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NOT ALL BLACK AND WHITE: The hunt for the fiscal deficit


PAT HOYOS

NOT ALL BLACK AND WHITE: The hunt for  the fiscal deficit

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“The 2015/16 fiscal deficit target of four per cent of GDP is within reach, provided that Government completes the planned divestment of the Barbados National Terminal Company Ltd. Accrued revenue for the fiscal year is projected at $2,584 million, and expenditure at $2,950 million, for a deficit of $366 million.” – Central Bank of Barbados, Press Release for December 2015

ONE OF THE things I like to do on a rainy day when both the Internet and satellite TV are down, and nobody is home to talk to, is hunt for missing information in the Central Bank of Barbados’ Press releases.

It is often like a real treasure hunt: You are provided with some clues, and then, at the risk of your own sanity, you begin to scrutinise and ponder how to get to the particular bit of data you are seeking.

Now, this time, although none of the above conditions were in place, I had to spend a few minutes trying to figure out what our country’s fiscal deficit for 2015-16 was likely to be.

That’s because what you see at the top of this article is as close as the bank came to telling us.

But the clues are all there, so our fiscal deficit hunt is on.

First we need to know what the estimated Gross Domestic Product will be for the year. So, let us take last year’s, which the bank says was BDS$8 817.00 (Table 2 in the December report) and add that estimated half a per cent growth which we have apparently achieved for the year. That would add about  $44 million, so let’s estimate the GDP for 2015-16 at, an even $8,850 million.

Now, the current deficit is put at $366 million, but don’t forget we have to add how much we spent on capital expenditure too. Up to December, says the bank, it was $116 million. So it looks like our overall deficit at the end of December was around $484 million.

And look, we seem to be going well so far, because just a couple of lines below, the bank gives us the fiscal balance as being $490.2 million.

(As a “refresher”, since you know it already instinctively at least, read this, courtesy of Reuters glossary: “Fiscal balance. The balance of a government’s tax revenues, plus any proceeds from asset sales, minus government spending. If the balance is positive the government has a fiscal surplus, if negative a fiscal deficit.”)

Now, last year, our fiscal balance was a deficit of almost $600 million, so as a percentage of our GDP of $8,817 million, the fiscal deficit was 6.8 per cent. (It is all there in Table 4.)

So our deficit of $490.2 million on a slightly expanded estimated GDP of $8 850 million gives us a fiscal deficit (so far) for 2015-16 of 5.5 per cent.

In other words, we are heading for the six per cent deficit put into the Estimates for the year.

So what then of all of those Budget measures dreamed up by our Minister of Finance, and perhaps summarised best in his own words at Page 74 of last June’s budget speech, as follows:

“On the basis of a projected net gain of $200 million in additional revenue this financial year, plus projected additional expenditure savings of 30 million dollars from reductions in (those measures announced), we now project an end of year fiscal deficit of between 3.5 – 4 per cent of GDP on an accrual basis. This would mean a shaving of two percentage points off the projected deficit in the 2015-2016 Estimates of Revenue and Expenditure of six per cent on an accrual basis. ”

Somebody needs to get a razor blade with a sharper edge.

Patrick Hoyos is a journalist and publisher specialising in business. Email [email protected]

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