The IMF is calling for an increase in GST and a cut in government's wage bill . Those are the main recommendations coming out of the Article IV Consultation which finished on September 21st. and found, quote, "high public debt, large fiscal and external deficits, and declining international reserves."
The IMF notes quote, "The economic outlook has worsened further since the 2015 (consultation). GDP is projected to decline by 1.5 percent in 2016, in part due to the damage inflicted by hurricane Earl, and average less than 2 percent in the medium-term, reflecting declining productivity, competitiveness and public investment." The IMF concludes, quote "In the absence of a radical change in policies, rigid current fiscal spending, particularly the public sector wage bill, would fuel high fiscal deficits and add to the already high debt burden. This deficit, combined with remaining payments for nationalized companies and increased debt service, would reduce international reserves to uncomfortable levels."
Uncomfortable levels - and to keep it from going there, the IMF warns that government must decrease its debt, and we quote, "highlighted that additional measures, particularly raising the GST rate, reducing the public wage bill, reforming the pension plan for civil servants, and strengthening public financial management, will be important going forward."
So does that mean that the Barrow Administration will increase the rate of GST at its next budget? Well, Prime Minister Barrow has long rejected IMF orthodoxy, but with falling reserves, increasing debt, a shrinking economy and a ballooning deficit, conventional wisdom says that he may not have many other options for raising much needed revenue at this time.
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