ITEMS TAKEN OUT OF THE VAT FREE BASKET
TARIFF NUMBER
TARIFF DESCRIPTION
19.01
Malt extract; food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of headings 04.01 to 04.04, not containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included
19019090000
Other
19019020100
Preparations of malt extract used for making beverages
19011000900
Other preparations for infant use, put up for retail sale
19011000100
Preparations for infant use, put up for retail sale ( milk and soya bean flour base
18069000900
Other chocolate and other food preparations containing cocoa
18061000000
Cocoa powder, containing added sugar or other sweetening matter
15.15
Other fixed vegetable fats and oils (including jojoba oil) and their fractions, whether or not refined, but not chemically modified
Maize (corn) oil and its fractions
15152900000
Other
15.07
Soya-bean oil and its fractions, whether or not refined, but not chemically modified
15079000000
Other
10.06
Rice
10.06.40.00
Broken rice
10064090000
Other broken rice
10064010000
In packages for retail sale
10063080000
Other wholly milled parboiled rice
10063070000
Wholly milled parboiled rice, in packages of not more than 10 kg
10063060000
Semi-milled or wholly milled rice
10.06.10.00
Rice in the husk (paddy or rough)
10061090000
Other
8.1
Other fruit, fresh
Christopene (Choyote)
8109080000
Other fruit, fresh, nes
8109060000
Carambolas
Golden Apples
8109020000
Other fruit, fresh, nes
8105000000
Kiwifruit
8104000000
Cranberries, bilberries and other fruits of the genus Vaccinium
8102000000
Raspberries, blackberries, mulberries and loganberries
8101000000
Strawberries
8093000000
Peaches, including nectarines
8092000000
Cherries
8091000000
Apricots
8082000000
Pears and quinces
8.07
Melons (including watermelons) and papaw (papayas), fresh
8071990000
Other
8045030100
Mangosteens, fresh
8041000100
Dates, fresh
8029090100
Other nuts, fresh
8029010100
Kola nuts, fresh
8025000100
Pistachios, fresh
8024000100
Chestnuts (Castanea spp.), fresh
8023200100
Walnuts shelled, fresh
8023100100
Walnuts in shell, fresh
8022200100
Hazelnuts or filberts (Corylus spp.) shelled, fresh
8022100100
Hazelnuts or filberts (Corylus spp.) in shell, fresh
8013200100
Cashew nuts shelled, fresh
8013100100
Cashew nuts in shell, fresh
8012200100
Brazil nuts shelled, fresh
8012100100
Brazil nuts In shell, fresh
8011900100
Coconuts In shell, fresh
7.1
Vegetables (uncooked or cooked by steaming or boiling in water), frozen
7109090000
Other
7.10.80.00
Other vegetables
7108090000
Other
7108040000
Vegetables, frozen, nes
7.10.40.00
Sweet corn
7104090000
Other
07.10.30.00
Spinach, New Zealand spinach and orache spinach (garden spinach)
7103090000
Other
Leguminous vegetables, shelled or unshelled
7102990000
Other
7.10.22.00
Beans (Vigna spp., Phaseolus spp.)
7102290000
Other
7.10.21.00
Peas (Pisum Sativum)
7102190000
Other
7101000000
Potatoes
7.09
Other vegetables, fresh or chilled
7099090000
Other
7095200000
Truffles
7095100000
Mushrooms, fresh or chilled
7092000000
Asparagus
7091000000
Globe artichokes
7081010000
Peas, fresh or chilled
7052100000
Witloof chicory (Chichorium intybus var. foliosum)
7042000000
Brussels sprouts
7039000000
Leeks and other alliaceous vegetables
7.01
Potatoes, fresh or chilled
7019000000
Other
4.06
Cheese and curd
4069000000
Other cheese
4064000000
Blue-veined cheese
4062000000
Grated or powdered cheese, of all kinds
305
Fish dried, salted or in brine; smoked fish, whether or not cooked before or during the smoking process; flours, meals and pellets of fish, fit for human consumption.
3055910000
Other: Mackerel
3.04
Fish fillets and other fish meat (whether or not minced), fresh, chilled or frozen
3049000000
Other
Frozen fillets:
Flying Fish
3042090900
Other
Fresh or chilled:
3041090900
Other
3038020000
Roes
3.03
Fish, frozen, excluding fish fillets and other fish meat of heading 03.04
3037990900
Other
3037990200
Frozen fish, nes
3037990110
Marlin, sailfish, spearfish frozen for processing
3037920900
Snapper, croaker, grouper, bangamary and sea trout
03.03.78.00
Hake (Merluccius spp., Urophycis spp.)
3037890000
Other
3037700000
Sea bass (Dicentrarchus labrax, Dicentrarchus punctatus)
3037600000
Eels (Anguilla spp.)
3037500000
Dogfish and other sharks
03.03.74.00
Mackerel (Scomber scombrus, scomber australasicus, scomber japonicus)
3037490000
Other
3.03.71.00
Sardines (Sardina pilchardus, Sardinops spp.), sardinella (Sardinells spp.), brisling or sprats (sprattus sprattus)
3037190000
Other
3.03.60.00
Cod (Gadus marhua, Gadus ogac, Gadus macrocephalus), excluding livers and roes
3036090000
Other
3.03.50.00
Herrings (Clupea harengus, Clupea Pallasii), excluding livers and roes
3035090000
Other
3034900000
Other
Yellowfin tunas (Thunnus albacares):
3034290000
Other
Albacore or longfinned tunas (Thunnus alalunga):
3034190000
Other
Flat fish (Pleuronectidae, Bothidae, Cynoglossidae, Soleidae, Scopthalmidae and Citharidae), excluding livers and roes:
3033900000
Other
3033300000
Sole (Solea spp.)
