What to expect in this year's Budget speech

What to expect in this year’s Budget speech

I intentionally stayed away from speculating about the Budget each and every year that I was blessed with a public platform. This was done not just from a point of professional intergrity, but, more so, from my fear that such guesswork normally becomes overly politicised. I cannot tell you how often I disappointed well-meaning journalists with this stance. It’s now to the point where some of my allies in the media know now not to even call me around beforehand. This year, however, I was asked to reconsider my position. But in order to do so, and still sleep well at night, I will teach you, instead, on how to speculate with credible information at hand. From this, I am sure that you’ll have an idea of what to expect yourselves.

Here is the broad stroke: it becomes quite easy to guess what a Budget may entail when a country is under an International Monetary Fund (IMF) programme. The Government of Barbados (GOB) continues to apply the strategies outlined in the the Barbados Economic Recovery and Transformation Plan. This plan was made in line the our country’s need for financing from the IMF via the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) arrangements.The GOB has intermittently drawn down from these facilities as a primary source of its fiscal support since 2018. As a result, the Government must align a substantial part of its economic management plans, fiscal strategies, and operational outlook with the recommendations of the IMF.

You can google the terms “Article IV Consultation Barbados” and the search results will lead you to what you seek. That is if you’re prepared to read the summary document or full Article IV Consultation press releases. The key here is to always seek the report that is written and released closest to when any borrowing country, alike Barbados, is due to have a Budget. The press release should be enough to offer key insight into the broad strategies that should be highlighted in the Budget Speech. Take note that you should also pay special attention to deviations in government expenditure, or operational priorities, which occur in the months between when the Estimates are laid in Parliament, and when the Budget is announced. They may imply a change to be announced that will not be easily speculated on.

You would surely guess that since the Budget was announced so near to the Estimates this year - closer than normal - that your best speculation will be squarely with the key takeaways from the Article IV Consultation staff report. This year, I recommend that you choose to focus on the latest version from December 2023, which also covered a second review of the Government’s performance for Fiscal Year 2023/2024. A press release, published on February 29th, would also provide a useful summary, but it is my view that it could be difficult for Joe Public to take real substance from. Next, we look through pages 2 to 3 of our chosen Article IV staff report and under the title: “Executive Board Assessment” or EBA for short. That title is where, in my opinion, you will learn what you need to know so as not to be surprised with the outcome of this year’s Budget. Any Budget for a borrowing country, really!

Do remember that what you see in there are high-level recommendations to the GOB. Any particulars or further details are, until the Budget is laid, at the whims and mercies of the creativity of policymakers. Some might have even been dreamt up the night before the Budget Speech for all you know. Now, this recent EBA looks like it encouraging the GOB to maintain what it has been doing to maintain its own reform. You think that this means that any changes to make the Government more efficient in the public services it provides is likely appear in the Budget. You are also expecting that this means further changes to the structure and operations of state-owned enterprises, and possibly with pensions.

You are also reading that the EBA suggests that the Government continues its efforts towards climate resilience. They goes without saying since the World Champion in the area lives with and governs us. You may wish to expect further and deeper initiatives in this area, particularly where it concerns financing. You may be also thinking, as you read, that this same increase in financing could be linked to some upcoming change to the corporate taxation framework. A further look into the EBA may also lead you to think that there won’t be any new taxes, in as much as there won’t be any removed or significantly reformed. However, I am confident that you will observe that is recommended that the Government make “modernised” changes to our tax exemptions framework. And since you know more economics than I do so you could infer that there may be some new “sensible” tax exemptions introduced so as to help with driving investment in the country.

Continuing with the theme of investment, you see that the EBA encourages continued redevelopment of our local capital markets and I think you will read that there maybe some provisions for the creation of new financial instruments. Furthermore, there may be the introduction of programmes meant to assist the local finance industry in its efforts to combat money laundering. Lastly, I think that you may see suggestions along the lines of the GOB investing in education and skills training while having to prioritise digitalisation. You will then put down the report and tune into the marathon of a Budget Speech and see how well you did with your “informed speculation”.