Fiscal rules, but not at expense of growth

Any fiscal rule Government introduces to improve its financial management should ensure that public investment, including infrastructural development, does not suffer.

That recommendation comes in the new Central Bank of Barbados working paper Do Fiscal Rules Impact Investments For Small Open Economies?, authored by Keisha N. Blades, a research intern in the Central Bank’s Research and Economic Analysis Department, and Dr Ankie Scott-Joseph, lecturer of Economics, University of the West Indies, Cave Hill Campus.

Their research study investigated the impact of fiscal rules on investments for small open economies (SOEs). A comparative analysis was conducted on Barbados, Greece, Grenada, Ireland, and Peru – five countries which have undertaken debt restructuring programmes within the last 20 years.

Government is planning to introduce a fiscal rule, one that is procedurial in nature to enhance transparency, accountability, and fiscal management. It is unclear if Barbados’ framework will evolve to one with numerical limits. (SC)

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