Governor of the Central Bank, Cleviston Haynes.
Business Monday: Progress!
The strategies and measures being implemented under the Barbados Economic Recovery and Transformation (BERT) Programme have begun to yield encouraging results.
Governor of the Central Bank, Cleviston Haynes, told business executives attending the Barbados Chamber of Commerce and Industry’s Business Luncheon at the Hilton Hotel recently, that the full scope of the new tax measures and expenditure containment measures should be realised by the fiscal year 2019/2020.
He made the point while noting that the BERT Programme, which is supported by an extended fund facility arrangement with the International Monetary Fund, is intended to facilitate fiscal adjustment measures, reform of the state owned enterprises sector and other structural economic reforms, all intended to create a platform for sustainable long-term growth and promote foreign reserve accumulation.
“Additionally, concessional loan financing totalling US$175 million from other multilateral government institutions, the IADB and the Caribbean Development Bank has been made available to Government. The receipt of these funds will significantly boost the external sector position, with the stock of gross international reserves now expected to exceed $1 billion by year end, or close to three months of import cover,” he said.
He made the comments while noting that Government’s cash flow position has improved significantly. To bolster that point, he said that current year’s tax refunds, including for corporations, are being paid; the National Insurance is now receiving its monthly transfers on a timely basis and the Government’s overdraft account is being used less frequently. Additionally, he noted that Standard and Poor’s recently upgraded Barbados’ credit rating on its local currency debt selective default to B/B-. The Central Bank boss said this represents an “important first step” towards rebuilding the international profile of Barbados and regaining the position of investment grade.
“We anticipate that with the conclusion of the external debt restructuring that the foreign debt will also be upgraded,” he stated.
The governor made the remarks as he explained that while there are several positive signs which will raise confidence and help stimulate growth enhancing investments, the work is not over. Haynes stated that achieving long term fiscal sustainability and strengthening growth prospects, require effective implementation of structural reforms and he said the BERT Programme contains several structural benchmarks, including initiatives to strengthen tax policy administration, upgrade public financial management and to reform the operational framework of state owned entreprises.
“In addition, enhancements to grow the business environment are planned to address the perennial weaknesses in the business environment that could potentially constrain the generation of greater foreign and local direct investment,” he said.
As part of that, he indicated, Government has committed to undertake a comprehensive review of the tax system by June 2019, and he said that goal has gained new impetus in the wake of the recent announcement of the plan to converge the corporate tax rates for international and domestic companies. That move, he suggested, is likely to simplify the tax framework and it would have implications for the wider tax system including the overhaul of the structure of personal income taxes and transaction based taxes.
“Domestic profit making companies should see this development as an opportunity to use their increased cash flows to finance new investments from internally generated funds. The adoption of new technologies and investing in employee development should have a better tax return that allows firms to be more competitive,” he said.
Haynes went further and urged those business leaders present to use their windfall to accelerate the move towards the adoption of alternative energy, as a means of reducing the country’s use and reliance on fossil fuels (JRT)