If Barbadians thought they had seen the back of Government’s Fiscal Consolidation Programme, they had better think again.
This strong word of caution this evening from Minister of Finance Chris Sinckler as he prepares to make his much anticipated Budget presentation in a matter of weeks.
Without revealing his full hand, Sinckler today declared in an interview with Barbados TODAY that what he had originally announced back in 2013 as a 19-month adjustment programme, involving more than 3,000 public sector lay offs along with some much-dreaded tax hikes, was “not over by a long shot”.
In fact, he served notice that more adjustments would have to be made, even though he ruled out the likelihood of Government embarking on another major public sector retrenchment exercise at this time.
At the same time, the Minister of Finance warned that it simply could not be business as usual, particularly at state-run statutory corporations. However, he assured that the current focus would not be on retrenchment as Government seeks to reduce “chunk by chunk” annual transfers in the amount of $200 million to these mostly loss-making entities. While stressing the need for greater efficiency at these state-run entities, he revealed that his ministry currently had before it proposals for an overhaul of the operations of the loss-making Transport Board, which he said neither called for any increase in bus fares nor full privatization of the state entity.
However, he did stress the need for greater public/private sector synergies and more focus on efficiency.
At the same time, Sinckler is not ruling out the possibility of increased taxes, while stating that his primary concern was to ensure that the country did not slip back into an unmanageable deficit position.
“We are working with it ever cautiously. . . . It doesn’t mean that you are going to go and have a whole set of taxes increased. It may mean that we will look at what we already have and we will see if there are any areas where we can give reductions. If there are, we will do so. If we can sustain without bringing back any of those taxes that we have allowed to lapse, we will do so, but if necessary where possible, we will make adjustments accordingly to ensure that we maintain that balance,” he said.
In light of the latest economic report released yesterday by Central Bank Governor Dr Delisle Worrell, Sinckler acknowledged today that the current level of growth in the order of 1.3 per cent was simply “not good enough”.
He also blamed the slight decline in Government’s revenue during the first six months of this year on the removal of the Consolidation Tax, which formed part of the initial fiscal consolidation programme, but only came to an end on March 31 this year.
However, he said the current economic situation was neither worrying nor depressing since Value Added Tax information for the period was still coming in and information to do with major tourism projects such as Wyndam, Sandals and Hyatt still needed to be factored into the mix.
In view of concerns expressed by the private sector, Sinckler also assured that planned adjustments to foreign exchange outflows would not limit their ability to carry out foreign currency transactions. In fact, he said those adjustments were more for Government than individuals and private entities.
Asked to explain the continued heavy reliance by Government on financing from the Central Bank and the National Insurance Scheme, which was also reflected in the Central Bank’s reporting, the Minister of Finance said it was due to the fact that the country’s deficit was still high.
“That is why we have to continue to do our fiscal consolidation, because until you complete that job and close that circle and Government continues to run a deficit at an annualized level of five per cent, you are going to be in the market, and the only way you are going to come out of the market is to ensure that your expenditure and your revenue bear closer relation to each other than what is currently the case.”
Pressed on the matter, Sinckler said the austerity programme was not over “not by a long shot”. In fact, he stressed that “it can’t be over, not when the deficit is still at a level of five per cent”.
He added that the aim was to close the fiscal gap by 2018/2019 “down to around 2.5 and certainly no more than three per cent”.
“So we still have another two-and-a-half percentage points to knock off that deficit,” he told Barbados TODAY.