Government will not rule out the use of temporary tax reductions to cushion the inevitable cost-of-living increase expected from the Russian invasion of Ukraine.
But in an interview with Barbados TODAY on Friday, special envoy to Prime Minister Mia Mottley, Professor Avinash Persaud warned that such concessions would further delay the Government’s recovery from the clutches of crippling debt and an International Monetary Fund (IMF) programme.
On the other hand, president of the Barbados Chamber of Commerce and Industry (BCCI) Anthony Branker called for reductions on import duties consistent with manifesto promises made ahead of last month’s general election.
For the second straight day, explosions were widely reported across Ukraine signalling the continuation of a deadly conflict in Eastern Europe that is reverberating across the world.
Oil prices briefly climbed to a whopping $105/barrel – the highest in almost a decade, over fears about the impact of the invasion on global energy supply given the involvement of oil giant Russia.
Brancker noted that wheat, which is produced in large quantities by Ukraine, would be in short supply, driving up the price of certain foods on the global market.
Economists have also warned that Barbados’ tourism recovery would suffer from an inevitable reduction in travel characteristic of market trends in times of war.
But Professor Persaud was adamant that the country remained well on course for recovery in the short to medium-term, adding that sharp price increases experienced at the start of such conflicts, are likely to fall shortly after.
“I think it’s important to say that this is not going to have the same impact as COVID in which our entire tourism industry which accounts for 40 per cent of our economy, was shut down. The economy is recovering quite strongly partly because tourism is coming back and other things are coming back. We expect to grow by 10 per cent this year,” Persaud told Barbados TODAY.
“This conflict could present some strong headwinds that could delay some of that recovery, pushing it into the following year. So instead of 10 per cent this year, it may be that we make eight per cent.
“But I don’t think people should panic and think that we are at the beginning of some big problem. We are probably seeing the effects of it fully and the concern is when it will get unwound… because it’s really a narrow set of commodities [affected] – oils and some foods that we import from Europe,” the economic advisor added.
He admitted that the Government is “very concerned” about the likely impact of the situation on the cost of living and is considering measures to address it.
But with ambitious fiscal targets under a new IMF debt reduction programme on the horizon, it will be hard to justify the type of spending employed to ease the burden of the COVID-19.
“There are not a lot of choices for flexibility here, because this is being driven by international pricing. So the only thing we can really do is to look at some temporary reduction in taxes, but that will hurt our revenues,” Persaud explained.
“If we are looking at the impact of these higher costs on ordinary Barbadians we would need to be very mindful of our expenditures and our debt, but the [IMF] programme is not so rigid. The programme was designed to stop us from going on a jolly of our own, but not to stop us from responding to something that everyone has had to respond to,” he added.
When contacted Friday morning, the BCCI president called for an aggressive approach from government to the looming challenges, noting that businesses are still at a sensitive stage with their pandemic recovery.
“Even though we are still in the early days, we obviously have to have a clear focus on what happens over the next couple days and weeks and how many countries get involved. So yes, depending on how it escalates, this could definitely have an impact on our recovery as a nation,” Branker told Barbados TODAY.
“The Government has already placed in its manifesto that it would be looking at lowering the cost of living through an adjustment to the freight cost that we are currently paying in the calculation of duties. I think that is one of the things that we have to urgently pay some attention to so that the average Barbadian can benefit from the reduction that would have on the cost of some items.
“Obviously, the government would be in a balancing act in terms of their revenues, but I think that wherever we can look at reducing the burden at the point of import on the duties that is where and how Barbadians would be able to benefit as they do their shopping.” kareemsmith@barbadostoday.bb
