For several weeks now, Barbadians have been waiting, in anticipation and perhaps trepidation, for the 2013 Financial Statement and Budgetary Proposals, delivered today by Honourable Christopher Sinckler, Minister of Finance.
While budgets have always stimulated some anxiety, interest in this year’s presentation has been heightened by the recent disclosures that a major fiscal adjustment of 4.4% of Gross Domestic Product (GDP), approximating to $400 million, will be required to address the country’s serious economic challenges. Further, there have been differing schools of thought as to how this adjustment should be effected — whether sharp and swift, or slow and gradual.
The Minister of Finance, in presenting the 2013 Budgetary Proposals acknowledged that the country’s macroeconomic programme is dangerously off track. The numbers paint a stark picture.
To put the decline in perspective, debt as a percentage of GDP has doubled since 2006 and now exceeds 98%. On the current trajectory the fiscal deficit as a percentage of GDP, if left alone, would likely end the current fiscal year between 8% and 9%, up from 2.7% in 2006.
Interest payments on government debt have increased over the same period from 14.8% of revenue to 36.8% for the latest quarter ended June 30. Foreign exchange cover has fallen to 16 weeks and, without intervention, is projected to fall further to around the international minimum standard of 12.5 weeks.
Reflecting on the loss of over $300 million in reserves in just over three months, the Minister noted that it would be reasonable to deduce that much of this could be attributed to a decline in the level of overall confidence in our economy by foreign and domestic investors alike.
In March 2013, Parliament approved the Estimates of Revenue and Expenditure for 2013-2014, which set out revenue projections of $2.63 billion. These estimates also set budgeted expenditure at $3.87 billion, giving rise to a projected deficit of $1.24 billion, or 5.6% of GDP.
Budgetary Proposals in summary
This year’s Budget was divided into two sections: (i) Barbados Growth and Development Strategy; and (ii) Fiscal Adjustment Measures.
Barbados Growth and Development Strategy
The aim of the Barbados Growth and Development Strategy is to create sustainable economic growth and development though enhanced productivity, efficiency, competitiveness and service excellence. This strategy replaces the
Medium Term Fiscal Strategy
The government has targeted the productive sectors of the economy such as tourism, international business.
The proposed strategies include expenditures as follows: increased investment in the Barbados Tourism Authority to boost tourist arrivals; additional funding for Invest Barbados to promote international business; major infrastructure projects including roads, schools, and Barbados Water Authority mains replacement;
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