UWI economist identifies Budget’s pros, cons

Dr. Winston Moore, Economist at UWI, speaking in terms of the Budget, stated that there are some pros and cons included in the Proposals.

 

In his estimation, “The budget tried to tackle two main issues – international reserves, as well as, the fiscal deficit. 

 

Concerning the international reserves, the Minister of Finance mentioned a lot of injections into the economy due to come over the next couple of months that will increase them. 

 

“In terms of reserves, we look for 12 weeks of cover that essentially implies that we can import all the goods and services we need in Barbados comfortably with the international reserves without adding to the debt. The reserves at the moment are approximately 13.8 weeks so that stands above the international threshold, but on the other hand the research I have done suggests that sometimes you need a higher level of international reserves, if you are subject to international shocks etcetera.

 

“We have seen a decline in international reserves since 2012. It can be from a number of different areas, part of it can be due to an increased repayment of debt, higher oil prices etcetera, but once we are subject to international shocks, we do see a decline in international reserves.”

 

He also outlined, while speaking at the BCCI and PWC post-budget breakfast discussion, at The Hilton, that “From the fiscal side, the two per cent tax on imports has a positive impact on the fiscal deficit so it generates a bit more revenue, but it all depends on how individuals respond to this two per cent tax. If individuals respond to that two per cent by purchasing less business services then the expected revenue might not be as large as what is projected.

 

Another question is how will the tax be implemented on domestic production.”

 

The Economist highlighted that the duty-free zone is useful and can create jobs etcetera, but also cautioned that it has been done in other Caribbean countries and there is always leakage. (NB)