Revenue shortfall ‘may force’ govt to recalibrate spending priorities

The government’s revenue target of $3.98 billion for the 2025-2026 budget has been questioned by a University of the West Indies economist, who warned that the projection was seemingly  based on overly optimistic assumptions.

 

Professor Antonio Alleyne, commenting on the newly revealed Estimates of Expenditure and Revenue for the new fiscal year beginning on April 1, noted that Barbados has consistently fallen short of its revenue projections in past budgets.

 

“Anything is possible,” he said, noting that he did not want to come off as a pessimist.

 

“However, the government has never collected 100 per cent of its budget, or estimated revenue and I don’t foresee it doing that either so this is my projection as it relates to patterns.”

 

According to the economist, the numbers simply don’t add up.

 

“We’ve always fallen short, and for various reasons,” he said.

 

“I think it’s overly optimistic, by a long shot, for the government to assume that it will collect that much revenue, given the history of revenue collection in Barbados.”

 

The government has already admitted that it expects to fall $1 billion short of its budget, collecting only 75 per cent of the estimated revenue. But Professor Alleyne argued that even this figure is doubtful.

 

“I just think the government is trying to paint an optimistic picture of the way forward. Persons are never really that compliant. So, out of $4 billion, they’re assuming a fall short of maybe $1 billion– that’s a 75 per cent collection overall. Again, still a little optimistic, in my opinion.”

 

Professor Alleyne also noted that even Value Added Tax (VAT), which he said is one of the easiest revenue streams to collect, often falls short of expectations.

 

“Given the history of revenue collection in the country, including VAT, which is one of the easier forms of revenue collection, it is still a challenge… that 75 per cent is still high.”

 

The economist further warned that if revenue does not meet expectations then the government will have to make tough decisions about which areas to fund and which may face cutbacks.

 

“They need to ask the questions like what area you’re going to spend the revenue in… what’s most important,” he said.

 

“Because if you fall short of what you aim for, you will likely have to recalibrate in terms of what money goes where.”

 

Professor Alleyne, however, acknowledged that the government’s optimistic outlook could help build public confidence.

 

“Well, I think the government is just trying to paint an optimistic picture in terms of the way forward. And if the society holds to that, maybe things will look good.”

But, he added: “To me, from an analyst’s perspective, it is overly optimistic.”

shannamoore@barbadostoday.bb