tax incentives (land tax rebates, withholding tax waivers or income tax holidays) promised to spur the renewable energy industry?

    Reply

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