BRIDGETOWN, Barbados: While delivering a Bds$3.6 billion (US$1.8 billion) budget in parliament on Monday, Prime Minister David Thompson revealed plans for a new employment stabilization scheme which would not see changes in domestic taxation.
The employment program, which aims to protect jobs, will give employers access to a loan which amounts to the deferral of one year’s payments to the National Insurance Scheme.
“Employers must, however, have been compliant as of June 30, 2009 and (commit to maintaining) current employment levels for the period of the facility,” Thompson said.
The arrangement takes effect July 1, 2009 with the amount of the loan repayable over a five-year term at a three per cent rate of interest.
Thompson, who is also the country’s finance minister, said in the coming fiscal year emphasis would also be placed on training and retraining of the workforce.
He cautioned that the nation’s economy, currently grappling with the global economic crisis, was likely to get worse before it improves, with the vital tourism sector, expected to end the year down 4.5 per cent, on the decline. Unemployment, which stood at 7.6 per cent at the end of 2008 compared to 6.7 per cent one year earlier, is also on the rise.
“With the downturn in economic activity and the reduction in net capital inflows, domestic deposit accumulation has been relatively sluggish which, when coupled with waning demand, has led to stagnant private sector credit growth.
“The expectations for the remainder of 2009 are not dissimilar. With the latest revisions to the IMF’s (International Monetary Fund) forecast suggesting an even deeper recession in the United States, Barbados is facing the possibility of dampened economic activity well into 2010,” Thompson said.
The government is projecting an overall deficit this year of 5.1 per cent of GDP.
Thompson also said the country’s public debt, which hovers around Bds$6 billion (US$3 billion), remains troubling and a new plan must be implemented to reduce it.
In response to calls from various sectors for an ease in domestic taxation, the Prime Minister said stakeholders would have to “hold tight”.
Thompson announced some relief for the automobile sector, which is reporting a 43 per cent decline in sales, as well as a reduction in the Value Added Tax (VAT) charged on building materials as it applies to first time homeowners.