BRIDGETOWN, Barbados (CMC) — The Barbados Government says the local economy is on a growth path once more and that the fiscal deficit is now on a “downward trajectory”.

Over the past months, the Freundel Stuart Government has implemented a number of stringent policies including laying off thousands of public servants in a bid to turn around the ailing economy.

Finance Minister Chris Sinckler told legislators that the island’s fiscal consolidation programme had been effective in restoring balance to the foreign exchange market and securing the value of the Barbados dollar.

“Our foreign exchange reserves have stabilised, our fiscal deficit is on a downward trajectory and the economic growth is returning. By any objective standard the programme is working.”

But he warned that “we now have to stay the course with the fiscal consolidation programme and do what is necessary to protect the gains we have made over the last 16 months”.

Sinckler said that based on information up to the end of last month, the expenditure targets set out in the fiscal consolidation programme had been achieved and that the Government was on track to record savings of BDS$68.5 million (BDS$1 = US$0.50 cents) from reductions in salaries and wages and BDS$229 million from reductions in transfers and subsidies.

“The expenditure reductions are now projected to generate total savings of BDS$290.8 million, or approximately 3.4 per cent of GDP (gross domestic prouct), over half of the proposed fiscal adjustment. The new revenue measures, (namely the) Consolidation Tax, Municipal Solid Waste Tax and Bank Assets Tax, are now projected to yield BDS$91.2 million or 1.07 per cent of GDP, and a special dividend from the sale of BNTCL another BDS$70 million or 0.82 per cent of GDP.

“Therefore, the fiscal adjustment measures currently in place are now projected to yield a reduction of BDS$452 million in the deficit or a reduction of 5.3 per cent of GDP,” Sinckler said, adding he was also confident that the targets set out by the Government would be met in 2014.

Sinckler added that Government had decided to delay the introduction of any major new tax reform measures until the budget presentation next year.

He said that while a tax study done by the International Monetary Fund (IMF) had provided a comprehensive basis for reviewing the island’s tax system, Government was not satisfied that the necessary impact analyses of any proposed adjustments to key growth sectors and vulnerable groups in society had been completed.

“The economy is showing its strongest signs of recovery since 2009, and we want to exercise an abundance of care in introducing new measures that may derail a return to sustainable growth.

“In light of this, and together with the discipline which we intend to place on supplementary budget allocations, we have determined that additional smaller expenditure cuts across the board, and more efficient targeted collection of existing taxes to effect gains of BDS$32.8 million will be sufficient to get us close to our deficit reduction target,” he said.

The finance minister also announced a short-term amnesty to all taxpayers across all tax categories on the interest and penalty accrued on taxes owed at December 31, 2014, to assist the Barbados Revenue Authority in its tax administration and collection efforts.

He said access to this facility would be on the basis that the taxpayers paid their total outstanding principal on or before March 15, 2015.

Sinckler said the Government was also extending the existing revenue measures that formed part of the 19-month programme until April 2016.

However, he noted, the Government would be reviewing the Municipal Solid Waste Tax with a view to determining whether its continued existence in its present form was justified.