ISSUE OF THE YEAR: Budget of sacrifices
As 2017 draws to a close, we look back at some of the stories that caught the public’s attention over the year.
This story was originally published on May 31, 2017.
If this was the Budget to sway the electorate, Minister of Finance Chris Sinckler may have made his job harder last night.
He told the country his proposals were about putting “country first” and even more sacrificing by Barbadians was the order of the day.
Forced to deliver successive Budgets laced with austerity proposals and generating only anaemic growth, the minister conceded that the island’s foreign exchange troubles had worsened and so any unforeseen shock could cripple the country.
Moreover, the economy had lost a staggering $1.4 billion in revenue from the international business sector in the last seven years, and the administration was hamstrung in the ways it could cut spending without firing thousands more public workers.
Calling the fiscaldeficit “public enemy No. 1”, Sinckler said: “The biggest obstacle right now to us growing faster and more sustainably, is the persistent deficit in our fiscal accounts that is driving the growth of debt and now eating away at our foreign reserves.”
In the wake of this situation, he imposed more belt-tightening measures to protect the dollar and reduce chances of further downgrades by the international rating agencies.
While the jobs of public officers have been spared for now, he warned the cost of living would rise as he slapped a 400 per cent increase in the National Social Responsibility Levy. That imposition moves from two per cent to ten per cent.
“The latest report provided by the Central Bank indicates that currently the import cover has improved slightly to 10.7 weeks by the end of March 2017 and current levels now stand at $749 million at the end of last week, representing 11 weeks of import cover.
However, more has to be done to stem the demand for foreign exchange, particularly the demand for consumer durables,” Sinckler told the House of Assembly during the three-hour presentation.
And starting July 1, the ballooning online shopping craze used by thousands of Barbadians to buy cheap goods, would be hit with a new two per cent tax on all foreign exchange transactions. This was part of the state’s attempts to rein in foreign exchange leakage on consumer durables.
Laying out the reality of the grim situation confronting the island, the Minister of Finance said if drastic action was not taken, the economy would be in deeper trouble.
“We must all carry some of the burden, even if some of us with the capacity to do so carry just a little more than others. This is the strongly held view of this administration and one from which we cannot and will not recoil,” he insisted.
In a proposal for which many details were not provided, Sinckler said the National Insurance Scheme and Central Bank of Barbados, which hold the bulk of Government’s debt instruments, were now in discussions with the state on a proposal to extend interest payments due on that debt.
Government expects to save $70 million on interest expenses this year through that agreement.
An International Monetary Fund (IMF) programme, though, was not on the cards, Sinckler insisted. He reinforced Prime Minister Freundel Stuart’s position that the island “cannot surrender policy into hands of entities that may not be as sensitive to the nuances” of Barbados.
After establishing two working groups to address the twin problems of foreign exchange and the deficit, Sinckler revealed that many of the proposals had to be rejected because their effects on the population would have been too draconian.
“It would be just as irresponsible for anybody in Barbados, most of all Government, to allow the current crisis to scare us into making ill-defined and inappropriate policy interventions to address our fundamental issues,” he said. (NATION ARCHIVES)