A local economist is predicting that Barbadians could face an even greater tax burden as a result of the rejection by the Fair Trading Commission (FTC) of the bid by the Sol Group to purchase the Barbados National Terminal Co Limited (BNTCL), owned by the Barbados National Oil Co Limited.
Jeremy Stephen yesterday argued that because Government was relying on the US$100 million sale to shore up the country’s dwindling foreign reserves, the FTC’s decision meant the Freundel Stuart administration would likely be forced to find the revenue from alternative sources.
“I wouldn’t be surprised if there is another emergency measure or tax measure that comes out of the woodwork because of this. I wouldn’t be surprised, but I hope I am wrong. But given the situation something has to be done and it’s a case of whether it would come in the form of expenditure cuts, slowing down expenditure in order to conserve cash or if it would come in the form of revenue in the form of a new tax. “Normally we don’t have it happen where a tax is introduced outside of a Budget but the Minister of Finance [Chris Sinckler] could make such an intervention in Parliament,” Stephen told Barbados TODAY in an interview, adding that there was “a lot of uncertainty surrounding this even now that it has happened”.
In addition, Stephen explained that the situation was compounded by Britain’s impending separation from the European Union, saying it did not augur well for the country’s hopes of stabilizing the foreign reserves through a bumper winter tourist season.
“The fact that we don’t know how long before Sol would have the means to return to the FTC with a new proposal [and] . . . given the uncertainty as pointed out by the IMF [International Monetary Fund] as it relates to the impact of Brexit on our tourism product in 18 months time, as it stands now we should really brace ourselves for any lapse of the pound, and therefore the average tourism spend could very well fall this winter,” he said.
The economist also contended that along with concerns over the foreign reserves, which have fallen well below the recommended benchmark of 13 weeks of import cover, Barbadians must now brace themselves for the possibility of even more economic downgrades.
“I have already factored in a downgrade already for this year. Standard & Poor’s have been keeping the outlook negative so there is a real likelihood that there could be another downgrade later this year as this issue with the FTC stretches towards December, as well as the expected slowdown of the economy. The IMF has to revisit our economy in October so their current outlook is only worth its salt for the next three month,” Stephen contended.
The IMF has already warned that growth in 2017 is projected to slow to less than one per cent, reflecting the fiscal consolidation efforts introduced in the Budget presented by Sinckler on May 30.
The minister had said in his presentation that the administration was still banking on the BNTCL deal to go through as it seeks to erase a $537.6 million fiscal shortfall before the next general election.
However, he had also announced the proposed sale of the Hilton Barbados Resort, also for US$100 million.