Stephen: Government may have to commit political suicide
(File Photo) Jeremy Stephen
Economist Jeremy Stephen has weighed in on the recent economic review released by the Central Bank of Barbados (CBB) saying it is time for government to focus on cutting expenditure rather than raising taxes.
In a video posted to Facebook, Stephen, a former President of the Barbados Economic Society (BEC), said he is concerned that government is still overly dependent on tax revenue which is impractical considering that the National Social Responsibility Levy (NSRL) did not perform as expected in the last fiscal year.
During the economic review it was revealed the NSRL, which yielded $84 million since its July implementation, fell significantly below what government expected due to numerous exemptions granted to private sector entities.
Stephen said though it is unreasonable to expect government to cut its expenditure between now and when elections are held, the time has come for government to make the necessary public-sector reform.
While not stating explicitly that public sector jobs needed to be cut, he noted the only way to cut expenditure was for government to make "politically suicidal" decisions.
"It comes down to reducing the safety that government workers have- the appointments. Probably changing how appointments are done, incentivizing government workers to perform more on the job. If you get performance pay in government I feel it can change things."
Stephen said Barbados can expect "more bad news in respect to the reserves", especially if planned divestment of government assets is not completed by the end of the first quarter. At the end of 2017 the international reserves stood at $410 million, equivalent to 6.6 weeks of imports. The sale of the Barbados National Terminal Oil Company (BNTCL) and the sale of the Hilton Hotel, expected to inject the reserves with $180 million in total, are yet to be finalized.
He said these hiccups will see the reserves fall to around four weeks of import cover by April. He added if this becomes a reality Barbados can expect another downgrade soon.