EDITORIAL: Critical economic issues must be addressed

TOMORROW the Minister of Finance and Economic Affairs, The Honourable Christopher Sinckler will be revealing to the House of Assembly his 2015/2016 Budget and Budgetary Proposals. 

 

Under normal circumstances this forthcoming Budget and Budgetary Proposals ought to be one where Government should be striving to reduce some of the taxes which in recent times have been of concern to wages and salaries’ earners.

 

The government has been at this since 2010 and while people agree that there is need for corrective measures, no one anticipated those measures would have taken this long to make things right in the economy.

 

Compared to a year ago when the economy was trying to find its way through recession and an environment of low growth, Barbados was growing at less than one per cent.

 

This time around growth has been of the order of 1.3 per cent; unemployment has come down from 14 per cent of the workforce; some of the long mooted tourism projects have started; and the local companies listed on the Barbados Stock Exchange (BSE) are doing better, albeit making some contribution to GDP.

 

 However, it is not as easy as this as there are still worries in the economy that call for urgent attention.

 

Among the main ones are the declining foreign reserves, the high debt levels, the fiscal deficit which hovers around 5.4 per cent of GDP, and more complaints coming from the Barbados Chamber of Commerce and Industry about business facilitation.

 

So recognising that there is still enormous work to be done the Minister of Finance and the Government has no alternative but to get on with the business of dealing with this situation.

 

Usually on occasions like this taxpayers tend to exercise some degree of apprehension as they fear that their take home pay will again be subjected to new taxes to provide government with the means whereby it can solve pressing problems in the economy. 

 

It is difficult to speculate what the Minister of Finance will be proposing tomorrow. It is sure that the depletion in the reserves will attract some attention as is the case with the state-owned enterprises, action for which has been promised a long time ago.

 

Government has to decide whether it wants to deal with those enterprises and be prepared to take whatever action it deems as necessary.

 

Faced with a similar situation in 2005 when imports were getting out of hand, the Government of the day took the approach of introducing a three per cent Cess and adjusted interest rates. The first was to curb imports which had been growing at a fast pace and leading to a depletion in the foreign reserves. The interest rate adjustments were meant to make it more it more costly to borrow while signalling to Barbadians that they had to save more. Initial results did show that there was a dampening demand for imports. Overall there were improvements to the external current account of the balance payments. 

 

It is expected that whatever policy is tried the results have to be positive. Clearly the policies have to be well sorted out and must fix the problem at hand.

 

Barbadians have reached the stage or approaching it, where austere measures are becoming very painful. Let’s hope this time around there won’t be more burden.