3033100000
Halibut (Reinhardtius hippoglossoides, Hippoglossus Hippoglossus, Hippoglossus ste
Other salmonidae, excluding livers and roes:
3032900000
Other
3032200000
Atlantic salmon (Salmo Salar) and Danube salmon (Hucho hucho)
3032100000
Trout (Salmo trutta, Oncorhynchus mykiss, Oncorhynchus clarki, Oncorhynchus aguabonit
Pacific salmon (Oncorhynchus nerka, Oncorhynchus gorbuscha, Oncorhynchus keta, Oncorhynchus tschawytscha, Oncorhynchus kisutch, Oncorhynchus masou and Oncorhynchus rhodurus), excluding livers and roes:
3031900000
Other
3031100000
Sockeye salmon (red salmon) (Oncorhynchus nerka)
3.02
Fish, fresh or chilled, excluding fish fillets and other fish meat of heading 03.04
3026990900
Other
3026920900
Snapper, croaker, grouper, bangamary and sea trout
3026500000
Dogfish and other sharks
Flat fish (Pleuronectidae, Bothidae, Cynoglossidae, Soleidae, Scopthalmidae and Citharidae), excluding livers and roes:
3022900000
Other
3022300000
Sole (Solea spp.)
3022100000
Halibut (Reinhardtius hippoglossoides, Hippoglossus hippoglossus, Hippoglossus ten
Salmonidae, excluding livers and roes:
3021900000
Other
3021200000
Pacific salmon (Oncorhynchus nerka, Oncorhynchus gorbuscha, Oncorhynchus keta,
3021100000
Trout (Salmo trutta, Oncorhynchus mykiss, Oncorhynchus clarki, Oncorhynchus aguabonit
2.1
Meat and edible meat offal, salted in brine, dried or smoked; edible flours and meals of meat or meat offal
2109900000
Other
2102010000
Salted or in brine
2101910000
Salted or in brine
2062100000
Tongues
2061000000
Of bovine animals, fresh or chilled
2043000000
Carcasses and half-carcasses of lamb, frozen
2032200000
Hams, shoulders and cuts thereof with bone in
2031200000
Hams, shoulders and cuts thereof with bone in
2.02
Meat of bovine animals, frozen
Boneless:
2023090000
Other
2023020000
Sirloin
2023010000
Tenderloin
Other cuts with bone in:
2022090000
Other
2022010000
Brisket
2.01
Meat of bovine animals, fresh or chilled
Boneless:
2013090000
Other
2013030000
Minced (Ground)
2013020000
Sirloin
2013010000
Tenderloin
2.03
Meat of swine, fresh chilled or frozen
203290090
Other, frozen
203290010
Spare Ribs, frozen
203190090
Other, fresh or chilled
203190010
Spare Ribs, Fresh or Chilled
(EDITOR’s PROLOGUE: Looking this morning at items removed from VAT, some are understandable… Tenderloin steak, Truffles, Pistachios, Walnuts and Mushrooms.
It is the following which has me pole-axed?
Malt extract beverages (Tiger Malt); “Other preparations for infant use, put up for retail sale;” “Other chocolate and other food preparations containing cocoa;” Corn & Soya Oil; Parboiled Rice; Christophene/Spinach/Frozen Vegetables/Sweet Corn/Peas/Potatoes/Spinach (all – local or NZ); Mackerel/Marlin/Saltfish/Bangamary/FLYING FISH 0_o (WDR?); Salt Beef or Pork; Ground Beef & any Frozen Pork)
PRESENTATION OF THE FINANCIAL STATEMENT AND
BUDGETARY PROPOSALS 2015 DELIVERED
BY CHRIS SINCKLER, M.P. TO THE HOUSE OF ASSEMBLY
MONDAY JUNE 15, 2015, 4 PM
Opening Statement:
Mr. Speaker, in my capacity as Minister of Finance and Economic Affairs, I am both privileged and honoured to stand before you, this Honourable House of Assembly and the people of Barbados to present the Financial and Economic Statement and accompanying Budgetary Proposals.
In doing so Sir, it would be remiss of me if I did not seize upon this early opportunity to express on behalf of the Rt. Hon. Prime Minister, the Right Honourable member for St. Michael South, colleagues, and all other members of this administration, our debt of gratitude to Almighty God for preserving our nation and its people in these challenging times.
Truly, the Lord has been and continues to be our ever dependable and never failing guide in whose blessed countenance we walk and will surely have no doubts or fears.
Equally Sir, permit me to express our sincerest and humble appreciation to the people of Barbados for their steadfast and committed support for this administration during this crucial period of reflection, reform, restructuring and resuscitation of our economy and society. It has not been easy, and chances are, it will continue to challenge us, but your support for Team Barbados has been exemplary and absolutely critical in allowing your government to steady the ship of state and navigate it to less turbulent waters.
On a personal level I would also like to thank the wonderful people of St. Michael North West not only for their continued solid support for me as their MP, but surely for their patience and understanding of the difficulties I would sometimes face in juggling the demands of the office I hold in the government and my ultimate responsibilities to them as their representative.
And last, but certainly by no means least, to my family: my wife Arlyn and children and the extended circle for their insistence in walking through this tough journey with me while maintaining a quiet, dignified, and unflinching commitment to the cause to which I have dedicated myself. I am eternally in their gratitude.
Mr. Speaker Sir, just over 20 months ago, I stood before this Chamber and soberly presented to the people of Barbados the then obviously challenging conditions of our economy. Barbados was truly at a cross road. Our economy, still reeling from the devastating impact of the worse global economic decline in nearly one hundred years, was facing a potential crisis in key macro-economic variables which, if left unaddressed, would have undermined the very functions and foundations of the country.
Our foreign reserves were declining at uncomfortable rates; our public finances had deteriorated to worrying levels of instability as both fiscal deficits and overall public debt rose to unsustainable heights, while economic growth had stalled and declines in GDP were inevitable.
