Govt’s billion-dollar revenue leap faces ‘credibility tests’ – economist

Economist Professor Troy Lorde has urged closer scrutiny of the government’s claim of a $1.3 billion rise in revenue over the coming fiscal year, warning that the figures must pass “three credibility tests” to be seen as realistic and sustainable.

 

Following the release of the latest fiscal estimates, Professor Lorde weighed in on the administration’s projections of a staggering jump in revenue.  

 

While the estimates align closely with recent campaign promises, experts warn that the sustainability of this fiscal pivot depends on transparency and the structural nature of the anticipated gains.

 

The projected 34.3 per cent spike in cash revenue has become the primary point of contention. Professor Lorde is calling for a deeper explanation of the mechanics behind such a significant one-year increase, questioning whether the figures are rooted in permanent economic shifts or temporary windfalls.

 

“That’s a significant jump,” Lorde noted following the release of the estimates. “A 34.3 per cent cash revenue jump in one year demands explanation. The question is: what is structural versus what is one-off? Is this jump based on broadening the tax base? Is it based on compliance, or is it from growth?”

 

The three credibility tests

 

To navigate the complexities of the new Budget, Professor Lorde has proposed three “credibility tests” to measure the realism of the government’s fiscal strategy.

 

The first test focuses on revenue realism. Critics point to earlier reports, such as the Pre-Election Economic and Fiscal Theory Report, which highlighted data gaps and timing effects that could skew perceptions of available cash. Without a clear breakdown of where the $1.3bn will originate, he said, the leap remains a significant point of scepticism.

 

The second test concerns spending “ratchets“. While the government has explicitly costed social programmes, there is a risk that the “quiet baseline growth“ of operational costs — such as goods, services and transfers — could become permanent.

 

“The biggest risk is that estimates embed a step-up in recurrent spending that could become politically irreversible,“ the economist warned. “Unless the revenue jump that we“re being told will take place is truly structural and not one-off, this becomes a major risk.“

 

The final test involves the governance of new institutions, specifically the Child Wealth Fund, the Resilience and Regeneration Fund, and the Blue-Green Bank. While the policy design has been praised for its alignment with social protection goals, the execution remains under the microscope.

 

“The devil is always in the details,“ Professor Lorde added. “We are good at promises, maybe even policy design, but the details are: how is it going to be executed? Where are the funds going to be held? How can people access these funds?“

 

Impact on Barbadians

 

For the average citizen, the benefits of these projections are a mix of immediate relief and long-term promises. The estimates confirm the introduction of a $78.4m targeted cash credit, which includes a $100 monthly cost-of-living credit for 12 months aimed at pensioners, welfare recipients and those with special needs.

 

The Child Wealth Fund, described as a “verified dividend“ for Barbadians born after November 30 2021, represents a long-term structural investment. But, for those looking for a reprieve from the daily pressures of inflation, the outlook is more conservative.

 

“Apart from those support measures, you’re not going to feel any real cost-of-living relief anytime soon,“ Professor Lorde cautioned. While the “BERT 3” framework aims to improve productivity and attract private sector investment, these dividends, he said, are expected to materialise only in the distant future.

 

Professor Lorde stressed that as the government moves from the campaign platform to the implementation of the estimates, the focus now shifts to whether these ambitious projections can withstand the rigours of economic reality and provide the promised stability for the island’s future.