Ahead of Tuesday’s highly-anticipated Budget presentation by Minister of Finance Chris Sinckler, the business community Monday issued a timely reminder to the Freundel Stuart administration that now was not the time for any electioneering, even with a national poll due here by next year.
Instead, President of the Barbados Chamber of Commerce and Industry (BCCI) Eddy Abed has called on Sinckler to focus his May 30th presentation on economic problem solving, in light of what he says has been a slow and sluggish past two months for local businesses, compared to the same period last year.
“Therefore it is imperative that Government seizes this opportunity to layout their proposals to problem solve [rather] than electioneer at a time when decisive and responsible leadership is needed,” said Abed, while warning that “businesses generally do not like uncertainty and rightfully so, are wary of Government’s Budget due on May 30”.
In a published statement released Monday morning in this month’s BCCI newsletter, Abed also suggested that the weak business performance between April and May was a direct result of Barbadian consumers holding their breaths “in anticipation of the bitter medicine that is sure to be forthcoming” in Tuesday’s Budget.
He pointed out that the BCCI as part of the Social Partnership with Government and the trade unions, had endorsed the recommendations of the Fiscal Deficit and Foreign Exchange working groups, which were established by Prime Minister Freundel Stuart earlier this year, and said the BCCI was hopeful that “many of those recommendations” would be incorporated into the Budget.
“Anything less can only be interpreted as a failure to act demonstrably so as to resolve our economic dilemma,” Abed said.
Among the broad recommendations of the two working groups are measures aimed at tax and revenue administration reform, a reduction of Government bureaucracy, divestment and reform of state-owned entities and local currency debt refinancing.
With the country’s foreign reserves having plunged to $681.1 million, or 10.3 weeks of cover at the end of last year, the foreign exchange committee has recommended, among its list of proposals, a hike in cruise visitor head taxes and airport departure fees.
Another worrying issue for the Stuart administration is its fiscal deficit, which ended the last financial year at an estimated six per cent of GDP, higher than the projected 5.8 per cent. The fiscal deficit committee has therefore included in its deficit reduction proposals the sale the Barbados National Oil Co. Limited BNOCL) and the National Petroleum Corporation (NPC).
Abed said balancing the Budget required savings in the region of about $750 million, about $600 million of which could be reached by implementing the recommendations.
The business leader said the remaining $150 million “must come from a resurgent private sector brimming with confidence in growing the GDP [Gross Domestic Product] of this country and more importantly foreign exchange reserves”.
With the national debt, including that of the National Insurance Scheme and state-owned enterprises, approaching 160 per cent of GDP, Abed said the situation was even more worrisome given that the “woeful sovereign debt rating has made it impossible to refinance any of our external debt at reasonable interest rates”.
“In fact, Government will have to find $364 million this year and a further $343 million next year to service and repay debt, and without a boost in foreign exchange reserves, these amounts will deplete our reserves,” he added.
“The repayment picture only gets worse when one considers that $536 million and $610 million will be required in 2021 and 2022 respectively. Consequently we believe that job number one is to reverse our sovereign debt rating in the short to medium-term so as to permit access to refinancing the foreign debt at attractive rates by 2021, failing which Government will not be able to meet its debt obligations,” he warned.
The business leader also warned of negative social implications if the tough steps were further delayed, adding that the services provided by the “welfare safety net” were so abused that many citizens have become accustomed to relying on them.
“We must ensure that the most vulnerable citizens have access to state services, however, if definitive and courageous action is not taken now to systemically tackle this country’s ‘living above its means’ scenario, I fear that the negative social impact will be greater and far worse the longer we delay,” he warned.
Earlier this month Chairman of the Barbados Private Sector Association (BPSA) Charles Herbert had pleaded with Sinckler not to introduce any new taxes in the upcoming Budget, while admitting that the lingering fiscal challenges would warrant some “painful” austerity measures.
“The key thing we are hoping for is that the Government will use the current mechanisms it has in its armory, VAT and income tax, and not introduce a new tax or something that requires more administration,” Herbert had said.
“Why put in a new tax? You have existing mechanisms, but don’t put in any new administrative mechanisms because every time you put one in it is difficult,” he said.