Minister of International Business, Small Business Development, Industry and Commerce Donville Inniss agrees with local economist Jeremy Stephen that Government’s delayed rollout of its controversial foreign exchange fee (FXF), will seriously hurt any chance of achieving the $542 million budgetary target.
Last month, Minister of Finance Chris Sinckler revealed a $542 million package of belt-tightening measures, which included the two per cent levy on foreign exchange transactions that was to take effect on July 1, aimed at wiping out the entire national deficit of $537.6 million in less than a year.
But in a statement late last month, the Central Bank said the measure would now be implemented in two phases, beginning with its application to cash, bank drafts and wire transfers on July 17, 2017, followed by credit, debit and travel cards on September 1.
Acting Governor Cleviston Haynes said the delay would give the Central Bank more time to educate Barbadians about the foreign exchange fee, so that they would be clear on what types of transactions it relates to and how it would be applied. He also made it clear that the FXF would be applied to the Barbados value of the foreign currency transaction and that “all persons conducting purchases of foreign currency will be required to pay the FXF, except residents and non-residents making payments from their foreign currency accounts, including entities in the international business and financial services sector”.
Foreign currency sales related to the settlement of transactions for the bulk purchase of petroleum, diesel or jet fuel have been exempted from the FXF.
However, in an interview with Barbados TODAY over the weekend, Inniss, who had earlier expressed reservations about the levy, expressed little optimism that Government would rake in the anticipated amounts of the levy in the now much shorter time frame.
“If as a Government we projected to collect a certain amount of revenue over a time period from a particular initiative, and one of those parameters has changed, then that ought to change the outcome. So, if the period for which that levy condition applies has been changed, then ceteris paribus [all things being equal] I would expect that the revenue intake would also adjust accordingly,” Inniss contended.
However, as to whether or not the delay would result in an even longer period of austerity than originally envisaged, Inniss said he was leaving it up Sinckler to deal with the effects of any revenue shortfall.
“There may be some other areas in which you exceed expectations of revenue collection. So, I really would leave it up to the Minister of Finance to figure out such, because I don’t know all of the variables and all of the expectations according to the models that all of the economists have drafted,” he said.