I indicated to this House and the country, as I had done in previous national consultations with the Social Partners, that if we did not take strong and decisive actions then, that those conditions, plus others, would have coalesced to produce an environment of instability that would have threatened the economic and social viability of Barbados.
Ours was a solemn duty to provide steadfast leadership as a government to ensure that we halted the deterioration, repaired the damage and prepared a platform for the return of financial stability and economic growth.
Today, I am able to say to you, to this Chamber and to the whole of Barbados that the home grown economic stabilization and recovery plan which we devised right here in Barbados (the Barbados Programme) is working. As a result of our 19 month programme, the Barbados dollar is safe, the fiscal deficit has been cut by nearly half and is well on its way to more sustainable levels, and a tourism-led recovery in the Barbados economy is under way.
However, the job is not yet done. We have to get our deficit down to more sustainable levels and we must capitalize on the foundation laid for economic growth.
Mr. Speaker, numerous persons inside and outside of this Honourable Chamber believed, propagated and some even prayed, I believe, that this administration would have failed. They believed and openly stated that we would have had to devalue the dollar; that the government would have defaulted on its foreign and domestic debt; that Barbados would have had to go (or ought to have gone) to the International Monetary Fund, cap in hand, and that all manner of economic and social calamity would have befallen this fair land of ours.
They pronounced this administration as inept, lazy, say-nothing and do-little, incapable of managing Barbados. Our failure, Sir, in their view was certain, and the Opposition, I am reliably advised, was already discussing which ministries would go to whom within their ranks when this predicted (end of year 2013 then 2014) collapse would come to a certain pass.
However Sir, those of us who are students of domestic politics and/or perhaps have been privileged enough to have been given the opportunity to serve at the highest levels of government are more than familiar with the kind of naked pessimism that makes for political discourse in small societies such as ours. It is a level of skepticism that seeks to undermine confidence in a nation’s ability to fashion and implement policies that reflect a collective consciousness.
Surely Sir, this kind of behaviour is hardly new to us on this side. We saw and had to deal with it on the great question of whether to seek independence from Britain in the mid-1960s; we equally had to contend with the doubters of several of the DLP’s revolutionary social programmes including free secondary education; and again we were confronted by the abuse and vilification of the Erskine Sandiford Administration of the early 1990s which crafted the then unpopular but now widely acclaimed national stabilization and economic resuscitation programme.
It therefore came as little wonder to any of us on this side that the bastions of defeatism once again reared their ugly heads in a vain attempt to destroy the confidence of the people of Barbados that we have what it takes to fix our faults and plot our progress back to the resumption of sustained national development.
But ambition Sir, for all its perceived shortcomings is made of sterner stuff, and this Democratic Labour Party led by The Rt. Hon. Member for St. Michael South believed in itself but more importantly we believed in the people of Barbados and we trusted God.
To be sure Sir, we took comfort in the exhortation of the great Indian leader and anti-colonial champion Mahatma Ghandi who, when in the heat of the struggle to liberate his country from the clutches of colonial domination, observed and I quote:
“Man often becomes what he believes himself to be. If I keep on saying to myself that I cannot do a certain thing, it is possible that I may end by really becoming incapable of doing it. On the contrary, if I have the belief that I can do it, I shall surely acquire the capacity to do it even if I may not have it at the beginning.”
? Mahatma Gandhi
We did not invest in the politics of failure, or succumb to the thought of inability. Rather this administration believed that as a people we had what it took to turn the situation around. We applied ourselves to the task at hand, designed and implemented a programme that was of the correct order of magnitude and appropriate to the circumstances, and have now given our people a chance to resume our march towards constructing a country that is socially balanced, economically viable, environmentally sound and characterized by good and transparent governance.
We are once again showing the rest of the region and the world that Barbados and Barbadians are leaders, not followers, and that through dint of hard work and working together as a nation we can achieve success even when the odds seem stacked against us.
Indeed Sir, I make bold this afternoon to say that with the significant progress we have made thus far from the Barbados Home Grown Fiscal Stabilization and Economic Revitalization Programme, if we stay the course, make the sacrifices as a nation and seize the opportunities which now abound because of our efforts, that we Barbadians will write an uncommon history in the pages of economic achievement. A history Sir, that will serve as a lasting guide to many a developing country that within their own minds, hearts and abilities lay many an answer to the challenges they face.
When they predicted failure the Democratic Labour Party crafted success; when they said our dollar would be devalued within months we strengthened it; when they predicted we would run out of reserves, we stabilized and grew them; when they said our deficit could not come down, we brought it down; when they lamented we couldn’t raise a primary surplus we generated one; when they said our economy would not grow again under our Barbados Home Grown Programme, we laid the platform for the resumption of economic growth and are growing again.
I say to you Mr. Speaker Sir, and to my fellow Barbadians that now is our time to stand upon this launch pad and renew our commitment to country and to ourselves that we resolve to see this process through to its ultimate goal of correcting past structural imbalances in our economy and society in as complete a manner so that we never have to walk this path again.
It is said that the longest journey begins with the first step and, as evidence will show and we will put forward over the next three days, we have begun that walk to a new beginning in Barbados where high deficits are no more, neither high debt nor high unemployment, but balanced, sustainable and inclusive growth that contribute to the expansion of opportunity, the boosting of productivity and the reduction of poverty across this fair land of ours.
Permit me Sir to begin my report by reflecting on the results of our 19-Month Barbados Home Grown Fiscal Stabilization and Economic Revitalization Programme:
Mr. Speaker, as I would have noted earlier and as Barbadians would have recalled, the operating environment, against which government took the decision to initiate the national home grown programme, was such as to threaten the economic stability of Barbados.
The country was losing international reserves at a rate of more than 10 million dollars per month as the FX market remained weak due to contractions in the main FX earning sectors, while aggregate demand in the overall economy was still relatively high.
