Economy stuck in ditch
You would think there had been no election, that a significant part of the electorate had not voted for a new approach to our fiscal affairs, leading to a result that has produced what may become at times a de facto hung Parliament.
Yes, the winner takes it all in our parliamentary system, but sometimes you might expect a little bit of what the other side was saying to have rubbed off.
Not so, it appears, from looking at the Estimates for the coming fiscal year which begins on April 1.
Government’s total revenue for 2013-14 is estimated to be $2.59 billion and its total expenditure $3.8 billion, which includes paying down the national debt (amortization) of close to $600 million plus interest just over $600 million.
With the deficit at $1.2 billion, this means that we are really rolling over not just our interest payment but also our debt repayment for the year. We seem to have been doing this for a few years.
The only way out of this is really to produce more as a country, but in line with the Central Bank of Barbados’ projection for less than one per cent growth in gross domestic product (GDP) this year, the actual estimates presented are that the Barbados economy’s GDP for the fiscal year ending March 31 and the coming fiscal year will both be just over $9.2 billion. Identical, because as projections you can ignore a couple of million dollars’ difference.
One good thing is that within those figures, Government has put close to $300 million aside for capital expenditure, and we heard from Minster of Finance Chris Sinckler that another $300 million will be given to the private sector in incentives – perhaps land, tax breaks and other perks – to get them to take on additional large projects. So in total, Government’s investment in capital projects will be around $600 million in cash and kind. But with the private sector ponying up its part, perhaps we will see projects started that could be worth a few hundred million dollars more than that, although they wouldn’t all be finished in one year.
For the financial year now ending, Government was set to spend $225 million on capital expenditure.
I hope Mr Sinckler follows up soon with his Budget, in which he will no doubt outline how he plans to revitalize tourism and carry on reforming the international business sector.
Despite the fact that VAT revenue, at 17.5 per cent in the first full year, brought in $2 million short of $1 billion and then fell back to $888 million for 2012-13, the Estimates place this revenue once more at $942 million. That was also the projection for the fiscal year now ending.
Why would anyone think VAT would do $50 million better when the economy is barely projected to grow?
The same is true for excise taxes. If you did $160 million in the first full year of their increase (2011-2012) and the same amount for the second, 2012-13, according to the revised estimate, why would anyone think they will bring in $20 million more this coming year, thus placing them at close to $180 million?
Let’s see, the one sure way these two revenue streams would increase is if the price of imported oil goes up. Or a lot of back excise taxes are collected.
We have the same situation with corporation and income taxes. Corporation taxes were expected to bring in $311 million this current fiscal year but fell short of the target by $20 million. Even so, they have been estimated to bring in $15 million more this coming fiscal year ($304 million).
Income taxes, same thing: they brought in $90 million less than the $453 million originally expected but have still been estimated to bring in $30 million more than the revised estimate for this now-ending fiscal year, or $392 million.
Ditto, import duties, which brought in $12 million less than estimated this fiscal year (almost $200 million) and have been projected to bring in the same amount ($212 million) as they didn’t bring in for the coming fiscal year.
So, if these big revenue earners perform the same way in the coming year as they did this year – and this does not even account for any fall-off in revenue – the Government’s revenue for 2013-14 would be down by around $125 million. And why, short of higher prices for imported oil, should we expect them to do better in an economy that is, by the Estimates’ own data, stalled, stuck in the ditch, going nowhere as the national debt keeps rising?
A note to readers: just before I go today, allow me to say one thing about this column. Notwithstanding the statement of His Excellency Robert “Bobby” Morris, Ambassador to CARICOM, speaking in his also highly important capacity as campaign manager of the Democratic Labour Party to the party faithful at the George Street Auditorium shortly after winning the Election, the day anyone tells me what to write in this space is the day I stop writing.
A note to “Bobby”: Ambassador, the next time you want to offer up any of your own “verbiage” to the contrary, I suggest you come with proof. You know, copies of emails, letters, financial transactions, bank statements, memos to prove any allegation you may like to make. In other words, my friend “Bobby”, when it comes to me, put up or shut up.• Pat Hoyos is a publisher and business writer.