Minister of Finance Chris Sinckler is insisting there will be no “gravy train” ahead of a general election due by the middle of next year.
In response to the latest downgrade of Barbados’ sovereign credit rating by international ratings agency Standard & Poor’s (S&P), Sinckler today said the Freundel Stuart administration was not unduly concerned.
In explaining its reasons for the downgrade from ‘CCC+’ to ‘CCC’, as well as negative outlook, S&P predicted that certain political considerations would have to be made with the election around the corner.
It was a suggestion that Government would be reluctant to take the necessary action to address its high debt and the fiscal deficit.
However, speaking on the periphery of the launch of the St Michael Battle of the West Primary Schools Quiz Competition at St Leonard’s Boys’ School in Richmond Gap, Sinckler suggested that the last Budget spoke for itself as far as electioneering was concerned, while he insisted that the taxes announced in the May 30 Financial Statement and Budgetary Proposals would remain in place.
“Some people expected this year that I would come with an election budget because election was within a year’s time at that time . . . we would have a lot of giveaways . . . the gravy train would have been in full flow. [But] I came with a budget that many people criticized, a budget which is seeking to cut the deficit to as close to a balanced budget as possible in terms of its current fiscal programme.
“We have had marches . . .we have had all types of abusive statements being issued . . . but nobody can say we did not put forward measures to address the situation,” he said.
In announcing $542 million worth of austerity measures in the Budget, Sinckler had said Government would overcome a high deficit of $537.6 million, achieving a small surplus of $4.4 million.
The tax measures included the steep rise in the National Social Responsibility Levy, the introduction of a two per cent tax on all foreign exchange transactions and increases in the duties on fuel.
Sinckler today said the success of those measures would depend on the people who are implementing them, as well as the Barbadian public.
“How we respond to it will be determined by those actions. So far we have seen some progress and we feel reasonably comfortable; there are one of two areas that are [of] concern to us, but generally we believe that we are moving in the right direction where that is concerned.”
With Government’s deficit estimated at six per cent, and overall debt at about 140 per cent of gross domestic product (GDP) – one of the highest in Latin America and the Caribbean – the S&P last week urged the Stuart administration to address its policy challenges, which it said included the high debt and deficit, as well as “debt servicing requirements; limited appetite for private-sector financing; and a low level of international reserves raising the risk to sustainability of the peg to the US dollar”.
In response, the minister said Government would not take any action to justify S&P’s major concerns, which he interpreted as the rollover risk associated with domestic debt, fears that Government may not implement its fiscal consolidation programme with general elections around the corner and the potential for a debt-restructuring exercise on existing domestic debt. Sinckler assured that the concerns expressed by the international rating agency were not insurmountable.
“The issue of the debt rollover . . . just under 50 per cent of the debt domestically of the Government of Barbados is held by the NIS [National Insurance Scheme] and by the Central Bank of Barbados. The rest is held by other commercial institutions. The question is, since we know the NIS and the Central Bank will rollover their debt because they are Government institutions, so it’s Government lending to itself . . . are the other financial institutions prepared to rollover their debt? My quiet and fervent belief is that they will. So I don’t think that is much of an issue,” he contended, while rejecting any suggestion that Barbados was undertaking a debt restructuring programme.
“As we have said, and we said to S&P very clearly, Barbados is not doing a debt restructuring. And that’s not what we are doing and we don’t contemplate doing it . . . certainly not in the traditional way people understand it to be,” he noted.
Sinckler said credit ratings were not management tools or exercises for Government in terms of fiscal programmes, insisting that Government preferred to look to institutions such as the Caribbean Development Bank, the International Monetary Fund and the Inter-American Development Bank when it planned to undertake programmes.
“Rating agencies don’t determine economic policy. They may comment on it, they may have an opinion on it, they may issue that opinion based on what they perceive to be the threats or potential threats to people who have lent money or are about to lend money. That is their role and we respect that role,” the minister stressed.
It was just last Friday while delivering the Democratic Labour Party’s luncheon lecture that Acting Prime Minister and Minister of Tourism Richard Sealy said the latest downgrade should not be ignored, although he was quick to point out he did not expect it to have a negative impact on tourism.
Sealy also told party supporters that “within the fullness of time we will start to see the rating agencies looking at us differently” because tourism could continue to meet or even surpass its targets.
Though dissatisfied with the performance of the economy as a whole, S&P said last Wednesday it expected Barbados’ tourism product to continue to perform well this year, after contributing to economic growth and a reduction of the deficit last year.