Auditor General Leigh Trotman sounded the alarm in his latest report and now one of the world’s eminent accounting and auditing experts is warning that Government’s $7.5 billion in net debt poses significant danger to its finances.
Ron Salole is the deputy chair of the International Public Sector Accounting Standards (IPSAS) Board, the Canadian entity that developed the IPSAS Government adopted and continues to use.
After engaging 40 public sector finance officers at a specially convened seminar organised by the Institute of Chartered Accountants of Barbados in partnership with the Accountant General’s office at Hilton Barbados last Thursday, Salole told BARBADOS BUSINESS AUTHORITY that he shared Trotman’s concerns that on the present course existing liabilities would be a major financial burden for Barbados well into the future.
In his recently released 2013 annual report, the Auditor General pointed to net debt that had grown from $4.8 billion (2009), $5.5 billion (2010), $6.3 billion (2011), $6.6 billion (2012), to reach $7.5 billion last year.
Trotman defined net debt as all of Government’s liabilities minus its financial assets, those assets “which can be used to pay off liabilities”.
“It is an important indicator of the Government’s financial condition as it represents the future revenue requirements needed to pay for existing liabilities . . . . The maintenance of a high net debt will divert significant funds to debt servicing, thereby reducing Government’s ability to provide services and limiting its options in adjusting to financial challenges,” he warned.
While Salole lauded Government for adopting the IPSAS before most of its Caribbean counterparts, for improving its financial reporting, and showing a willingness to improve its overall accounting, he said spiralling net debt was not something that should be ignored.
“One of the key indicators of fiscal health is . . . net debt. Net debt is the money the Government is going to have to find in the future, and . . . if you look at all the Auditor General’s report, he makes a very clear statement that net debt is going up and has increased significantly,” he said.
“So if you want to tackle [the fiscal deficit] you need to inform people about what the net debt is, how it’s increasing and how it needs to be managed. I sense that the Auditor General is getting frustrated because immediately after his report is issued it dies down and nobody then picks it up again. But he deals with it very, very well in his report and for my jurisdiction, which is Canada, that was one of the ways which we had to tackle our deficit.”
Salole said what Barbados was doing was akin to “borrowing from your kids. You are going to give them some real difficulty around their necks for future generations”.
