The COVID-19 pandemic, which led to a three-month shutdown of services in Barbados, has had an impact on Government’s projections for its 2020-2021 financial year.
Minister in the Ministry of Finance and Economic Affairs Ryan Straughn told the House of Assembly on Tuesday that the adverse effects included “significant declines in most of our major revenue items and increases in expenditure, as Government responded to develop a comprehensive pandemic response plan to manage the public health threat, social protection to ensure no family or household fell through the cracks, and to generate enough domestic economic activity to ensure people remained employed and businesses remained solvent to make it through the next 24 months”.
Delivering the mid-year Economic Review and Report for Barbados, covering the period April 1, 2020 to September 30, 2020, Straughn outlined some of the adjustments Government had to make to the budgeted expenditures which were laid out in the Appropriations Bill in March, just a few days before the island went into lockdown mode after reports of the first COVID-19 cases here.
The adjustments were made during a special sitting of the House of Assembly on April 1.
“For the first time ever, we met on the first day of a new financial year to make supplementary provisions, as what we had done a few days before on March 20 was no longer relevant to meet the needs of the people,” Straughn said.
At that session, approval was given to increase welfare grants by 40 per cent as well as $10 million for the Adopt-a-Family programme, which aimed to offer financial relief to 1 500 of the most vulnerable households in Barbados, to help them cover food, shelter and payments of living expenses. The families were given a pre-approved, pre-checked ATM card with $600 per month.
“During the review period, 3 448 families were assisted, and there were also 603 private donations from individuals, groups and companies totalling $3 819 866.74,” the Minister told the House of Assembly.
He noted that the Ministry of Finance had provided assistance to the Ministry of Health and Wellness since the unemployment situation led to a $4.7 million decrease in revenue from the Health Services Levy and more resources were needed to manage the COVID-19 situation.
In terms of how the economy performed overall, Straughn said: “In terms of revenue, we stood at $1,252 billion at mid-year. This was a decrease of $46.9 million, or 3.6 per cent when compared to the budgeted amount of $1,298.8 billion. and $202.4 million or 14 per cent less than the revenue for the previous year of $1,454.4 billion.”
“The reduction in economic activity due to the COVID-19 pandemic was the main reason for this large decline. Tax revenue, direct and indirect, was $1,200.5 billion for the period, a decrease of $169.9 million or 12.4 per cent compared to the previous year, and $34.5 million, or 2.8 per cent when compared to the budget. Direct taxes revenue was $643.8 million, or 53.6 per cent of tax revenue. Although less than the budgeted amount of $663.1 million, direct tax revenue was $60.8 million more than in the previous year (2019), which was $583 million, due to improved performance of corporation tax on a net basis. Income tax net and property taxes performed worse than projected and were $32.9 million and $13.2 million less than budgeted respectively,” he added.
The Minister expressed concern about the performance of state-owned enterprises over the six-month period.
“The state-owned enterprises performed poorly when compared to 2019, as many of the reforms introduced, such as the Airline Travel and Development Fee, have suffered owing to COVID. And while there has been a significant decrease in state-owned enterprises’ arrears, they are still a concern and will continue to be closely monitored,” he said.
Turning his attention to the expenditures, Straughn said: “Our debt outstanding is $12,481.3 billion, or 131 per cent of Gross Domestic Product (GDP). This comprises an external debt of $3,005.1 billion, domestic debt of $8,944.3 billion, external guaranteed debt of $54.9 million and central government arrears of $80.5 million. At September 30, the outstanding debt was under the IMF ceiling of public debt of $13.308 billion by approximately $826.7 million. Government also received budget support of $181 million from the International Monetary Fund.”
Straughn also outlined how the Barbados Optional Savings Scheme (BOSS) had performed for the first six months of the current financial year.
The BOSS bonds started in July 2020 to provide public workers with a mechanism for savings, while providing Government with funding for capital works projects. $14 million in bonds were issued, with $3.8 million held by public servants and the remainder sold on the secondary market. Of that amount, $2.9 million were held by pensioners, $2.5 million by pension schemes, $2.4 million by individuals and the rest by other institutional investors.
In addition, Series F bonds totalling $8.4 million were issued for the settlement of tax arrears and legal fees that pre-dated September 2018. Approximately $502,300 in bonds were liquidated for bondholders, predominantly those facing serious health challenges.
“Finally, as agreed during the last debt restructuring exercise, the $2.5 million overdraft previously held by the Caribbean Broadcasting Corporation was converted to a term loan to be serviced by the Government,” Straughn added.
On the issue of how Government is servicing its debts, the junior minister said that as of September 30, actual expenditure on debt service was $373.7 million compared to the approved amount of $444.3 million for the period – a difference of $75.6 million.
“Approximately $32.3 million of this was attributed to the redemption of matured savings bonds not yet presented for settlement, $14. 6 million due in respect of sinking fund contributions, and (external) slow projected disbursements and lower interest rates during the period than projected. Government’s total arrears of $81 million is substantially less than in 2019, when they were $180 million. These arrears at September 30 were substantially below the target of $145 million,” he disclosed.
Straughn said the Government was aiming to achieve a primary balance of -$42.1 million, or 0.5 per cent of GDP, at March 31, 2021.