This situation was further compounded by a growing central government deficit which, at the start of the programme, had reached near 9% of GDP. As a result, it was fuelling an unacceptable expansion in short-term public sector debt since government was forced to borrow at relatively high rates to finance the gap.
Beset by these challenges, and mindful of the potential they had to undermine the stabilizing influence of the exchange rate anchor in the Barbadian economy, the primary objectives of that programme were as follows:
1. Restore and stabilize the foreign exchange reserves so as to be able to protect our fixed exchange rate;
2. Reduce the fiscal deficit to sustainable levels; and
3. Lay the foundation for returning the Barbados economy to sustainable growth.
As you would recall Sir, the package of measures I presented before this Chamber was set against a projected operating deficit in central government of between 8 and 9 percent of GDP. However, even before the core measures of that programme could run a full financial year, the impinging growth of rising debt service costs, and particularly, the accruing of several prior year expenditures from key statutory entities such as Queen Elizabeth Hospital (QEH), National Housing Corporation (NHC) and Transport Board, caused the deficit to leap frog the official projected levels.
On a revised basis therefore, the degree of difficulty facing the government was increased by about 3 percentage points of GDP, so that by December 2014 the country was dealing with a deficit projected at 11.8 % rather than 8.5%.
Nonetheless Sir, we were not daunted by the task, preferring instead to recalibrate both our projections and the level of our intervention to suit the circumstances. So that where we were initially intending to move from a deficit of 8% to 5.4 % by the end of fiscal 2013-14, and then to 2.5 % by end of fiscal 2014-15, we had the more difficult task of moving it from 11.8 % in 2013-14 to 6.6% by end of fiscal 2014-15.
Put another way Sir, rather than reducing the national deficit by 6 percentage points in 18 months, we were set with the task of reducing it by the same amount in one financial year.
Of course few people thought this was practical or indeed achievable.
Mr. Speaker, following a comprehensive review by the Division of Economic Affairs, I am able to report to the country that at the end of the 19-Month Home Grown Fiscal Stabilization and Economic Revitalization Programme at March 31st 2015, of the fifty (50) budgetary policies announced by the Minister of Finance and Economic Affairs, an estimated 72 percent or thirty-six (36) policies have been completed. In addition, nine (9) of these policies continued their implementation trajectories in advanced momentum based on key performance indicators. This puts the overall programme for implementation coverage at 90 percent and the overall implementation momentum at 100 percent. Five (5) policy actions are ongoing steadily and there were no outstanding concerns.
In this context the following observations can be made with specific reference to the objectives:
Objective 1. Restore and stabilize the foreign exchange reserves so as to be able to protect our fixed exchange rate:
I am pleased to be able to report to this House and the country that the foreign exchange reserves have been restored and are stable at levels adequate to protect the fixed exchange rate. At the end of March 2015, reserves were $1,135 million or 16.1 weeks of imports of goods and services, up from 14.7 weeks of imports at the end of December 2014 and further up from the 12.5 weeks they had fallen to by the end of 2013. This 16.1 weeks is well above the international benchmark of 12 weeks of import cover. The normal daily pattern of changes in foreign exchange reserves has now been restored, and the foreign exchange market is stable once again.
Sir, those of us who understand the import of this achievement would tell you that the single most important variable in this economy, in a small vulnerable FX dependent and open economy with a fixed exchange rate such as ours is a stable and growing FX market. Practically, everything we do in Barbados is linked in one way or the other to the earning and spending of foreign exchange. As such the very economic stability of the country, the confidence of domestic and foreign investors, and the sustainability of government operations, businesses and households is invariably dependent on the availability of adequate levels of reserves in the Monetary Authorities.
That we were able to stop the disturbing hemorrhaging observed in 2013, stabilize the FX market and resume some signs of growth in the reserves by late 2014 is a tribute not just to the appropriateness of the fiscal policies we pursued, but to the very robust monitoring process which the Ministry of Finance and Economic Affairs and the Central Bank of Barbados have put in place ever since these challenges emerged.
Objective 2. Reduce the fiscal deficit to sustainable levels:
At present, most experts agree that the normal growth rate for the Barbados economy is between 2.5 and 3.0 % of GDP, otherwise the debt as a share of the economy or the Debt to GDP will keep rising. As indicated earlier, at the end of the 2013/2014 fiscal year the fiscal deficit stood at 11.8 % of GDP. As we sought to move the deficit to a more sustainable level without, quite frankly, destroying the economy and all the social services, we have set ourselves the ambitious target of reducing it to around 6.6% of GDP in a single financial year. More than this we also knew that in real terms the primary deficit of $385 million which we closed 2013/14 with was absolutely unacceptable and had to be brought down significantly over the next fiscal period and reversed entirely over time.
The empirical results, the figures on which I will shortly report, will show that not only were we able to meet the overall fiscal target of 6.6 % surpassing even our revised target of 7.2 % of GDP, but also we were able to turn around the primary deficit of $385 million to a primary surplus of BDS$85 million dollars in one fiscal year.
It is important to appreciate Sir, that if you don’t run a primary surplus, it means that you are borrowing all of the money you need to pay interest on your debts. Achieving a primary surplus therefore is a crucial first step as we restore fiscal balance, and we have seen that we have been successful in achieving this.
The fiscal deficit is not just a number that you mechanically focus on. The fiscal deficit represents the amount of new borrowing the government will have to undertake in a given period and by extension how much of the future wealth of the country will go towards servicing debt rather than being invested in the people of the Barbados. We promised and we are delivering on deficit reduction. What’s more Sir, is that we have been able to reduce our deficit by as much as 5 percentage points in a single financial year.
A reduction of this magnitude in the overall fiscal deficit in a single fiscal year, and the dramatic turnaround in the Primary Balance is a remarkable achievement and a testimony to the skill and determination of our economic team, the discipline and determination of the government and the resilience and discipline of the people of Barbados. As we approach our fiftieth year of independence, we have once again shown the world that we have what it takes to be a great nation – firm craftsmen of our own fate.
