On Tuesday, March 14, 2023 the Honorable Mia Amor Mottley S.C. M.P., Prime Minister and Minister of Finance, Economic Affairs and Investment of Barbados delivered her government’s Budget Proposals and Financial Statement for the fiscal year 2023 – 2024.
In a speech she titled “Upward Onward Bajan Excellence – 2030”, the Prime Minister sought to outline a plan for “Mission Transformation”, a growth plan for not only the Barbados economy, but for the people of Barbados “to accomplish excellence that will redefine our national approach; typify our efforts on the international landscape and solidify the benefits for this and future generations” all by the year 2030. The focus therefore of her “conversation with the nation” and proposed budgetary measures was envisioning what it would take to achieve the goals of “national transformation” as well as “building a global society and a world class people”.
Tricor Caribbean’s Commentary on the Budget Proposals 2023 provides a snapshot of the main fiscal measures announced. Read the commentary in full here:
Tricor Caribbean Commentary
No bad news! No new taxes!
This was the clarion message that the Prime Minister laid down at the beginning of her presentation to seemingly settle the minds of Barbados citizens and commentators, and to focus our collective attentions to Mission Transformation – a plan for growth of Barbados and its people by 2030. A plan, in Prime Minister Mottley’s words, “to secure the stability of our people, to empower and enfranchise those who have not been able to access wealth or create intergenerational wealth, to ensure redress and balancing of the economic scales, not to exclude anyone, but to include all”.
She highlighted that on taking up the Government of Barbados in 2018, her administration had successfully completed Mission Critical – a plan that saw, amongst other things, the saving of the Barbados dollar from impending devaluation. Moreover, in response to the unprecedented Covid pandemic, the ashfall from the neighboring volcanic eruption, the freak storm, and the passage of Hurricane Elsa, they were victorious in Mission Survival. Now Barbados sits as of March 13, 2023, with Gross International Reserves at $2.999 billion, compared to $441 million on May 24, 2018. With an injection from the Inter-American Development Bank of US$100 million, these foreign currency reserves will increase to about $3.2 billion.
In addition to the reflection at what has been achieved, the Prime Minister sought to engender confidence that her government is acutely aware of what is necessary moving forward. Stating that their focus is “on generating growth and encouraging financial institutions back into the domestic capital markets”, she referenced the current Barbados Economic Recovery and Transformation (BERT) 2.0 programme which is monitored by the International Monetary Fund and sets out some critical milestones that must be met including:
- Boost and maintain capital expenditure to approximately 5% of Gross Domestic Product (GDP).
- Boost domestic private sector investment from 10% GDP, where it now stands to 20% of GDP (from approximately $975 million to about $2 billion); and
- Boost foreign direct investment to about 6 to 7% of GDP.
- It is our view that Barbadians will welcome some of the measures announced as cumulatively they would be expected to result in increased employment, a reduction of debt and ultimately an increase in the disposable income of those directly impacted. Measures such as the introduction of special concessions for those involved in the film industry, the increase of the personal allowance for pensioners,
- the inclusion of nurses to access Public Officers Loan and Travelling Allowances, the reinstated cap on VAT on diesel and gasoline and the reduction of Air Travel and Tourism Development fee for CARICOM travel, are all applauded.
In an apparent acknowledgement of the often quoted adage that a country “cannot tax its way out of a recession”, the Government has indicated its intention to properly administer some of its current legislation to ensure that Barbados is not being drained of much needed income to its detriment. We note with particular interest the stated intention to police those who have been or will be granted customs and other tax concessions to ensure that they are in full compliance of their statutory obligations. This is with a view of ensuring that Barbados is receiving its full benefit from granting concessions and thereby agreeing to give up certain income for some other advantage.
While this positive messaging is encouraging, the Budget itself, in our opinion, lacked significant tax incentives and details regarding some of the measures announced to fuel growth of the economy and the eventual success of Mission Transformation. We look forward to receiving information on the proposed growth initiatives such as the introduction of the Afrieximbank partnership, the EXIMbank of Barbados, and other capital works projects that are approved but
yet to get underway. We also wait anxiously for the highly anticipated transfer pricing legislation which is sure to affect the structuring of global business throughout Barbados.
Any success in these growth initiatives would be a welcomed boost for our economy as would the enhanced development of people and processes. We hope this will be enough for the touted exponential growth of an economy that is so heavily in debt, even the cheapest debt. Time will tell.
For more information, contact: