Barbados is more indebted than most of its Caribbean neighbours. (Internet image)
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BARBADOS SHOULD DO all it can to reduce the fiscal deficit, but it should not do so at the expense of public investment.
That’s the advice the United Nations Economic Commission For Latin America And The Caribbean (ECLAC) in its new report Fiscal Panorama Of Latin America And The Caribbean 2017.
The report said in the English- and Dutch-speaking Caribbean the fiscal deficit “is estimated to have narrowed substantially (from 2.6 per cent of GDP in 2015 to 0.7 per cent of GDP in 2016).
This was attributed mainly to “higher public revenues (up from 28.1 per cent of GDP to 28.8 per cent of GDP in the same period), in some cases because of extraordinary receipts associated with citizenship by investment programmes”.
ECLAC also pointed out that public spending fell from 30.5 per cent of GDP to 29.5 per cent of GDP. It added that “although the debt burden diminished slightly in 2016 (by an average of 1.5 percentage points of GDP), considerations of long-run sustainability do not leave much scope for active short-term fiscal policies”.
“These countries’ fiscal deficits have tended to improve in recent years (they averaged an estimated 0.7 per cent of GDP in 2016) as a result of measures taken to ensure public debt sustainability and of the temporary effects of extraordinary revenues.”
However, the report stressed the importance of maintaining public investment levels.
“. . . There is considerable evidence for the importance of protecting public investment when fiscal consolidation measures are considered, as it has been shown to boost medium-run economic growth considerably,” it said.
The report also said Caribbean countries like Barbados needed to reduce their debt levels, including interest payments.
“Although public debt service declined on average relative to output in 2016, it remains very substantial in some countries of the sub-region. This is particularly true of Barbados and Jamaica, where interest payments increased to the equivalent of over 25 per cent of total revenues in 2016,” the report said.
“Conversely, debt service dropped substantially in Grenada (by 0.7 percentage points of GDP). Central government debt in the English- and Dutch-speaking Caribbean has risen by 16 per cent since 2008, although the trend has been clearly downward in recent years.”
It added: “In 2016, public debt averaged 69.6 per cent of GDP, a drop of 1.5 percentage points of GDP from 2015. Jamaica is still the country with the highest level of public debt (124 per cent of GDP), followed by Barbados (103 per cent of GDP) and Belize (78 per cent of GDP).” (SC)