“Timing is critical: a deficit reduction plan generally should be phased in, but a fiscal policy that is counter-cyclical is most important.” – excerpt from Restoring Fiscal Sustainability: Lessons For the Public Sector OECD 2010.
Timing is critical in everything we do, for example, the longer we wait to go to a doctor for symptoms we have, the worse they can get and instead of the doctor having to prescribe one daily dose of 50mg, he may have to suggest two doses daily of 100mg.
Fiscal balance is paramount in bolstering investor confidence and solidifying a foundation for future economic viability and sustainability. The budget presentation on June 11th, 2018 put country first as we take aggressive action to address our fiscal deficit and implement a fiscal policy aimed at stabilizing the economy as we seek fiscal balance.
On May 26th we were made aware of the IMF’s Article IV 2017 report which was dated January 2018, and a couple days later we were made aware of the significant amount of outstanding debt to creditors which would mean our position was worse than when the IMF review was completed. Considering the time lag between review, report date, and release date, the surgeon issued a “Code Red” alert.
Many of the recommendations in the Article IV report from the IMF have been addressed and should hopefully lead to favourable negotiations with the IMF and subsequently to an improved outlook for our economy and improved credit ratings as we seek to make a Barbados which works for all and not just some.
Mission critical issues of the new Government were all addressed in this budget and included rebuilding our foreign reserves and dealing with the debt. The measures revealed shows we have a leader who is not afraid to act and also embraces engage in effective communication with all parties to ensure there was buy-in to benefit all Barbadians.
The Social Partnership was engaged in communications with one common goal of saving Barbados and the Barbados dollar. Engagement of all players in the economy where open and honest discussions are held and all information available is considered leads to reasonable requests and timely decisions being made.
Alternative measures could have opted to put people on the front line and could have included increased bus fares to $5, increased VAT to 20 per cent, Public sector pension reform through increasing the retirement age, reduced social insurance benefits, the laying off public sector workers and foregoing the reinstatement of tuition fees, all on an already burdened tax base.
Instead, a bold move to broaden the tax base which was long overdue was taken. The measures on tourism are not new and exist in multiple countries. We have seen increases in passenger arrivals yet decreases in tourism earnings. To yield additional benefits from tourism, we need to continue to diversify our product, pursue more overseas students, attract low fare carriers and use more local inputs to provide an authentic Barbadian experience.
A balanced budget where the burden is shared across all players was achieved and is a step in the right direction towards a fair and equitable tax system. This budget should also lead to a changing mindset, for example, a move towards fuel efficiency by using electronic/hybrid vehicles as we move towards a Green Economy and the installation of water tanks to reduce our water bill. These measures are aimed at achieving the best Barbados as we seek to transform our socio-economic landscape and embrace a new and sustainable Barbados.
Therefore, while one can criticize the measures taken, the fact is there are limited alternatives further compounded by the timing element. All choices are difficult but must be made in the best interest of Barbados as we seek to achieve the best Barbados for all Barbadians.
(Kemar Sobers, FCCA BSc.)