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Stuart outlines growth strategy for Barbados

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A new strategy to fix the Barbados economy and spur growth is threatening Government’ pledge not to send home public servants. But even if the Freundel Stuart Administration sticks to its guns and says no to civil service retrenchment, it “will have to” enforce $233.7 million in cuts in public sector pay, money spent on goods and services, and funding to state agencies and statutory bodies.

That’s central to the recommendations in the draft Barbados Growth and Development Strategy 2013-2020 discussed at the recent economic consolation and which is now generating debate in economics fraternity.

The 141-page document was prepared by the Ministry of Finance and Economic Affairs in collaboration with the Central Bank of Barbados, government ministries and select departments and in consultation with the Barbados Private Sector Association and labour representatives.

While Prime Minister Freundel Stuart is on record as agreeing with a recommendation from Central Bank of Barbados Governor Dr. DeLisle Worrell that there needs to be a $400 million adjustment in spending, the strategy document was more specific in its proposals, many of which would affect the public sector.

Measures which it said “will have” to be implemented first included a $87 million reduction in money now spent on goods and services, $80.6 million less spent on subsidies and transfers, and a $66.4 million cut in public sector personal emoluments.

“During the first year of the strategy the main adjustments will be on the expenditure side where it is estimated that a $295.3 million dollar reduction in spending will have to be made,” the new strategy recommended.

“To achieve this, the bulk of cuts will have to come from non interest recurrent expenditure to the tune of an estimated $233.7 million of which includes personal emoluments, goods and services, and subsidies and transfers.

“By front loading the expenditure adjustments, government as shown in 2014/2015 and onwards do not have to make any major amendment,” it added.

That was not all, however, since the strategy also advised government to focus on other expenditure cuts, including having ministries remove programmes “that are no longer needed or not seen as priority”, and “containing the growth in public sector employment”.

Other recommendations were: * Reduce the operation cost of ministries and statutory bodies by 30 to 50 per cent through the aggressive use of renewable energy for electricity generation, and through the infusion of appropriate technology.” * Seek to merge government departments and entities that are carrying out similar functions or serving the same interest. * Keep caps on the transfers to the statutory boards, statutory corporations and government owned companies, such as the Queen Elizabeth Hospital, Transport Board, Barbados Agricultural Development and Marketing Corporation and the University of the West Indies. * Reduce transfers to levels that will maintain the operations of state owned entities while yet forcing them to be more efficient and self financing. * Seek to reduce spending to the UWI and QEH through the use of special mechanisms that will helped these agency to be more self sufficient in terms of their financing. This would include special education and health funds to be financed by government and the private sector.

The experts suggested that given the serious fiscal hole Barbados was now in, government had little choice but to implement the recommended changes.

“To achieve these fiscal targets, there have to be significant corrections on the expenditure side given the current weaknesses in revenue performance and the not so positive outlook for growth in the short term. In this regard, cuts will have to be made to current expenditures, primarily wages and salaries, goods and services, and transfers and subsidies,” the document stated.

“It is estimated that to bring the deficit down to about 4.7 per cent of GDP, from its current position, current spending will have to be cut by over $290 million. Give our debt service obligations, this adjustment will have to be found in the other categories … to achieve this adjustment, serious policy and consideration has to be given to a number of structural issues.” (SC)