I am confused and worried about Barbados’ future. The indicators on the economic gauge are all heading towards the danger zone, and there seems to be precious little time left to implement corrective measures to slow their progress.
Yet, I get the uncomfortable impression that though those in command are just as concerned as I am – probably even more so as their reputations and careers are on the line – their agenda has them on a path which could lead to the whole thing blowing up in our faces.
I hope that I am wrong about this!
I hope, too, that those financial gurus at the Central Bank and the Ministry of Finance and Economic Affairs know about something positive happening in the economy that they have not yet shared with us lesser mortals.
I am confused and worried because the Central Bank report for the first six months has left me with more questions than answers. The question that keeps gnawing at me is, how could the economy have grown by 2.1 per cent, yet spending is down?
What compounds my confusion is that independent, esteemed economists Sir Courtney Blackman, Charlie Skeete and Professor Michael Howard are all ringing alarm bells, warning of serious and dangerous times ahead, yet we are being assured by Governor of the Central Bank, Dr Delisle Worrell, and Minister of Finance and Economic Affairs Chris Sinckler that though things are not the best, we are holding our own and are slowly improving.
This is what I mean. According to the Central Bank report, “Transfers and subsidies and interest payments declined by 13 and 10 per cent, respectively. There was a 56 per cent reduction in grants to individuals, but grants to public institutions rose eight per cent. Spending on capital projects and wages and salaries were also lower when compared to a similar period last year. Overall, spending was down seven per cent from April to May 2010.
“Corporate tax receipts were less than half of the collections received in April-May 2010. VAT receipts fell by two per cent in spite of the increase in the VAT rate in the Budget of November 2010. On the other hand, personal tax receipts were up by ten per cent, partly reflective of the removal of the tax-free allowance on travel and entertainment in the Budget. Excise taxes rose by 13 per cent.”
To put all of this in layman’s terms, Government has spent less – seven per cent less – in critical areas in the last six months. At the same time, they have collected less money from businesses, but squeezed more from the average citizen.
Put another way, the fact that corporate taxes are less indicates businesses have not been profitable. As VAT is earned based on people’s spending, less of it collected suggests sales have dropped.
This assertion is validated by the hefty increase in taxes collected from those who have effectively had their salaries cut now that their allowances are taxed.
The initial point is made, too, when the money collected from excise tax is considered. Motorists must pay this tax as well as the VAT associated with it whenever they buy gasoline. As these prices have steadily risen, it means more VAT has been collected here.
But as Government’s overall takings from VAT are down, it clearly means that spending in all other areas has fallen significantly.
So if Government and the public both spent less, and at the same time prices of just about every item rose, how could the economy have grown?
I am totally baffled by this.
At first I thought it was just dumb me, but the more people I ask, the more I realize that some others are not clear on this point. So, Mr Governor, would you please clarify this for me.
I must add, sir, I want to believe that I can depend on what the bank says and take it as gospel. Sinckler and Opposition Leader Owen Arthur are politicians, and as such present arguments from their political perspective. The bank, however, has only one remit, and that is to work in the best interest of all Barbadians. This is why the confusion I have needs to be clarified in simple language.
I am sure all right-thinking Barbadians feel this way too as, like me, they want to have confidence in what they’re being told and feel comfortable about the future of our island home.