Hardship from increased taxation and user fees, no growth and very little in terms of capital works.
This, according to the Opposition People’s Party for Democracy and Development (PdP), is the bleak fiscal picture for Barbados painted in the 2021/20 Estimates.
Speaking at a press conference this morning at the Worthing Corporate Centre where Parliament is sitting temporarily, Opposition spokesperson on the economy, Senator Crystal Drakes, contended that with 68 per cent of Government expenditure going towards operational costs and another 26 per cent going towards debt servicing, the Mia Mottley-led administration only has six per cent, or $200 million, with which to execute capital works projects.
She further argued that with this lack of stimulus, the country was in need of major private investment if it is to recognize any growth this fiscal year.
Senator Drakes further contended that with the shortfall created by the decision to cut corporate tax to between one and five per cent across the board, Government was seeking to close the gap by increasing user fees and taxes. For example, she noted that the Estimates accounted for an $18 million increase in land tax, while Value Added Tax (VAT) was poised for a major increase of $23 million.
“When we look at expenditure, what Government spends in keeping people employed and keeping the lights on, it’s actually 68 per cent of total expenditure, which is just about $2.2 billion and the total expenditure is $3.3 billion. The debt obligation, now that we are going to start back to pay some of our debt services, is actually 26 per cent of total expenditure. We are going to spend $800 million in debt service, with half a billion dollars going to amortization and $360 million in interest payments. This means that we are only left with six per cent of expenditure to go towards the capital works programmes,” Drakes explained.
“This is the key point here. Government only has about $200 million to spend on things like roads and infrastructural projects. This is important because if Government does not have the fiscal space to get money into the economy, then we are going to find ourselves in a situation where, if the private sector does not inject those funds, we can actually see a greater negative effect on the economy…. Essentially, Government does not have the ability to provide a stimulus if things become worse and private investment does not come on board as needed.”
In addition, the Opposition spokesperson argued that despite Government’s debt restructuring efforts, the country’s overall debt burden, which prior to 2019 stood at 160 per cent of GDP, has not decreased enough to justify the hardship Barbadians were facing.
A“Government saw it fit to go to the IMF and commit to an Extended Fund Facility programme. When you look at the Estimates for this year, our total obligations for 2019 were about $13 billion. For 2020 and 2021, our obligations stand at $12.3 billion, which is only a decrease of $700 million. So, one of the things that Government will have to find a way to do, is to make sure that the public feels as though the sacrifices that are being made are worth it. Restructuring the debt only gave us a longer repayment time, but we still have to repay it,” Drakes argued. [email protected]