EARLIER THIS YEAR, the Government published its draft medium-term fiscal strategy covering the period 2010 to 2014. This document, along with the national development strategy, sets out Government’s plans and policies to combat the current economic conditions, restructure the economy and lay the groundwork for future economic and social development. The strategy reflects wide consultation and is quite comprehensive, including specific targets and performance indicators, and the authors of this document should be commended.The medium-term fiscal plan discloses the measures devised by Government to address the major issues facing the economy. In particular, it acknowledges concerns about the fiscal deficit and the level of public debt, targeting a balanced budget by 2014/2015 and a reduction in Central Government debt to 67 per cent of gross domestic product by 2017/18.
Despite much public speculation, I can find little mention of any plans to increase taxation – instead, emphasis will be placed on more aggressive collection of taxes, increasing the efficiency of the system of tax collection, and collecting arrears owed to Government. In addition, the VAT base will be broadened by restructuring fiscal incentives (presumably by reducing the instances where VAT is waived on specific transactions or for specific industries). There is also a clear recognition that the level of Government expenditure will have to be reduced and delivery of services improved. An attempt will be made to constrain growth in the salaries and wages bill, and cost savings will be targeted through “more astute, aggressive and efficient procurement”. The strategy promises a 100 per cent cut in non-productive Government programmes, and a cap on transfers to such entities as the Queen Elizabeth Hospital, Transport Board, Barbados Agricultural Development and Marketing Corporation, and the University of the West Indies. Furthermore, transfers to the National Housing Corporation and the Barbados Water Authority are eventually to be eliminated.
Other significant measures included in the national fiscal strategy include divestment (or long-term leasing) of certain assets; greater use of concessionary and grant funds from international financial institutions; greater use of amortised debt schedules rather than bullet loans; proper pricing structures for state-owned enterprises; emphasis on increasing efficiency and productivity in the economy; and improving accountability and management practices in state-owned enterprises and Central Government. There is already evidence of the implementation of some of these plans. Nonetheless, I believe that implementation is one of our major national weaknesses.
The targets enumerated in the fiscal strategy and development plan must be translated into key performance indicators for individual ministries and government agencies, and mechanisms developed to measure and publicly report progress towards the targets. This will allow us to objectively assess our progress towards the stated goals, celebrate our successes, and implement remedial action where required. Even though one may debate the likely success of the fiscal strategy in the identified time frame or disagree with some specific elements, the general direction and objectives of the Government’s strategy appear to be reasonable and, in my view, merit support.
One major challenge for Government will be to explain the strategy in clear, simple language and gain the support of the public. A convincing case will have to be made for making sacrifices now to avoid more severe consequences in the future. It may reasonably be argued that there is more that could be done to provide inspirational leadership at all levels, explain the way forward to Team Barbados, and persuade the nation to accept the national strategy and commit to the actions and sacrifices required for its successful implementation.
