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Fiscal consolidation necessary

rhondathompson, [email protected]

Fiscal consolidation necessary

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A BUDGET IS DUE TO BE presented to Parliament very soon. As usual consultation with various sectors will have taken place with a few remaining to be completed. Given the relentless pressure on the economy, it is certain expenditure has to be managed or revenues expanded.
In either case there are painful ramifications, as on the one hand social services will have to be reduced whilst, on the other, additional or increased taxes will need to be imposed. Neither of these courses is particularly desirable since citizens are already exhausted by the effort required to survive.
Prices have been in an upward spiral since early 2008, if not before, whilst energy costs, previously reduced, have recommenced gradual increases. Commodities, whether by artificial manipulation or the ravages of the weather, have increased in price. Higher consumption by Japan, China and India have not helped.
As far as we are concerned, a satisfactory tourist season was what was neeeded.
This did not occur, as declining economies in North America and Britain influenced less travel by citizens. Britain and Canada, our two most productive markets, have shown declines in numbers, as well as average spend and stay over.
So, what does the future hold for Barbados? It is a blessing that remittances from the diaspora have held their own and recently showed signs of modest increases. However, with energy prices predicted to return to the three figure mark it is indeed cause for concern. As at November 5, crude began trading at almost $87 per barrel. Prices in excess of that figure will be a record high over the last two years.
Thus we need to brace ourselves for possible increases in VAT, bus fares and very likely the rebirth of the promised cellular phone tax with the burden of collection of the latter placed in the hands of the providers, thus enabling Government to enjoy the full benefit.
Other avenues for increased revenue such as higher rents for Government units, a cess, and higher import duties on motor vehicles according to category, whilst attractive, are politically worrisome. It therefore seems Government must insist on thrift within the public sector and an improvement in productivity.
Both of the last two above mentioned will, in due time, result in reduced jobs and a regime of accountability. Despite the introduction of Public Sector Reform for more than two decades, there is precious little to be seen. To cut jobs at this time in the public sector, though highly desirable and overdue, calls for political bravery yet unseen in this country.
All factors considered, Government has no choice, if it treasures the parity of the Barbados dollar, but to adopt revenue expansion measures rather than expose the country to increased inflation.
Still further, there has to be a reasonable degree of certainty that new revenue measures will in fact provide the level of receipts contemplated and not a lesser aggregate.
 We must answer the question “for whom the bell tolls?”