IT?IS?NOT business as usual in Barbados.
The Government is under increasing pressure to produce a certain fiscal out-turn, as follows: “To increase earnings in the first fiscal year (2010/11) by 0.25 per cent of GDP or $17.0 million over trend” and at the same time “to cut spending, as a per cent of GDP, by 0.50 per cent from trend” (Medium Term Fiscal Strategy document).
That is for this fiscal year ending March 31.
Further and higher targets have been established for the new fiscal year starting April 1, but a major downturn in Government revenues in 2010 of six per cent overall made reaching even these fairly modest targets almost unattainable without major tax increases aimed directly at the consumer, possibly in order to reduce consumption at the same time.
Why reduce consumption? Because even with things so bad last year, our import bill rose by close to $150 million to almost $2.75 billion (it was close to $2.6 billion in 2009, a drastic fall-off from the $3.4 billion the year before).
So we are creeping back up the import vine.
Imports use up increasingly scarce reserves, so if people have less to spend, they will indirectly consume less foreign exchange.
Plus, in that overall six per cent decline was the more troubling figure of a 26 per cent decline in corporate tax revenues, making it impossible for the administration to tax businesses even more at this time.
It therefore is understandable that with so many new tax burdens on the shoulders of individual wage and salary earners, their unions should be seeking increases.
Whether such increases are forthcoming and acceptable to the unions we will wait to see, but the whole purpose of the exercise thus far has been to stave off the reduction of our debt burden to junk bond status and also reduce Government’s huge fiscal deficit.
And while I personally think this administration has no creative ideas to get us out of the mess we are in and seems terrified of the Opposition stealing its thunder by offering to work together on a much-needed economic consensus, I can see that there is no way any wage increase can be given now without doing even more harm to the economy.
In fact, with Government’s present wage bill of $850 million accounting for 30 per cent of its total expenditure, any such increase would probably take us over the fiscal edge.
