The Institute of Chartered Accountants of Barbados (ICAB) says the country’s fiscal deficit, which stands at 6.9 per cent of Gross Domestic Product, is in need of urgent attention.
In a statement today, it also raised concern about the lack of progress in Government’s previously announced reform of state-owned enterprises, while expressing support for privatization.
“We note from the [latest Central Bank] report that if the planned divestment of the Barbados National Terminal Company Limited is concluded the financial inflow will bring the fiscal deficit in 2015/2016 down to the targeted four per cent of GDP.
“ICAB repeats its call for further divestment of functions and enterprises which do not necessarily have to be performed by or owned by Government. By way of example it is interesting to note that the divestment of the roadside maintenance of the ABC Highway has resulted in savings to Government as well as an improvement in the general appearance of the roadside,” the umbrella body for accountants said.
Following last week’s report by Central Bank Governor Dr DeLisle Worrell, ICAB said it was disappointed with the low growth rate of 0.5 per cent for 2015, given the strong performance of tourism and the benefits of falling international oil prices.
In a statement today it pointed to several factors affecting growth, including the ongoing fiscal and debt challenges, weak performance of several sectors and declining productivity levels.
ICAB’s Executive Director Reginald Farley said while tourism was expected to lead future growth, Government should be careful not to be too dependent on one sector.
“The return of the tourism sector to its 2007 performance levels, the opening of new international hotel brands, such as Sandals, and policy initiatives, such as the new Tourism Product Authority to improve the quality of our tourism product are encouraging signs.
“While it is expected future growth will be led by tourism, there is a risk in excessive dependence on one sector and therefore more needs to be done to boost other sectors, especially those which earn foreign exchange,” Farley said.
He also pointed to low productivity levels, which he called on Government and the private sector to address urgently.
“The gap [between the unit cost of labour and output per worker] has steadily widened over the last 20 years and can only have a negative impact on Barbados’ competitiveness.
“The decline in national productivity even though expressed in terms of output per worker is not limited to workers. It points to failures in management in some public and private enterprises, insufficient use of modern technology, and a pervasive inefficiency across several aspects of our society.
“ICAB recommends that in addition to the obvious improvements at the workplace, we must also address the loss of a substantial number of hours of production through inefficient road transportation, time loss standing in long lines to do simple transactions that should be done through e-commerce, and the general unpunctuality in the society,” Farley said.
ICAB also wants Government to implement policies and projects to promote renewable energy in order to reduce the island’s vulnerability to fluctuating oil prices.
“Another risk relates to fluctuation in oil prices. The fall of 42 per cent in the price paid for imported petroleum products resulted in significant savings of foreign exchange and a reduction in the cost of living. Conversely, any rise in the price of oil will have negative effects for Barbados,” Farley stated.
He believes there is a need to improve the country’s ranking in the ease of doing business index, given that Barbados’ international business sector has lost some of its competitiveness due to changes to the tax laws and regulations in North America and Europe.