Governor of the Central Bank of Barbados Cleviston Haynes has described the planned introduction of fiscal rules as a step in the right direction, saying it should allow Government to better manage its finances and meet fiscal targets.
However, he cautioned that how it is managed will be a critical factor in its success.
The Mia Mottley led administration had indicated that it was planning to introduce fiscal rules that would enhance accountability, transparency and fiscal management.
Fiscal rules are parameters put in place to help government control its revenue and expenditure. They are generally implemented to help put constraints on government’s appetite for borrowing and spending to ensure fiscal responsibility and debt sustainability.
The Central Bank Governor said fiscal rules should help future governments avoid a massive build up of arrears and having to implement “sharp” policy adjustments.
“The fiscal framework allows you to plan for what you want to do over the medium-term, and therefore hopefully we won’t have the sort of stop-starts that sometimes we have had in the past,” said Haynes.
“I think it is a step in the right direction. How it is managed will be critical but if we keep our focus on the fact that it really is going to lend towards putting us on a sustainable growth path then I think that over time we will all see the benefits of having had the fiscal rule,” he said.
The Governor was responding to questions during his economic review for 2021.
He said “We as a nation have to take control of our public finances and the fiscal rule really represents a codification that we have to exercise that discipline that will allow us to be able to finance whatever commitments we have, what commitments we have made.”
He further explained that fiscal rules would allow Government, if it deviated from its commitments to be able to “go back to Parliament and say ‘look, we deviated because we have a pandemic. We are still committed to this process and this is how we are going to get back there because we have lost a year or two years, or what have you’. I think that is the important part.”
Late last year, University of the West Indies Professor Dr Justin Robinson called for the introduction of robust fiscal management laws, which he said would force Government to exercise fiscal control.
“In terms of growing despite COVID, I would argue that we need strong fiscal and financial management rules that allow us to build up fiscal buffers to mitigate the impact of these external shocks . . . . I am arguing that we need a legislative framework that allows us to maintain fiscal discipline outside of an International Monetary Fund (IMF) programme,” said Robinson, as he addressed a December 2021 Rotary Club lunchtime seminar.
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