Like a cautious batsman on a sticky wicket, Prime Minister David Thompson today began his first budget presentation to the people of Barbados by framing the island’s economic outlook for 2008-2009 within the context of a lethargic global economy. Indeed, he had no other choice. Based on current estimates, Barbados’ economic growth is expected to peak at 2.5% in 2009, limited by an inflation rate that is set to reach 7.9% by year-end, while public debt is to rise to almost 8% of the Gross Domestic Product. Figures, he says, are subject to review if the global economy performs even more poorly. In other bleak news, the trade deficit is set to increase due to a surfeit of local manufacturing output, while tourism and other key sectors are also expected to see declines.

Labeling this budget as one of restraint, the Prime Minister made it clear that this was not to be the typical ‘honeymoon’ budget of previous incoming governments, while at the same time curiously unveiling incomprehensible plans such as building port facilities for private jets and ships in the north of the island, as well as plans to reclaim land from the Caribbean Sea in a bid to address increasing shortages on the mainland. Indeed, the budget of restraint was, in many ways, very unrestrained; it came to include all the key buzzwords and concepts from a development textbook, while being overly optimistic about the island’s financial ability to meet them. Yet, this remains a feature of all budgets; grand projects with grand ideals, often emotive and compelling, thrown in to inspire awe and suggest moves to ‘modernity’ which we are largely ill-prepared to take.

In the end however, this budget will not be remembered for what it can’t deliver. David Thompson has managed to tap into the pulse of the people in a way that the former administration somehow forgot how to, addressing - on paper - the key issues of social and economic concern for the majority of Barbadians. Indeed, he has boasted of his success with ‘participatory governance’, having held extensive focus group discussions with Barbadians to gauge the public’s concerns and perceived needs.

Key elements of the budget are as follows:

• Controversial capital-intensive highway flyovers - a hand-me-down from the previous administration - have been canceled.
• Integrity and freedom of information legislation is actively being developed by a cross-sectoral board of advisors.
• Statistical collection methodologies are to be modernized through technical assistance from the Inter-American Development Bank, with the aim of producing new, accurate data on controversial unemployment and public debt figures.
• Affordable access to higher education is further being facilitated through an increase of over 300% on loan amounts from the Student Revolving Loan Fund, while repayment periods are to be extended to 30 years, with an interest rate fixed at 1.5% above prevailing bank savings rate.
• Free public transportation for school children has also been introduced - both as a means to cull the divisive ‘minibus culture’ and reduce costs to poor families. Projected savings start from a minimum of $400 per annum for single-child families.
• The National Housing Corporation is being put on target to provide 2,000 low income housing solutions per year. Meanwhile Value Added Tax on building materials will also be refunded to first-time home buyers with a gross income of up to $42,000 and for houses up to a value of $150,00, in a creative means-tested approach of alleviating the high costs involved in home ownership.
• Foreign land ownership has been banned from Pico Teneriffe in the North to Skeete’s Bay in the South in a move to ‘protect the patrimony of Barbadians’. Tourism development is to continue when it is not deemed to be ‘in conflict with the aspirations of the population’.
• Government is expected to liquidate $200m worth of shares in the Insurance Corporation of Barbados and the Barbados National Bank to fund the expansion of the Queen Elizabeth hospital. Further fundraising is expected to be sought through philanthropic donations and corporate sponsorship.
• Government’s income is to be shored up by increased tax rates on banks, insurance companies and new-car dealerships, as well as tax hikes on lottery winnings, alcohol, tobacco products, road and license taxes and a monthly tax on mobile phone top-ups.
• New taxes will add $104m to the Treasury, while benefits are expected to cost $82m, leaving a net revenue gain of $22m.

While moderately impressive on paper, it remains left to be seen what impact these new amendments will have on the cost and quality of living in Barbados in the trying times ahead, even as fears are already mounting that newly heavily-taxed companies will pass on increases to consumers, thus negating any dent in living costs.

Through hiking taxes on key services, increasing demand on an already-ailing public transportation system, expanding social services in a time of economic restraint and increasing cost burdens on the private sector, uncertainty prevails among skeptics as to whether this seemingly all-encompassing budget will live up to its mandate to deliver relief where it really counts.

Downloads & further links:
Prime Minister’s budget speech 2008