Our goal in the next phase of fiscal adjustment is to move to a current account surplus, where we only borrow for capital expenditures which increase the growth capacity of the economy.
Objective 3. Lay the foundation for returning the Barbados economy to a sustainable growth path.
While a number of commentators have focused on the fiscal adjustment aspect of the 19-Month programme, laying the foundation for growth was always a central plank of our Home Grown Fiscal Stabilization and Economic Revitalization Programme. The specific growth objectives were outlined in the Barbados’ Growth and Development Strategy 2013 – 2020. Mr. Speaker, with respect to the progress report on that strategy, there are some key achievements as at March 31st 2015:
Tourism
The Barbados Tourism Authority (BTA) was successfully restructured with the establishment of the Barbados Tourism Marketing Inc. (BTMI) and the Barbados Tourism Product Authority (BTPA) with minimal disruption to this critical area of work.
The Government purchased and refurbished parts of the Almond Beach Resort and put those rooms back into operation;
We reduced the VAT rate on accommodation and direct services in the hotel sector to 7.5 percent.
We successfully amended and are now in the process of implementing the provisions of a much improved Tourism Development Act (TDA), which when fully accessible will shift the fundamental basis of the tourism trade towards a genuine export sector for the first time in the country’s history.
The Government reduced the bound duty rate on identified items in line with the common external tariff rate of 40.0 percent observed by CARICOM for external goods.
Over 300 rooms were brought back into operation in the tourism sector during that period of time.
We have successfully increased our airlift out of key source markets such as the UK, USA and Canada, while beginning the process to dramatically improve our accommodation offerings with the presence of Sandals in the market place.
We have successfully worked to resuscitate the high-end part of the tourism market which took a hard hit from the global downturn. Existing capacity is beginning to be sold again, some of the stalled projects have restarted while new ones such as Sam Lords and Hyatt are set to kick-off by next quarter.
We have worked with private sector interests to enhance our product offerings and attractions to the extent that Barbados now boasts a world standard car racing facility at Bushy Park, where we have already hosted two world-renowned racing events in one year.
The National Tourism Host Programme has been successfully launched.
The development of the holistic tourism product pertaining to the UNESCO World Heritage property, which focuses on fully presenting the Historic Bridgetown and Its Garrison Property as a premier attraction, is well underway.
Over the last 19 months much has been done to enhance the competitiveness of the crucial Tourism and Hospitality sector, and in the 2015 Global Tourism Competitiveness Report, Barbados was ranked number one in the Caribbean.
Energy Sector
In the area of energy our policy has been to lead a comprehensive intervention to
achieve three critical results:
1.) restoring financial order to the lone Oil Company and its subsidiaries by completing the removal of the massive debts with which the last administration saddled the BNOCL with from an ill-advised and unsustainable policy of subsidization of fuel, while returning the company to a state of profitability;
2.) continuing our aggressive facilitation of the build-out of an alternative energy sector in Barbados thereby creating the widespread use of renewable sources of energy and bringing down energy costs, while diversifying the economy of Barbados further leading to new areas for investment and job creation; and
3.) We have crystallized and advanced in an appropriate manner the efforts of Barbados to successfully pursue an off-shore oil exploration programme, while re-energizing our on-shore efforts from existing fields.
In this regard Sir, government over the last 19 months has been able to fully stabilise the position of the BNOCL, eliminate the near 200 million dollars of debt that threatened its viability and returned it to profitability.
In the meantime we have completed the process for the bidding on the sale of the Barbados Terminal Company Ltd, and are now in a position to not only make a final selection as to the successful bid but finally return this part of the company’s operation to the private sector from whence it came.
In an effort to reinvigorate our on-shore exploration business the Oil Company has been able to sign a deal with a UK-based firm to re-enter previously retired wells on-shore and, using the latest technology, seek to capture residual oil stocks in those wells to the extent of potentially increasing Barbados daily production to between 500 and 1500 barrels a day. If successful, this effort could also increase the amount of natural gas available to the National Petroleum Corporation.
Government has also been able to sign an official licensing agreement with the international oil company BHP Billiton to lead an off-shore exploration effort that, if successful, could bring hundreds of millions of dollars in earnings to the country in the medium to longer term. And, at a minimum, to bring significant investment and spending in the shorter term as the work leading to the exploration gets started on-shore.
In the Alternative energy sector we have put a National Renewable Energy Policyin place together with accompanying legislation to assist in the orderly build-out of this critical new sector.
That policy envisages more than 29.0 percent of all electricity consumption will be produced from renewable energy. The very critical alternative energy framework is also nearing completion for issuance in October this year. The following specific actions were taken:
Amended the Electric Light and Power Act to better facilitate the development, distribution and regulation of alternative sources of energy as it relates to their interface with the main power supplier and the National Grid. This is to allow for the sector to grow while protecting the integrity of the power system in Barbados.
Amended the Income Tax Act and other critical pieces of legislation to provide the most wide ranging concessions in the history of Barbados for both producers and consumers of alternative/renewable energy. These efforts alone have seen a steady growth in the production and use of this form of energy forcing the Fair Trading Commission to increase the amount of allowable mega-wattage from the initial 15 MWTs. to 25 MWTs, and I am advised that it is likely to go to 50 MWTs.
Facilitated the establishment of a BDS$20.0 million Smart Energy Fund.
Under the UN GEF, the pilot programme for the distribution of 2,000 Power Monitors and 15,000 CFLs (bulbs) was completed with all power monitors and CFLs being distributed and installed. The fiscal incentive for Sustainable Transport as well as concessions to stimulate increased Private Sector investment in Renewable Energy and Energy Efficient technologies are in place and are being accessed by the general public.
