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For fiscal year 2019/2020, Government achieved its targeted primary surplus of $634 million or 6 percent of GDP, under the IMF supported BERT programme. Revenues were weaker than initially projected but Government adapted its spending across all expenditure categories to attain its target. The overall fiscal surplus was 3.7 percent of GDP compared to the small deficit of 0.3 percent recorded in FY 2018/19.
Total Revenue for the financial year was $2.98 billion, or 29 percent of GDP. This outturn was $9 million below the previous fiscal year and $75 million below the initial 2019/20 target. The impact of a number of revenue reforms and the shift of revenue off-budget to finance statutory bodies resulted in reduced inflows when compared to the previous year’s outturn. In addition, the decline in corporation tax and a shortfall in new tourism related taxes because of continued administrative issues impacted revenues. There were also lower collections of excises relative to 2018/19 and the initial revenue targets.
Revenue from property tax totalled $215 million, $53 million above 2018/19’s outturn and $9 million above the forecast, reflecting increased land tax rates. However, these gains could not offset the declines in restructured Personal Income Tax (PIT) and Corporation Taxes which together fell by 0.7 percent of GDP.
The decline in PIT, indicative of the new PIT tax structure, was less severe than initial expectations. However, the new sliding scale structure in tandem with the grandfathering of a number of offshore entities contributed to lower tax collections and a deviation from original forecasts. Concurrently, lower interest income associated with the restructured bonds as well as the elimination of taxes on royalties and management fees to non-residents reduced withholding tax receipts by $10 million. The reclassification of the Health Service Levy in FY2019/20 also contributed to a $15 million decline in other direct taxes.
Indirect Tax revenues were largely on par with 2018/19’s performance. VAT receipts increased by $26 million but these gains were partly offset by lower excise revenues. The loss in revenue associated with the repeal of the NSRL, as well as the reclassification of the Garbage and Sanitation Contribution as off-budget revenue, contributed to a $81 million loss for this fiscal year. However, these declines were tempered by higher import duties and the contributions arising from a full year receipt associated with the Fuel Tax and the Room Rate/Shared Accommodation and Product Development Levy. In addition, as anticipated the Airline Travel and Tourism Development Fee yielded more revenue than needed for BTMI’s activities and the surplus boosted revenues.
Non-Tax Revenue was in line with expectations, $39 million higher than the last FY. This outturn was largely due to increased investment income, the proceeds of an oil signature bonus and receipts from the Foreign Exchange Fee.
Total expenditure declined by 14 percent relative to the 2018/19’s performance. Non-interest spending was down 11 percent on the basis of reduced transfers while interest declined by 35 percent, the result of the debt restructuring.
The reduction in transfers was driven by the decision to finance the Queen Elizabeth Hospital (QEH), BTMI and SSA with off-budget revenues, resulting in $159 million in savings. Additional savings were gleaned through the restructuring of the SOEs, as well as through efficiency gains which culminated in lower transfers to most entities. Despite additional Covid-19 related transfers to the QEH towards year-end, there was a $297 million reduction in outlays to public institutions.
Grants to individuals increased but spending remained below initial expectations given efficiency savings during the financial year. Subsidies declined by $20 million relative to 2018/19, owing in part to reduced outlays to the Transport Board, but was slightly above the parliamentary estimates because of unexpected maintenance costs for a number of buses.
Wages and salaries were lower by approximately $5 million relative to outlays in 2018/19 mainly due to attrition within the public service. Additionally, unfilled civil servant positions during the year contributed to this decline relative to initial budget estimates. However, spending on goods and services exceeded that of the previous year by $34 million due in part to the preparation of the health service for the Covid-19 pandemic, particularly the acquisition of medical supplies for the drug service program.
Capital expenditure was largely on par with last year’s performance as capital works related to the preparation of the health service in response to the Covid-19 outbreak boosted this category in the final quarter of the fiscal year. This included Capital Transfers to the QEH for equipment as well as funds to refurbish Harrison Point.
Adapted from the Central Bank of Barbados’ Review of Barbados’ Economic Performance: January-March 2020