BRIDGETOWN, Barbados, Tuesday November 4, 2014 – Refusing to swallow the medicine from the doctor at the central bank, which had done its best to sugar-coat the bad-tasting prescription without success, our resolute minister of finance went before the public of Barbados on Monday to announce the latest news of The World According to Chris.
It was a tricky task, but Mr. Sinckler would not be fazed. In fact, he almost congratulated himself in advance on the Herculean task on which he was embarking to reduce the 13 percent current account deficit of last year by half. With only six months to accomplish this feat!
What better person to undertake it than the finance minister whose runaway policies caused that 13% gap between revenue and spending in the first place, and then left it unchecked until this unseemly jolt from the central bank brought him back to reality?
It was not the Opposition which had said his current plan was too little, too late. Even though they tried to bury it deep in their report, the central bank had to state the facts, which were that “Further revenue enhancement and expenditure adjustment equivalent to 2.0 percent of GDP will be required in the second half of the fiscal year, to bring us to the target deficit of 6.6 percent of GDP.” (Page 3, Press Release, September 2014)
Now, it does not appear that the bank just pulled this figure out of the same magic box of inspiration which seems to sometimes be the source of other predictions, like coming investment in the economy. No, the bank gave us a chart in which there was a sum.
Starting with Mr. Sinckler’s handiwork, the deficit of $1,117.3 million for the last fiscal year, the bank showed the fiscal adjustment measures taken to date being worth $77 million in savings to the economy, and projected that for the remainder of the fiscal year another $123.9 million would be saved as well. So, in all, those measures would account for $200.9 million.
Another $178.6 million would come in from something called a “special dividend,” as well as “grant funding” and “additional tax revenue” ($56.8 million) – which is presumably the Garbage Tax and a few other incremental increases.
So the bottom line is that to get to the target deficit of $565 million, Mr. Sinckler needs to put another $175-odd million into the pot, one way or another.
The private sector jumped on this like my dog on Chefette chicken bones.
Don’t even think about new taxes on us, they said. We have had it with all these taxes. I can’t remember exactly what they did say but I am sure it was far more diplomatic than my crude summary there.
What to do? What to do? I know, let’s go sit in the big chair in the Cabinet Room and try to outshine them, with all the glitter of executive authority at our command.
But you cannot preside over a steadily declining economy, which has moved from $9.2 Billion in 2009 to $8.6 Billion last year, and a current deficit which has been over seven percent every year since the DLP took office (except for 4.8% in fiscal 2009 and 4.4% in fiscal 2012) and still have people wait on your every word.
All we do every time Mr. Sinckler speaks is wait to hear which tax he is raising next. Even this time around, he could not bring himself to say there would be no new tax increases.
Instead, he would be assiduously implementing a set of Five Measures, which would save the day, and bring us home at the end of March to a current deficit of 6.6%.
These “smaller targeted interventions” would include keeping supplementaries down to $100 million for the rest of the year; cuts in spending to programmes “not absolutely critical to the achievement of the core objectives of the government” (I wonder how he will find any of those); getting the Barbados Revenue Authority to ferret out more unpaid taxes; making the tax code more fair and broad-based, based on IMF suggestions; and reducing the supplementary grants to state-owned enterprises.
Now, believe it or not, those “five interventions,” Mr. Sinckler said, would allow the government to achieve the target for the fiscal deficit in 2014-15, you know, close that $174 million gap in the gap. Really.
As I have said before, Mr. Sinckler reminds me of Antonio in the “Merchant of Venice,” waiting for his ships to come in. These are mainly going to be in the form of new hotel projects – some of which are going to end up as part of our national debt, like the Chinese project to build at Sam Lords. Another big one will be the new Beaches Resort if and when that gets going in a year of two.
In the meantime, Mr Sinckler undertakes his Herculean task of restoring an economy, he, more than any other person except Dr. Dolittle himself, has helped to destroy.
The opinions expressed in this commentary are solely those of Pat Hoyos. This article is exclusively republished with the permission of Pat Hoyos and first appeared in the Broad Street Journal. Pat Hoyos is a business writer and publisher of the Broad Street Journal.