The first component of the Energy Smart Fund which is to generate one (1) MegaWatt of Renewable Energy systems and 500 Mw hours in energy saved was 70.0 percent complete at the end of the reporting period. To date, thirty (30) technical assistance grant applications were approved totaling BDS $426,724.50. In addition, BDS $272,363.60 was disbursed and sixteen (16) loan applications were approved by the Enterprise Growth Fund Limited Board totaling BBD$8.169 million (of which approximately 72.0 percent of the loan funds was disbursed). The GEF Pilot Programme which is to supply and install PV and Wind systems was successfully completed.
International Business & Financial Services Sector
The Government has implemented a multi-year license with IBCs in addition to the introduction of a Special Entry Permit.
A unit that is responsible for Business Facilitation was created.
Key legislation was passed, particularly regulations to accompany the International Corporate and Trust Provider Act. The Private Trust Companies Act 2012-22 and the Trustee Amendment Act 2012-21 were proclaimed and the Foundations Act, 2013-2 is currently being amended to also provide for an Exempt Foundation.
Agriculture
The Barbados Cane Industry Project has finally been properly initiated and work has begun on the transformation of the old sugar industry in Barbados.
The Government has also started a special programme to incentivize local hotels to use more local produce in their operations.
The process for utilizing excess alcohol as additives for gasoline has also started (2013/2014).
The Government has also created an initiative for small farmers to further engage in crop production. This initiative provides $2.0 million grant funds to small food crop farmers to help boost production at that level.
Culture, Sports & International Events
The Cultural Industries Act was passed and proclaimed.
Telecommunications
The Legal Framework was adopted and signed for the establishment of a National Internet Exchange Point in Barbados which connects Barbados and the region.
Housing
Construction was completed and a Certificate of Practical Completion was issued for the multi-storey two-bedroom apartments at ‘The Woods-at-Dalkeith’ or Grotto Housing Project.
Under the Housing and Neighbourhood Upgrading
Programme, the Beneficiary Selection System was successfully utilized for the selection of clients.
Mr. Speaker, against the background of these extensive and successful initiatives, and others not mentioned, by government, over the course of the 19-Month Home Grown Programme we have begun to see a solid platform laid for the initiation of a new period of growth for the Barbados economy. Indeed Sir, for more than four consecutive quarters of contraction in the country’s GDP, the Barbados economy started its climb back to growth during the latter part of 2014 and this has continued and picked up pace so far for this year.
Current State of the Economy, Context and Planning Environment
Mr. Speaker, based on the Central Bank of Barbados’ 1st Quarter Report 2015, the Barbados economy recorded its best first quarter performance in two years in 2015, compared to declines in the first quarter of 2014 and 2013.
This was achieved with a 4.0 percent expansion in tourism GDP in the first quarter, leading to an estimated growth rate of almost 1.0 percent in the economy as a whole. Long-stay arrivals grew by 12.0 percent to reach the highest level since 2008, and expenditure is estimated to have risen by 6.0 percent. It is one of the best tourist seasons we have had in many years. Canadian, US and UK arrivals rose by 28.0 percent, 24.0 percent and 9.0 percent, respectively. Increases in seating capacity were a key factor. There were also improvements in the German (10.0 percent) and Brazilian (14.0 percent) markets and a turnaround in the CARICOM market, which rose 8.0 percent. The hotel room stock rose by 160 rooms, or about 2.5 percent, even though the average length of stay of visitors dipped slightly reflecting a higher proportion of North American tourists.
While output in the construction sector is estimated to have declined marginally by 2.0 percent this was a marked slowing compared to the heavy fall off in the sector in 2012, 2013 and 2014. Even in spite of this, expectations for positive growth in this sector remain bullish with the observable pick-up in the construction of high-end tourism accommodation projects on the West Coast as well as planned expansion of the traditional hotel room stock with the beginning of work on the Sam Lord’s project, Hyatt, Sandy Bay, Settlers Beach and the further expansion of Sandals Casuarina this year should suffice.
Marginal increases in wholesale and retail, business and other services and non-sugar agriculture were also recorded during the period.
The foreign reserves, unaided by foreign market borrowings of the nature undertaken last year, increased by $83.0 million between December 31, 2014 and March 31, 2015, boosted by the capital inflows associated with the completion of the sale of Almond St. Peter, increased net private inflows, grant funding, and significant savings generated by falling oil prices. At the end of March 2015, reserves were $1,135 million or 16.1 weeks of imports of goods and services, up from 14.7 weeks of imports at the end of December 2014.
During the first quarter, retained imports were estimated to have fallen by 12.0 percent, with fuel costs down by 42.0 percent, food and beverages imports down by 4.0 percent and capital goods imports down by 6.0 percent. For January and February of 2015, exports of chemicals and food and beverages declined by 2.0 percent and 18.0 percent respectively, while rum exports were at the same level as in 2014.
The average annual unemployment rate is estimated to be about 12 percent. The 12-month moving average rate of inflation is estimated to have remained slightly below 2.0 percent, due to declining average prices for food and fuel.
Total labour productivity growth averaged 1.0 percent from 2009 to 2013, while the unit cost of labour has increased by an estimated 2.0 percent over the same period. An accelerated level of productivity is needed to close the gap between wage costs and productivity that opened up in the 1990s.
As could be expected Mr. Speaker, the beginning of the turnaround in the Barbados economy which started from around the last quarter of 2014 has begun to have some impact on the outturn of the fiscal figures. This, together with a concerted effort by government to improve its tax administration process with the establishment of the Barbados Revenue Authority, has not only led to the stabilisation of revenues but significant growth in several key areas.
In this regard, permit me to now turn to the fiscal outturn report for the period April 1st 2014 to March 31st 2015.
Current Revenue
Preliminary information received from the Accountant General indicates that current revenue for the period April 1st 2014 to March 31st 2015 was $2,486.5 million, an increase of $151.9 million or 6.9% from the amount recorded for the corresponding period during 2014. This amount was $26.0 million more than projected.
