Tough balancing act to spur growth
Barbados’ international credit rating will depend critically on Government’s ability to execute its capital expenditure programme.
This is according to Dr Justin Robinson, lecturer in the Department of Management Studies at the University of the West Indies’ Cave Hill campus.
“The rating agencies will primarily look at the fiscal deficit and debt-to-GDP ratio as well as how Barbados compares to other countries with a similar rating,” he said.
Robinson said the risk of a downgrade was more likely if debt to GDP is out of whack with countries that also have a BBB- rating, as assigned by Standard & Poor’s.
He noted that the reduction in Barbados’ fiscal deficit will be viewed positively, especially if there was also a reduction in the current account deficit.
Commenting on the Estimates of Revenue and Expenditure to be debated from today, Robinson said Government will have to do a tough balancing act during fiscal year 2011-2012.
He said there was no easy way to meet the need for growth while further reducing the fiscal deficit.
Robinson noted that Government had stuck to its policy of maintaining employment throughout the recession and this, along with the six per cent decline in gross domestic product (GDP), led to a higher debt-to-GDP ratio.
He said it appeared Government was trying to spur growth by cutting current expenditure while increasing its spending on capital works.
In relation to Government’s $700 million wage bill, he said this was due not only to contractual salary increases but “it would be expected that the wage bill would rise by at least the rate of inflation.”