University of the West Indies (UWI) Professor Don Marshall is warning that the government’s 2024-2025 Estimates of Revenue and Expenditure portends a worrying public finance quandary for policymakers, suggesting the situation narrows wriggle room for growing the economy while paying debts.
On the eve of the debate in the House of Assembly, Professor Marshall, the director of the Sir Arthur Lewis Institute for Social and Economic Studies (SALISES) expressed “great” concern over the challenges the Mia Mottley administration will face in the new fiscal year that begins on April 1, in financing the deficit and meeting a burgeoning foreign debt.
Professor Marshall said the essential features of the spending estimates “relate to the task of financing the deficit and delving into the public policy constraints posed by the International Monetary Fund (IMF)/Barbados Economic Recovery and Transformation (BERT) programme 2.0 master plan”.
The UWI academic was adamant that discussion on the Appropriations Bill will be preoccupied with spending allocations, and actual and pending adjustments in statutory corporations such as the recently closed Barbados Agriculture Management Company (BAMC) and Export Barbados, the Barbados Investment Development Corporation. He noted that Export Barbados has been the subject of repurposing and reorganisation, but that as of last month, its innovation initiatives take on the “colour of privatisation when cut to the bone”.
Professor Marshall told Barbados TODAY: “The first-order questions should precede the public policy decisions that belie the expenditure allocations. Barbados’ total debt obligations, including interest payments, are estimated to be $1.06 billion in 2024/2025. This is cause for great concern as the foreign dollar component of this debt continues to grow.
“There, too, is a projected $251.9 million fiscal deficit on the cash basis next year. Normally, governments could rely on taxes and fees, Central Bank financing, borrowing from external sources, and a sale of government assets to finance its deficits and address debt obligations.
“However, the Barbados Government has no easy recourse to Central Bank financing for institutional investors, and the citizenry remains skittish about purchasing Government bonds and securities following the 2018 haircut experience.”
The SALISES director suggested that the reduction in government transfers, real and anticipated, concerning the BAMC and Export Barbados, are yet to be realised.
“The clamour against the high cost of living also makes the prospect of increasing taxation politically unbearable. This, altogether, bespeaks a public finance quandary that can no longer be overlooked,” Professor Marshall cautioned.
He pointed out that it has been five years since the government has come to rely on the IMF for financing support to, among other matters, sustain the country’s foreign exchange buffer.
“While such financing adds to its debt stock, it provides the gateway for the government to borrow from other external lenders… all the while, the country compounds its foreign debt exposure,” he said. “The persistent borrowing also entails commitments to financial sector reform and an ongoing fiscal correction that trespasses on the country’s public policy autonomy.
“This impacts the budgetary conduct of our public and elected officials. Solutions to our challenges in seeking to diversify the economy, stimulate innovation-mediated industry, and encourage value-added, sustainable growth must satisfy objectives set out by financial elites,” the professor suggested.
“There is everything about the 2024 Estimates of Expenditure that tells us about our development paradoxes marked by our limited range of policy manoeuvre, and the negatively dependent relationship Barbados has forged with the IMF.”
In a statement on Tuesday, the Ministry of Finance said it expects to spend one-third more during the coming financial year – $4.66 billion – to support central government operations. This is on the accrual accounting basis or $4.59 billion on the cash basis. It revealed that one in three dollars will be spent on paying down the country’s debt.
On the revenue side, the government is forecasting it will collect $3.72 billion ($3.54 billion on the cash basis) from taxpayers and other sources over the next 12 months – a quarter-billion-dollar deficit.
emmanueljoseph@barbadostoday.bb
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