The new strategy of the Do-Little Administration, with help from the Central Bank, may be summarized neatly by its apparent new slogan You Never Had It So . . . Stable.
All we heard last week from Minister of Finance Chris Sinckler and Central Bank Governor Dr Delisle Worrell was how “stable” the Barbados economy was despite the raging seas of global turmoil all around.
If we are to go by what they are suggesting, then we owe a lot of thanks to the knowledgeable seamanship and skilled captaincy of the two entities, as Barbados continues its calm passage through dangerous seas, keeping its head above water while most other countries are losing theirs. (My apologies to Rudyard.)
Mr Sinckler boasted to Parliament and the country live on radio that his Government had collected more taxes from the value added tax (VAT) increase over the past 18 months than even he had expected. It had allowed the Government to bring the overall tax revenue up to around 29 per cent of gross domestic product (GDP), he said, noting that at market prices the latter had increased to some $8.6 billion.
No doubt we will get more precise figures in the Budget, now said to be coming our way this month. But it sounds like the total tax revenue for the last fiscal year will be close to $2.58 billion or about $150 million more than so far projected by the Spamalot Bank, which, if memory serves, was just over $2.4 billion.
This may be why Mr Sinckler said last week that the medium-term fiscal strategy’s (MTFS) fiscal-deficit-to-GDP target ratio might even fall further – could it be possible? – to under five per cent.
Perhaps the Do-Little Administration’s Minister of Finance can say how much achieving these targets has been as a result of rising oil and other commodity prices in 2011.
If you have GDP expanding by $1/2 billion– that is, by about six per cent – but the real economy growing by less than one per cent, how do you account for the difference, except that prices of imports have risen?
Lethal combination
So we have achieved the MTFS target cited by Mr Sinckler through a lethal combination of, firstly, punitive taxation – including the removal of personal allowances, a 2.5 per cent increase in VAT, which has brought in over $180 million more in fiscal 2011 over the previous year, and additional revenue from the 50 per cent increase in the excise tax – and rising oil prices.
Meantime, Dr Worrell tells us not to worry, things are stable. What he does not remind us too regularly about is the fact that we are borrowing heavily to pay for an illusion of stability so that our national debt and interest payments continue to rise. For some reason, this has not been missed by those hawk-eyed ratings agencies.
So just a few hours after hearing Dr Worrell on the airwaves saying how we never had it so stable and that no ratings agency could possibly think of downgrading our debt to junk status, a much more sobering breeze blew through my window with last Friday’s Weekend Nation, Standard & Poor’s reminding us that our rising debt was of continuing worry and could result in said catastrophic downgrade.
Instead of looking for ways to restructure the economy, including applying private and public sector solutions to sacred cow statutory corporations, Mr Sinckler gets up in the House of Assembly and dismisses any such idea as privatization that would simply cause people to be sent home in droves.
This, when his own Government has given a sweetheart deal to local private sector interests to get Coverley Estates built, contracted with foreign private sector interests to build and lease to it the proposed new Bridgetown Marina, and agreed to pump millions into a failed private sector project via the National Insurance Scheme (NIS) called Four Seasons.
Dr Worrell, a little later in the week, invited the media to a briefing on how “we” keep the economy stable, pointing out that “we” had brought the debt down to under 80 per cent.
That may be the figure for the total “public” debt when you net off NIS purchases of Government paper, but until the International Monetary Fund tells me otherwise, it is my poor layman’s understanding that the total “national” debt was, at December 2011, 117 per cent of GDP. That is, the Government debt plus the NIS debt.
The latter doesn’t go away just because someone decided not to talk about it any more.
• Pat Hoyos is a publisher and business writer.
