Get rid of the dreaded National Social Responsibility Levy (NSRL)!
This is the latest piece of free advice being given to the Freundel Stuart administration by former Governor Dr DeLisle Worrell.
In his latest monthly newsletter issued today, Worrell warned that the tax and other “emergency” measures announced by Minister of Finance Chris Sinckler in his May 30, 2017 Budget were actually “strangling” the life out of local businesses, and had stunted this island’s overall growth, while contributing to the free fall of its foreign reserves.
“The accelerating loss of foreign reserves in 2017 is evidence of the failure of Government’s adjustment policies. Reserves, which fell [by] $246 million in 2016, declined by $274 million in 2017,” said Worrell, adding that “since December 2012 the Central Bank has lost over $1 billion of foreign exchange”.
As part of a $542 million austerity package that was meant to close the island’s fiscal deficit, Sinckler had increased the NSRL from two to ten per cent on all locally produced items for local consumption, as well as the import value on imported products.
This was coupled with the introduction of a two per cent levy on all foreign exchange transactions, as well as an increase in the tax of fuel.
However, Worrell pointed out that while the NSRL was expected yield $218 million in tax receipts, between April and December last year, it actually realized $97 million in revenue.
“The NSRL has had an adverse effect on economic growth. In the absence of the tax, the Barbados economy might have achieved another 0.5 per cent on top of the one per cent growth rate actually attained. That represents a loss of about $50 million of national income,” the economist said.
The former Governor, who was fired in February 2017 amid public disagreement with Sinckler over economic policy, acknowledged, however, that the dip in foreign reserves was also as a result of Government’s foreign debt obligation, which he said required payment of about $137 million.
“Foreign lenders were unwilling to roll over this debt because of Government’s poor credit rating,” Worrell said while pointing out that although Government had forecasted a reduction of $82 million in expenditure during the May 2017 Budget presentation, its spending had actually increased by $57 million between April and December.
“The Central Bank’s foreign reserves continue to be in free fall, with the failure of Government’s corrective strategy. The current costs of Government operations exceeded revenues by $288 million between April and December last year, and Central Bank’s lending to the public sector increased by $372 million during the year. Unless this gap is closed foreign reserves will be exhausted, and Government will lose control of the exchange rate,” he warned, adding that “the Barbados Sustainable Recovery Plan 2018 does not address this issue”.
However, the former Governor assured that “all is not yet lost”.
He called for the removal of “the emergency taxes” as the first order of business, which he said was currently “strangling private business”.
Worrell also reiterated his call of the public sector to be reduced by at least 4,500 workers in order to cut Government spending and drive down the deficit, which fell slightly by $197 million or to just over four per cent during the first nine months of the current financial year.
The economist insisted that his plan, which also included an International Monetary Fund programme backed by financial support, be activated in order to help save the ailing economy and maintain the BDS$2 to US$1 peg.
“Barbadians must insist that our Government preserve our country’s reputation for taking tough short-term measures in the interest of future prosperity,” Worrell said.