Oct 2010 Financial News

Gov’t continues to arrest fiscal deficit

Oct 20, 2010

GOVERNMENT continues to make strides towards achieving its goal of erasing its fiscal deficit by 2016, with a further reduction being seen at the end of the August this year.

In its review of the economy for the first three quarters of 2010, the Central Bank of Barbados (CBB) indicated that at August 31st, despite a significant fall-off in revenue, the fiscal deficit was Bds$500.8 million, slightly below the $535 million seen at the same point in 2009

As a percentage of Gross Domestic Product (GDP), the fiscal deficit to GDP ratio during this period was estimated at 9.3 per cent compared to 10.4 per cent for the similar period of 2009.

The Central Bank report stated that Government’s tax revenue collections fell by three per cent, with corporate and personal tax revenues down by 32 per cent and four per cent, respectively.

Valued Added Tax (VAT) was the main exception to this trend of declining revenues, as receipts yielded nine per cent more than that seen for the comparable period last year.

Transfers and subsides – which is described as the fastest growing category of current expenditure over the past decade – were reduced by three per cent, while expenditure on goods and services fell by 13 per cent, and the bill for wages and salaries was down six per cent.

With so many declines it may have been expected that the drop in the fiscal deficit would have been greater, however, there were other areas of cost that offset some of these decreases. One of these was the fact that interest payments rose 11 per cent, reflecting the additional borrowing needed to finance the crisis-related fiscal deficit.

As it relates to Government’s financing of this deficit, the CBB indicated that this was done mainly through the use of domestic sources, especially the National Insurance Scheme and private non-bank entities, with commercial bank contributions being lower than in previous years.
(RH)


Source:
Barbados Advocate
Wednesday October 20, 2010

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