Taxes on incomes and profits realized $767.1 million, an amount of $132.7 million or 20.9% more than that collected for the corresponding period in 2014 and $49.3 million more than projected for the period. Corporation taxes increased by $31.6 million for the period under review.
With respect to income taxes, $93.6 million more was recorded for the period April 2014 to March 2015. Withholding taxes decreased by $11.1 million from the corresponding period in 2014. Consolidation tax collected for the period was $33.1 million.
Taxes on property decreased by $8.4 million from the corresponding period in 2013-2014 to $122.6 million. Amounts of $105.3 million and $17.3 million were collected for land tax and property transfer tax respectively. This small decline is attributable to a change in the payment period for hotel properties which was extended to coincide with the winter season as an accommodation to players in the hospitality sector. It is projected that the final figures would show a similar amount in 2014 as for the previous year.
Taxes on goods and services increased by $16.4 million or 2.0% to $1,154.1 million. The projected amount for the period was $1,181.4 million. Receipts of VAT totalled $886.3 million, a decrease of $19.4 million from the corresponding period in 2013-2014. Excise duties recorded $132.5 million, an increase of $17.1 million from the actual outturn for 2014.
Import duties increased by $29.5 million to $223.1 million. This is an increase of 15.2% over the amount collected in 2013-2014. The projection for the period under review was $209.4 million.
Special Receipts decreased by $18.0 million to $63.2 million. An amount of $32.0 million was collected for the municipal solid waste tax. The projection for total special receipts for the period under review was $61.9 million, of which $35.9 million was projected for the municipal solid waste tax.
Non-Tax Revenue recorded $89.4 million, an amount of $4.6 million less than the corresponding period in 2014. An amount of $55.7 million was received in Grant Income from the European Development Fund.
Expenditure
Current expenditure, exclusive of amortization of $774.9 million, decreased by $216.9 million or 6.9% from the 2013-2014 figure to $2,907.3 million. The projected amount was $2,945.0 million.
Wages and Salaries decreased from $807.8 million in the corresponding period of 2014 to $751.1 million. The amount projected was $743.1 million.
Expenditure on goods and services decreased by $42.0 million to $340.2 million. The projection for the period was $388.3 million.
Expenditure on current transfers decreased by $158.6 million, moving from $1,261.5 million in 2013 to $1,102.9 million for the period April 2014 to March 2015. The main contributors to this decrease were Subsidies, Grants to Individuals and Grants to Public Institutions which were reduced by $31.5 million, $30.3 million and $98.3 million respectively. Conversely, there were increases in Retiring Benefits and Other Benefits of $8.2 million and $4.0 million respectively. The projection for current transfers is now $1,084.2 million.
Capital expenditure for the period under review was $171.3 million compared to $143.9 million for the corresponding period in 2013-2014. Capital formation decreased by $9.4 million whereas capital transfers increased by $33.3 million. This is mainly attributed to the subscription of $50 million by the Government of Barbados to become a member of Corporación Andina de Formento (CAF). It should be noted that the projection for capital expenditure was $173.3 million.
Total expenditure for April 2014 to March 2015 was $3,853.5 million compared to $3,939.5 million in the corresponding period of 2013-2014. The projection for the period was $3,929.1 million.
Debt Stock
Central Government’s disbursed and outstanding debt stood at $11,390.4 million as at March 2015, approximately 133.1% of projected Gross Domestic Product (GDP), compared to $11,070.9 million for the corresponding period ending March 2014. Of the $319.4 million increase in Government debt, there was a $22.6 million net increase in external debt, compared to the same period in the previous year, mainly the proceeds of the US$25.0 million First Citizens’ loan. This increase was offset against repayments, particularly on the US$120.0M Bond from Credit Suisse. Domestic debt increased by $296.9 million, financed principally through the issuance of Debentures and Treasury Bills, which are significantly more prone to roll-over risk.
The net increase of $319.4 million is attributable to the need to finance the deficit.
Debt Service
Total debt service payments in the period amounted to $1,442.1 million with increased interest payments of $664.8 million, amortization payments of $639.0 million, and Sinking Fund contributions of $138.3 million. Interest payments saw a net increase of $56.2 million, primarily as a result of interest payments due in respect of the Credit Suisse US$225.0 million and First Citizens’ US$25.0 million loans. The larger domestic interest payments are attributable to increased issuance of domestic securities. External amortization decreased by $28.4 million primarily as a result of the maturing of a number of loans. Domestic amortization increased primarily due to a larger amount of maturing debentures during the period April 2014 to March 2015 compared to 2014, total net increase in amortization payments was $87.4 million. Sinking Fund contributions increased by $18.5 million during the period under review as a result of the increased issuance of Debentures.
Contingent Liabilities
Government’s contingent liabilities stood at approximately $1,399.6 million at the end of March 2015, compared to $1,422.9 million at March 2014.
Deficit
The deficit of $592.1 million represents 6.8% of GDP at market prices of $8,767.7 million. Using the IMF accounting method the deficit is calculated at 6.6 % of GDP. The deficit for the corresponding period in 2013-2014 was $984.6 million representing 11.6% of GDP at market prices of $8,458.1 million.
Global and Regional Economic Outlook:
The global economy continues to present a mixed picture, with strong growth prospects in the USA, continued uncertainty in the Euro Zone, and slowing growth in China and some of the emerging Emerging markets. While oil prices showed a downward trend for a large part of 2014, some recovery in the price has begun and it is predicted that prices will like go a little higher in the latter half of 2015. There has been some positive shock from lower oil and commodity prices to the extent that our external current account deficit has declined marginally and is expected to improve some more over the next financial year.
These are all good developments for the domestic economy and present a real opportunity for government to press ahead with its fiscal consolidation and economic reform programme. The global economic environment remains uncertain and we remain highly vulnerable to adverse shocks and developments.
