Dec 2014 Financial News

Economy improving; efforts on target (Barbados)

Dec 17, 2014

Minister of Finance, Christopher Sinckler says that the economic situation in Barbados is improving and the country is on a growth path once again.

In a Ministerial Statement delivered in the Lower House yesterday morning prior to the start of Government Business, the Minister, referring to the 19-month stabilisation programme that Government instituted 16 months ago, maintained that based on actual performance and projections for the immediate future, the efforts outlined in that programme have not been in vain.

“Our foreign exchange reserves have stabilised, our fiscal deficit is on a downward trajectory and economic growth is returning. By any objective standard the programme is working,” he stated.

He disclosed that the fiscal consolidation programme has been effective in restoring to balance the foreign exchange market and securing the value of the Barbados dollar.

To that end, he said the foreign exchange reserves are now equivalent to 14 weeks of import cover, but he warned that in order to maintain these gains, they must stay the course of the fiscal consolidation programme and do what is necessary to protect the gains made over the past 16 months.

As it relates to the fiscal deficit, he said the target was to reduce that figure to 6.6 percent of GDP by the end of the current financial year in March 2015, but current figures are promising and suggest that it should be at least a percentage less. His comments came as he added that Government is also on track to record savings of $68.5 million from reductions in wages and salaries, and savings of $229 million from reductions in transfers and subsidies. Based on that, the Minister revealed that the expenditure reductions are now expected to generate $290.8 million, which is equivalent to 3.4 percent of the gross domestic product (GDP) and over half of the proposed fiscal adjustment.

Moreover, speaking to the new revenue measures inclusive of the Consolidation Tax, the Municipal Solid Waste Tax and the Bank Assets Tax, Sinckler said that combined they are now projected to yield $91.2 million. Altogether, he said, the fiscal adjustment measures are now projected to bring about a reduction of $452 million in the deficit, which he explained would be approximately 5.32 percent of GDP.

“Containing supplementaries to State institutions to a maximum of one percent of GDP, instead of the 4.2 percent of GDP recorded last year, is absolutely critical if our projections are to be met. Given the critical work and special monitoring of both the up-scaled Management Accounting Unit in the Ministry of Finance and the special Oversight Committee on State Owned Enterprises, working with agencies to control their expenditure programmes, we are confident those targets will be met in 2014,” Sinckler added.

With that in mind, the Cabinet Minister said that the successful execution of the fiscal adjustment programme, together with moving from a primary deficit of -5.6 percent of GDP in 2013/2014, to a primary surplus of 0.2 percent of GDP in a single financial year, is by any measure a major achievement for Barbados. In fact, he contended that it is also greater than what was achieved in a number of International Monetary Fund programmes.

“We therefore need to be resolute and finish the job of stabilising the public finances in 2014 and moving to effect a further reduction in 2015/2016 financial year below five percent of GDP,” he said. (JRT)

Source:
Barbados Advocate
Wednesday December 17, 2014

http://www.barbadosadvocate.com/newsitem.asp?more=local&NewsID=40547