If not seriously addressed, transfers from Central Government to statutory bodies have the potential to pull this entire economy down.
Minister of Finance and Economic Affairs Chris Sinckler, made this dire prediction today in the House of Assembly while leading off debate on the 2014-2015 Estimates Of Revenue And Expenditure.
Citing statistics to bear out his argument, Sinckler said: “In 2005-2006, subsidies and transfers were $782.1 million and $821million in 2006-7, $977.8 million in 2007-8, $1.137 billion and over another $1 billion in 2008-09 and 2010. This shows that . . . expenditure has been growing, whilst the revenue has been shrinking. These things began from around 2005 to show up structural problems in the government finances. It is popular for the other sides and others to give the impression that it was due to Government’s fiscal indiscipline and all of these things to give the impression that this entire story can be told from the beginning of Januray 2008. That does not square with the facts. If we are to correct these issues, we have to be honest and fair up front, recognise that Government is a continuum. History did not begin in 2008, but a build-up of challenges over many years.
“A study was done by a Governor of the Central Bank and it spoke about the need for Government reform. He made the point that Government was too big and that 36 cents of every dollar was going to pay wages and salaries and that you had to do something because if you did not address the issue along with other issues Barbados has within the economy, structurally it will come back to haunt us.
“The main point that I am saying is that he recognised then, as did many other people, that we had some fundamental structural issues to address. But at that time we were basking in the glory of the great expansion, money was flowing, drinks were being bought, all was well and we believed that we could postpone dealing with these fundamental issues,” Sinckler added.
The St Michael North-West MP argued that no one expected the scale of the financial crisis which arose from the financial crisis which gripped the world in 2008.
“We know that business cycles go up and business cycles come down and that it was inevitable that we would have a global recession, because that is part of the nature of business cycle.
“However, nobody expected the financial crisis would have been so devastating to econopmies across the world and particularly to our major trading partners. We did not expect it. We never expected that it would have lasted this long and drag on. The Governor of the Central Bank was saying that we should have been repositing ourselves. That is the real issue,” Sinckler said.
He recalled that his first budget highlighted the very serious expenditure explosion in Government even though some people did not appreciate his exposure.