Barbados Economic Recovery and Transformation (BERT) Plan Monitoring Committee Public Report #12 Since its last report, the BERT Monitoring Committee has continued to receive reports from the Government of Barbados (GOB) on its progress through September 2021 towards the targets agreed in the Memorandum of Economic and Financial Policies (“MEFP”) agreed with the IMF within the Extended Arrangement under the Extended Fund Facility for Barbados (“EFF”).
Below is a summary of the performance for the period ended September 30, 2021, which coincides with the 12th set of targets under the EFF.
1. Quantitative Performance Criteria under the EFF
The quantitative performance criteria required to be met compared with the actual results achieved are outlined below:
Floor on Central Government Primary Balance
The primary balance represents total revenues and grants less all expenditure but excluding interest.
Revenue collection exceeded the target under the BERT Plan and expenditure was also contained allowing the adjusted primary balance minimum target of -$262 million to be exceeded by a wide margin. a. Revenue Collection Total revenue for the fiscal half-year ended September 30, 2021 was $1,305 million representing an increase of $53 million on the total of $1,252 million collected in the same period in the prior year and exceeded estimates.
Tax revenue was $1,235 million versus $1,201 million in the prior year an increase of 2.8 per cent. The primary factors contributing to the increase in revenue versus the prior year related to: – $111 million growth on various indirect taxes including VAT, excise tax and import duties as there was some recovery in economic activity in 2021 compared the prior year when the pandemic lockdown was most severe.
– $69 million from income tax due to the higher level of lay-offs that occurred in 2020 due to the COVID pandemic combined with a delay the settlement of refunds in 2021 due to an extension of the filing deadline. Refunds paid by this stage in 2020 were $51 million versus nothing paid to date in 2021.
– An additional $20 million related to land tax due to earlier invoicing compared to the previous year combined with higher collections of arrears.
These increases were offset by a decline in the corporation tax revenue of $171 million which was largely anticipated as there was a significant increase of collections from specific foreign currency earning entities in 2020 that were known to be unique to that year.
b. Expenditure Control
Total expenditure in the first two fiscal quarters was $1,432 million which was $157 million or 12.3 per cent higher than the $1,275 million in the prior year period. Practically all the major categories of expenditure recorded increases with the principal growth in expenditure being: – $96 million of the additional expenditure was incurred on grants to public institutions and individuals as measures were taken to address the volcanic ash fall and the impact of Hurricane Elsa and efforts to support those most negatively impact by the pandemic continued.
– An additional $35 million was spent on goods and services.
– $28 million of the increase arose from capital expenditures.
– $11 million additional was spent on salaries and wages.
These were slightly offset by reduced expenditure on interest of $11 million.It should be noted that the reduced interest expense has no impact on the primary balance.
Non-accumulation of Central Government external debt arrears
Under this performance metric the central government may not incur new arrears in the payment of its external (foreign) debt obligations at any point during the program. It should be noted that the definition of new arrears excludes debt where a debt restructuring is being pursued.
Ceiling on Central Government Transfers and Grants to Public Institutions
This maximum transfer target applies to a list of 33 public institutions listed in the MEFP. Transfers to these public institutions were $186 million versus the $280 million limit.
Ceiling on Public debt
This maximum limit applies to Central Government’s domestic and external debt, Central Government’s guaranteed debt, and arrears. As of September 30, 2021, the stock of total debt was $13,097 million versus the cap of $13,381 million under the MEFP.
Ceiling on Net Domestic Assets of the Central Bank of Barbados
Net Domestic Assets of the CBB were $1,692 million versus the ceiling of $2,200 million.
Floor on Net International Reserves
Net International Reserves (‘NIR’) were $2,391 million, well in excess of the $1,400 million minimum target under the MEFP.
2. Indicative Targets under the EFF
The three indicative targets required to be met compared with the actual results achieved are outlined below:
Ceiling on Central
Government Domestic Arrears Central government domestic arrears include overdue trade payable for goods and services, overdue contributions, rents and loan payments to the NIS and overdue tax refunds. The GOB has managed to continue to reduce these arrears ahead of the schedule it had established under the BERT program. It should be noted these are confirmed debts only, as any amounts still being processed by the various agencies are not included.
Floor on Social Spending This minimum limit on social spending applies to programmes intended to have a positive impact on education, health, social protection, housing, community services and recreational activities. Overall spending at $29 million was ahead of the minimum limit.
Ceiling on Public Institutions Arrears Public institution arrears include purchases of goods and services not settled within applicable contractual grace periods or within 60 days after the due date, together with contributions to the NIS overdue more than 60 days and tax obligations not settled within legislated timeframes. The current level of arrears at $17 million is within the maximum limit.
3. Structural Benchmarks under the EFF There were four structural benchmark required to be achieved under the EFF during the current period under review.
