The following is an update from a BU correspondent with a few edits applied by the blogmaster. It is important we maintain focus on the management of the economy. It is encouraging to observe in recent days the Nation newspaper has been guided to also focus on the economy and related news as Barbadians immerse themselves in matters related to celebrating Christmas. The challenges facing the country will be waiting patiently for a return to more sober ways.
The Estimates for 2022/2023 confirm the common practice in recent decades of successive governments constrained to fund ugly deficits to support our consumption behaviour, graft, financial incompetence/mismanagement exposed in annual Auditor General Reports and Central Bank Reports. The estimates for 2022/2023 read a shortfall of $173. million dollars.
–David, Blogmaster
On the 16 December 2022 in parliament Minister in the Ministry of Finance, Ryan Straughn delivered the mid-year review of Barbados’ fiscal performance from March to September, as is required by the Financial Management Act passed in 2019. The review consists of important information on spending, interest payments on debt and current debt levels. Here is a video of what the Minister had to say at about 6 minutes in https://youtu.be/icgJs7wFN0I and the document laid in parliament with the title MINISTERIAL STATEMENT HONOURABLE RYAN STRAUGHN M.P. MINISTER IN THE MINISTRY OF FINANCE.
The good news is that Barbados’s debt to GDP ratio is on a downward trend, this is after it increased during the pandemic, The Debt to GDP ratio now stands at 126 % which is below the 178% in 2018.
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Policy Performance and Outlook (Part 2)
This is consistent with what some had predicted with the economy producing higher growth this year which is materialising due to significantly higher tourism arrivals with growth projected to be at around 10% this year.
Of concern to many in the mid-year review is that the government will run a fiscal surplus of 2% which is larger that the original 1% target. This higher fiscal surplus is due to larger than expected corporate tax intake and transaction tax (e.g. VAT ) intake due to higher inflation and the fact that government spending this year so far is actually 9% lower than originally projected.
The current global environment remains challenging for developing countries due to rising global interest rates and a strong US dollar which put a strain on debt servicing costs and causes Foreign Direct Investment (FDI) outflows since bond investors can now get higher interest returns in developed countries with less risk. This environment can be seen in challenges faced by Sri Lanka, Ghana and Pakistan.
An overall assessment of the Mottley administration’s handling of the economy is – so far so good.The biggest area of concern however is the fall in the Government’s capital works programme. In the previous fiscal year it was felt that the administration did well to get it to about 4 percent of GDP. which was the highest since the mid 2000s, but it has fallen again in this fiscal year to only $55 million thus far. Whatever bottlenecks the administration needs to remove to get it going again it needs to do so, given that public capital investment is tied to competitiveness in many ways.
Related economic activity
In related developments, a UK media report about Scottlands’s trade mission to Barbados and the work that is being done between companies from both countries, and developments with respect to the relationship between Barbados and Rwanda and also Kenya and the number of Barbadian entrepreneurs that are now going on these missions. This is where the rubber meets the road on economic diversification, Barbadians should be glad to see that we are now finally moving beyond talk and into action. Now that trade policy seems to be improving, the next step is to deal with Education Reform at home.
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