The Freundel Stuart administration today announced that an ambitious home grown fiscal adjustment programme embarked on during the past 19 months has prevented a devaluation of the Barbados dollar and stabilized foreign exchange demand.
Leading off a one-week debate on the 2015/2016 Estimates of Revenue and Expenditure in the House of Assembly, Minister of Finance Chris Sinckler also disclosed that the programme had resulted in a primary surplus for the first time in three years, to the tune of $56.1 million.
In a presentation that lasted more than two hours, Sinckler described this as a major achievement for the local economy, considering that the country had recorded a primary deficit of $351 million during the 2013/2014
financial year.
Minister of Finance Chris Sinckler.
“The fiscal adjustment programme has already shown success in attaining the preeminent objective of protecting the Barbados dollar and stabilizing the foreign exchange [situation]. The value of the dollar has been protected by these measures that contained spending in line with capability,” he said.
“The fiscal deficit to date has achieved that most important objective – to reduce the demand for foreign exchange in line with our ability to supply.”
The Minister told the Chamber it was clear that not only has the Government been able to meet its revised fiscal target of 7.2 per cent of Gross Domestic Product [GDP] in the current financial year, but would have been able to achieve its original goal of 6.6 per cent, taking in account the capital stock of the Bank of Central America [CAF].
He said it was “absolutely critical” that Government get the deficit to a sustainable level to avoid accumulating an insurmountable amount of debt for future generations.
Sinckler noted that the success of the homegrown measures demonstrated that Barbados could craft its own policies – albeit with some outside technical assistance – that would work, and without intervention from financial institutions such as the International Monetary Fund.
“However, the job is not over. We must stay the course, maintain our discipline and feed and extend the fiscal gains we have been making in 2014 into the next financial year and beyond. As our economy returns to growth, the combination of robust growth and fiscal discipline augurs well for our future,” the Finance Minister contended.
Sinckler said 2015 provides a chance to lock in the small gains made and to push for further achievements, restore the foreign exchange market and lay the foundations for real economic growth. However, he stressed, this was only phase one in a wider project to repair, restructure and fully revive the economy.
He said the other major aspect of “operation restore” would be to tackle the twin problems of the deficit and
the debt.
“If there is anything that could stand between this country and its ability to return to robust and sustainable growth, it is our current challenges with high fiscal deficits and high public debt levels,” Sinckler cautioned.
Spelling out the projected financial outturn for 2014/2015, the Finance Minister said that on the accrual basis, the net operating balance was projected at negative 5.7 per cent of GDP.
Sinckler told the House that preliminary data from April 1, 2014 to January 31, 2015 revealed that current revenue was $1.876 billion, an increase of $117.4 million or 6.7 per cent from the amount recorded for the corresponding period during 2014.
He explained that this amount was $103 million less than projected.