The island’s main private sector organization is calling on the Central Bank of Barbados to come clean on the island’s fiscal deficit.
While agreeing with most of the recent comments made by Acting Governor Cleviston Haynes on the performance of the economy over the past nine months, and the measures needed to correct the economic challenges, President of the Barbados Private Sector Association (BPSA) Charles Herbert said the report fell short of saying exactly how far the economy was in the red.
In delivering his third quarter report this week, the Governor said “the fiscal deficit was estimated to be $279 million for the first six months of the fiscal year, a $115 million improvement over the same period in 2016”.
However, Herbert said “the report does not allow the reader to accurately deduce the progress in the reduction of the fiscal deficit”, which up to June this year was estimated at close to six per cent of gross domestic product.
“It is asked that the Central Bank issues a clear statement showing the actual progress made with the reduction in the deficit and the details on the efficacy of the measures outlined [by Minister of Finance Chris Sinckler] in the May 30 Budget proposals,” said Herbert.
As for the $542 million austerity package announced by Sinckler back in May, Herbert expressed concern that the measures, which included a 400 per cent hike in the controversial National Social Responsibility Levy (NSRL), a two per cent tax on foreign exchange transactions and an increase in the tax on fuels, had so far collectively failed to achieve their intended targets.
“The economic performance at the end of September when compared to the end of June 2017 would indicate that six major fiscal measures introduced in the last budgetary financial statement collectively have not achieved their stated objectives,” the BPSA head said, adding that there is no indication that the private sector, which had joined with the island’s trade unions back in July in protesting against the NSRL, has been proved wrong in terms of its initial reaction.
“In response to the Budget the private sector said while the NSRL would bring in revenue to the Government, the results would be short-term pain, without long-term gain, as there is yet to be anything but a series of one-off unsustainable measures, which have not addressed the needed improvements in the underlying inefficiency of the public sector,” Herbert said, adding that “the Central Bank report supports this view”.
Government is currently boasting of $98.6 million in direct earnings from the recent tax measures, including $48.8 million from the NSRL alone.
However, based on the latest Central Bank report, the country’s foreign reserves plunged further below the comfortable 12 weeks benchmark to reach just 8.6 weeks of import cover or $549.7 million at the end of September.
Though not surprised by this less than favourable performance, Herbert said it only served to “justify the concerns highlighted by the private sector and other interested parties”.
He pointed out that the economy grew by 1.4 per cent for the first nine months of this year, down from the 2.2 per cent witnessed in the first six months.
“The private sector regards this decline as confirmation of its view that the fiscal measures introduced in July would cause a slowdown in economic activity and affect growth,” the BPSA spokesman said.
Herbert also said that the low reserves underscored “the private sector’s view of the need for Government to accelerate its plans to arrest the declining credit rating by improving fiscal discipline in order to allow for international debt refinancing at lower rates for its external debt payments and to improve credit rating in the medium-term”.
But while renewing his call for the Freundel Stuart administration to urgently reduce its spending, he said the BPSA was not suggesting any layoffs of public sector workers since this would only put further strain on the already struggling National Insurance Scheme.
“The private sector’s consistent call is for Government to reduce expenditure as such, not merely to stabilize expenditure,” he said.