Stopping just short of calling the 2016/2017 Estimates of Revenue and Expenditure an election budget, the grouping of Barbadian economists has said the “aggressive” proposals tabled by Minister of Finance Chris Sinckler this week were meant to promote short-term economic growth.
However, the Barbados Economics Society (BES) warned that not everyone would reap the benefits of the financial plan.
“I would say rather aggressive, I would say geared towards top line growth, meaning you are just looking at GDP [gross domestic product], but it’s not Estimates that would benefit everybody,” BES President Jeremy Stephen told Barbados TODAY when asked to critique Government’s financial package.
Stephen said the proposals seemed designed to drive capital expenditure, noting that the ministries which would benefit from the new allocations were those that engaged in infrastructural projects.
“So it is one that seemingly is geared towards an improvement in the economy; growing GDP in the short-term. I have seen some people refer to it as an election budget and typically, election budgets tend to do so. But at the end of the day, speaking to the economics of it alone, it is one driven towards capital expenditure,” added the lecturer in economics at the University of the West Indies, Cave Hill Campus.
Stephen warned however, that social services would suffer as a result. He contended that even though some jobs may be generated, those that were at risk would gain little from the social services allocation.
“What people need to be very mindful of when it comes to the Estimates, that they are [just] estimations. So you can always have some additional funds being allocated to a ministry later on after the budget has been set,” he explained.
“So I wouldn’t go hard and fast in saying that this is what Government plans to spend during the year; but as needs arise and as financing needs arise, it might very well change, and you might find a better balance across all sectors,” the prominent economist added.
He suggested that this was the sort of budget that most economists would have recommended some years ago before that start of “this debt trap or this deeper debt trap” that the country was experiencing.
Stephen believed that while Government could finance most of the capital projects that it wanted to pursue, it still needed some foreign funding. However, he noted that access to external financing remained a challenge because of questions about the continued strength of the Barbados currency.
Asked if the Estimates responded to the tough economic situation facing Barbadians, the BES president replied that persons working closely with construction would realize some gains, but that based on “this new direction the Government was taking us,” it would take some time for the rewards to trickle down to the wider society.
“But having cut social services, I expect . . . the spread effects to take much longer for most Barbadians to feel and enjoy,” Stephen added.
On the vexing issue of salary increases for public workers, the UWI economist opined that Government would be challenged to meet the wage demands of trade unions because the administration would have to rely on treasury bills to fund the pay rises.
“ . . . and if you remember what was said about treasury bills some years ago, that, having produced more of them and having the Central Bank finance more of them, was leading to paper printing,” Stephen pointed out.
“In terms of Government salaries, they are going to probably bring more [treasury] bills to the market in order to finance the increase in wages they are planning to take on for this new fiscal year,” the Barbados Economics Society head said. (EJ)