The International Monetary Fund, IMF, says the government in Barbados will have to take a bolder stance on taxes and find new ways of growing the economy, after the severe knock it took from a global economic collapse.
In its latest analysis of the country, the IMF says Barbados was particularly hard hit by the global crisis which seriously hurt key industries such as tourism, financial services, and real estate investment.
The assessment says the Barbadian economy declined by 5% in 2009 and output is expected to fall again this year, albeit at a slower rate.
The weak economy has led to a steady increase in the unemployment rate which now stands at 10.7% compared with 7.4% in 2007.
The study also says the lower government revenues and higher expenditures are contributing to persistently large fiscal imbalances which have caused the public debt to climb to 15% of total economic output.
In a bid to help balance the books, the Barbados government last month announced an 18 month rise in the Value Added Tax (VAT) to 17.5%.
This is set to last for 18 months, initially.
However, in this latest report the IMF says the VAT increase should remain permanent.
In addition, the Fund says the government should look at increasing cooperate tax rates and widening the tax base to raise desperately need revenues.
But while it suggests that the Government tightens the purse strings, the IMF does say the economy can benefit from moderate increases in spending on capital projects to support medium term growth.
(Source: The BBC Caribbean Service)
All feeds
