WITH TOURISM STARTING to rebound, and with oil prices at historic lows, it’s time to free up the economy.
Of course, we don’t want people to go out there and consume whatever they like, but there really isn’t anything you can do about that. A small and open economy like ours can only survive if it allows people to bring in, as well as spend, foreign currency as they like, or at least, within much wider parameters than before.
Knowing this to be the case, the policy of the Freundel Stuart Administration has been as follows: We may not be able to stop you from buying what you like, citizens and taxpayers of Barbados, but we can take the money out of your pocket before you get the chance to spend it.
Even though it was a raw deal that we got, let us for one moment pretend it was based on noble ideals about saving the country from its import lust. The reality was that Government did not tighten its belt back in late 2010 when most of the new taxes were introduced or the traditional ones raised.
Nor did it do so to the extent it promised when it announced that 19-month stabilisation programme back in 2013, under which the last vestiges of spare change in people’s pockets was removed by the Government’s seemingly ever-more-efficient tax suction tubes.
But as we consumers lay on our sick beds with all those tubes attached, sucking our economic lifeblood out of us rather than putting in the nutrients we needed, the Government continued to raise its spending until its half-hearted tightening up effort that was supposed to start in September mid-2013, got underway at the end of the year.
Then the Government ran away from its own programme like a bat out of hell as soon as people cried out, mainly because the administration could not resist making most of the burden fall along political lines.
Remember the promised rationalisation of the statutory corporations? Never happened, and even now, only the very low hanging fruit is even contemplated being picked.
The result? A fizzle of the much-vaunted restoration programme, because by the time Government started to get semi-serious about cutting expenditure (those 3 000 people sent home and those caps on subsidies and transfers), it had had to borrow so much to make up the shortfall in revenue that everything it saved in expenses it is now paying out in interest on the massive borrowing undertaken to keep this ungainly economic ship of state afloat. It turns out that the fiscal deficit doesn’t go away just because you ignore it. It gets bigger.
Wonderful news
That is why the Central Bank of Barbados was notably, and perhaps surprisingly, muted in announcing last week the wonderful news that tourism has gotten of to a flying start this year.
Coming to the end of its press release for the first quarter’s performance, the bank simply noted that, despite the benefits we will get in terms of foreign exchange and the economic turnover from the industry on which everything depends, the fiscal deficit projected for the current fiscal year 2015-16, which is six per cent of GDP, “remains above levels that can be sustained over time,” and that reducing the ratio of debt to GDP “will be attained only when the deficit falls below the growth rate of GDP.” (Central Bank press release, March 2015, page 4)
We will achieve the latter (increasing the growth in GDP) if our sudden tourism resurgence does not turn out to be a flash in the pan, which I doubt it will. I personally am impressed by the enthusiasm and hard work of the Minister of Tourism Richard Sealy, whose efforts to bring back the airlift is now paying big dividends and who should be congratulated on a non-partisan basis.
I am also impressed with the team now in control of the Barbados Tourism Marketing Inc. They were appointed when things were near their lowest ebb and they did not panic, but continued with the plans they were putting into action.
But let us not do like the Government did back in mid-2013 and give a half-baked response to the debt crisis that faces us.
The first part of the central bank’s terse statement, (reducing the ratio of debt to GDP), will not be achieved if the Government continues to operate so many loss-making enterprises.
We have been through all of the pros and cons and we will revisit them for each case as it comes up. But before you rationalise, which means selling off assets and businesses, and which inevitably will put some people out of jobs, let us provide everyone will more incentives to get into businesses of their own, no matter how small.
Much of the programme outlined in the value added tax (VAT) reform paper produced by the International Monetary Fund should be passed into law, and Government should keep up the pressure, but this time include the vehicle dealers, to turn Barbados into a renewable energy geographic space at a much faster clip.
It is national shame that not one long-established vehicle dealership is offering any form of hybrid, far less electric, vehicle in their line-ups. Please, somebody, prove me wrong. Don’t wait for the oil price to go back up. Let the renewable energy industry grow exponentially, as it will create thousands of jobs at all levels of society.
If Minister of Finance Chris Sinckler takes some risks in opening up the economy, he may see lots more tax revenue coming in than his Estimates suggest, as they are mainly flat with the exception of expected surges in personal income tax and VAT revenues. Could that be a hint as to the thrust of the coming Budget Speech?