At present the Barbados economy is stable with solid foreign exchange reserves, an improving fiscal deficit and growth is returning. However, the job is not yet finished and there are a number of structural issues which we need to address in a meaningful way if we are to protect the gains we have made so far, and continue to develop our country and people even further.
THE NATIONAL ECONOMIC GROWTH AND REFORM AGENDA
Growth Initiatives
The single largest issue facing the economy is that economic growth in Barbados remains below the 2.5 to 3.0 percent that is normal for our economy. We must get back to normal levels of growth sooner rather than later, and indeed try to exceed them. To be sustainable this growth must be led by the foreign exchange earning sectors and must be based on improvements in productivity and the competitiveness of our economy. The public and private sectors in Barbados must now craft a productivity and competitiveness revolution over the next few years.
Our growth strategy is private sector led, and key to the productivity and competitiveness revolution must be a fundamental change in the environment for doing business in Barbados. Great ideas for new businesses happen every day and everywhere. Great ideas are at the heart of social and economic development: they allow economies to grow and they improve people’s lives; they provide the base of tax revenues to support the social services that make a more equal and just society. For ideas to prosper in this environment, it is important that entrepreneurs can give legal form to the idea, that is, by forming a business. It is important that this process is simple, quick and inexpensive. Entrepreneurs also need a well-designed insolvency system, in case the idea fails to work out. The whole suite of business regulations is crucial to the process.
The right business regulations enable good ideas to take root, leading to greater levels of investment and the creation of jobs. Where business regulations make it difficult to start and operate a business, good ideas may never see the light of day and important opportunities may very well be missed. Budding entrepreneurs daunted by burdensome regulations may opt out of doing business altogether, or if they have the resources, take their ideas elsewhere.
In Barbados we have to guard against creating the impression that we are anti-business, not because we don’t appreciate the importance of business investment, but because we have become too wedded to cumbersome and in some instances outdated and unnecessary processes and procedures that frustrate rather than facilitate investment. In this Budget we will introduce measures aimed at enhancing our competitiveness and productivity.
The National Medium Term Economic Objectives
In pursuit of these objectives government’s medium term fiscal, debt and growth strategy must continue to be the anchor on which the economic stability so critical to successful developmental outcomes must be attached.
In this regard over the next three years your government will push forward its medium term economic agenda to achieve the following:
1. Continued stabilization and growth of the International Reserves to an average of at least 20 weeks of import cover.
2. To reinvigorate and deepen economic growth to an annual average of between 2.5 to 3.5 % of GDP at a minimum.
3. Reduce the fiscal deficit to be at least no greater than the rate of GDP growth by end of fiscal 2017, and near balance by 2020.
4. A primary surplus of at least 4 % by end fiscal 2018 and thereafter annually an average of about 5%.
5. Establish and achieve a medium term debt anchor that use the above outcomes to stabilize debt growth by 2018 and start the process of reducing the debt to GDP ratio to a target below 100% in the next five years.
Facilitating Economic Investment – Public/Private Sector:
Sir, government is in the process of investing in or facilitating private investment in a number of major capital projects that will invigorate productivity on the island, grow jobs and deepen economic growth going forward. A total of US$1,126.9 million in capital projects are currently on the books for growing and developing Barbados’ economy. Some of these include projects such as the Sam Lords Refurbishment project which is due to start in September 2015 that will bring US$200.0 million in investment; Royal Westmoreland expansion expected to start within weeks will bring an additional US$30.0 million; Beachlands due to start in September 2015 and will bring US$120.0 million; the Barbados Port Development project (Berth 5) is currently ongoing and is expected to cost US$25.0 million and clear the way for the Port to accommodate two new mega ships to Barbados from the coming winter and with 8,000 new passengers every week; the refurbishment of the Settlers Beach Hotel scheduled for this year is estimated to be an investment of US$50.0 million; Sandals Beaches Casuarina in Christ Church will start an expansion project in July to add 200 more rooms and will cost US$100.0 million; Sandals Almond Beach Project at Heywoods, St. Peter is due to start in November 2016 and will cost US$200.0 million; and the world renowned brand of the Hyatt Hotel is expected to be constructed at a cost of approximately US$70.0 million starting in August this year.
Projects such as the Sandals Casuarina (phase 1) and the Barbados Water Authority Headquarters Complex have been completed or are in their final stages of completion. While the new owners of the Sandy Beach will be carrying out some refurbishment of the hotel plant at an approximate cost of US$20.0 million starting in a few weeks.
All of these plus others not mentioned are expected to lock in the economic turnaround in the local economy as private and public foreign inflows continue to grow.
Added to these will be a fairly robust public capital works investment programme which is already on the way and expected to expend more than US$100 million over the course of this and the next financial year. Some of these include the ongoing BWA mains laying/replacement and water augmentation project, US$50 million; the BWA Smart Meters upgrade project US$70 million and the SSA headquarters project at Vaucluse estimated to cost 28.7 million Barbados dollars. All of these projects have already started, will intensify going forward and will drive a resurgence in the domestic construction, wholesale and retail sectors.
On the basis of these, a stronger tourism performance this year, a settling in the international business and financial services sector, and expected increased output from industry and agriculture we are expecting that the current growth trend in the Barbados economy will continue through this year and into an even stronger performance next year.
In order to lock in these gains and build on them however there are a number of things which we have to keep working on to ensure that we improve our overall competitiveness and raise the level of our output.
Facilitation: The cost and ease of doing business in Barbados:
Another one of our key strategies for sustaining and intensifying growth has to be in focusing on reducing the costs of doing business, especially for Small and medium-sized businesses as more and more persons explore self- employment. As such we propose a 25% reduction in fees and licenses related to operating a number of businesses in Barbados, this year, with a further 25% reduction to be undertaken next year.
This will be applicable to the following under the Profession, Trade and Business Regist