Government estimates that it will lose about $450 million in tax revenues over the next 12 months, as a result of the economy being fully or partially shut, or only now slowly re-opening because of COVID-19.
In an address to the nation on Wednesday night, Prime Minister Mia Amor Mottley said less income tax, corporation tax, Value Added Tax, excise tax and duties would be collected, while fuel and air transport levies had “shut down” for now.
However, Ms. Mottley noted that it was the hard work done over the past two years on transforming the economy that had enabled Government to focus firmly on public health first.
“Just before COVID-19 struck, our reserves had reached $1.55 billion, the highest level ever recorded on a like-for-like basis. Today, as a result of low-interest borrowing from our partners, including the Inter-American Development Bank, reserves today are just over $1.7 billion. It is more than enough reserve cover,” she assured.
She pointed out that Government was currently in dialogue with an IMF mission this week and described the discussions as “satisfactory” to both parties.
During her near two-hour presentation, the Prime Minister said given Government’s concern on a disproportionate reliance on fees by the commercial banking sector, she asked the Governor of the Central Bank of Barbados, Cleviston Haynes, to meet with the management of the institutions.
She stated that the revenue from fees at all of the banks grew from $78 million in 2008 to $126 million in 2018, while interest income for the same period declined from $637 million to $525 million.
“This is not a sustainable model for growth, nor does it reflect an energy in the interest of being able to make funds available to provide the oxygen to fuel the growth in our economy,” she said.
Ms. Mottley reported that a number of areas were agreed to during the meeting with the commercial banks and Governor and listed them as:
- No maintenance account fees for the seniors holding accounts (previously only some banks had that measure in place);
- No over the counter charges for seniors over 70;
- No maintenance account fees for youth accounts (the banks are to indicate what criteria constitute youths).
The Governor, the Prime Minister said, had indicated that achieving more concessions required additional dialogue with the banks.
She added that the recent onset of the COVID-19 pandemic had negatively impacted employment and this could erode household savings.
Ms. Mottley stressed that reduced bank charges on deposit accounts would therefore be helpful and asked that discussions continue with the banks.
“On the other hand, banks are legitimately concerned that their non-performing loans and provisions will rise, with the risk of increased write-offs if this crisis is prolonged. The Central Bank has indicated to me that it therefore proposes to require banks to ensure that all fees are easily accessible online, preferably through a clearly visible link on their home page.
“Customers … must be notified by the banks of any changes in fees or any new charges via email and other social media platforms, and I am adding to that snail mail, where necessary. Further, the Central Bank has also agreed that it will publish, every six months, a comparison of fees bank by bank, to make sure that customers are aware of their options,” she disclosed.
With regard to utility companies, namely, water, light, telecommunications and natural gas, Ms. Mottley said she had asked the Director of Finance and Economic Affairs to meet with them, to ascertain how they could work with customers in relation to April and May bills, given the disruption caused by the cessation of work and imposition of the curfew.