Jan 2012 Financial News

Fiscal deficit falls to 4.8 per cent (Barbados)

Jan 18, 2012

GOVERNMENT’s policy of lowering the country’s fiscal deficit appears to be bearing fruit.

Yesterday the Central Bank of Barbados (CBB) announced that between April and December last year the fiscal deficit has been reduced from 7.4 per cent to 4.8 per cent of GDP.

Governor Dr. Delisle Worrell said that the decline is in line with the revised targets of Government’s Medium Term Fiscal Strategy (MTFS).

“The MTFS sets out policies designed to achieve a balanced budget by 2016/2017,” he said while reviewing the Government spending and expenditure policies.

According to him, this fiscal strategy is sustainable, as evidenced by the following:

(1) the cost of servicing the external debt will absorb less than ten per cent of foreign exchange earnings for the remainder of this decade;

(2) there is no need to refinance a major borrowing on the international financial markets until 2021;

(3) the annual interest cost of the total debt, domestic and foreign, is manageable at 22 per cent of Government tax and other revenues; and

(4) maturing domestic debt may be refinanced without difficulty because there remains considerable excess liquidity in the economy.

He pointed out that the ratio of debt to GDP for all of Government, net of statutory corporations, is 47.3 per cent.

He also remarked that financing from the National Insurance Scheme (NIS) for 2012 is projected at approximately 38 per cent of Government’s financing needs.

Dr. Worrell reported that the extent of the NIS purchases of Government debt is prudent, in view of the investment options available to the Fund.

“Alternative domestic investments available to NIS are all riskier than Government securities and are in limited supply, while investments elsewhere in the Caribbean region may be subject to exchange rate risks as well as country risk.

“Investment returns in US dollars, euros and sterling are uncertain, and the yields are too low to give NIS the revenue it needs to meet its obligations. What is more, it is not in the interest of national development that NIS should use foreign exchange to invest abroad, in preference to investment in the domestic economy,” the Governor added.

He said that the immediate policy priority has been to ride out the international economic storm and keep the economy stable.

(JB)


Source:
Barbados Advocate
Wednesday January 18, 2012

http://www.barbadosadvocate.com/newsitem.asp?more=local&NewsID=22208