adjustment effort, including addressing interest costs on selected debt on a voluntary basis, to reflect current borrowing constraints. the impact of the fiscal developments was manifold. first, fiscal adjustment attempted to compensate for the substantial loss in taxes from foreign sources by substituting with domestic taxes. as a result, sequential reforms were made to the personal income tax and property taxes, new taxes were introduced to stabilise revenue and the value added tax was reformed and the rate increased. secondly, potential growth enhancing capital expenditure absorbed much of the initial non - interest expenditure adjustment. however, state enterprises were able to cushion the impact on growth through their capital works programmes. however, since some of these enterprises lack the financial capacity to service the ensuing debt, central government is expected to absorb the costs over the medium term. thirdly, the persistence of large deficits and rising debt led to deterioration in the sovereign credit rating, with adverse effects on access to capital markets at reasonable costs. increased reliance on domestic financing while servicing debt has added to the depletion of reserves. fourth, government encountered cash flow difficulties that encumbered its ability to make payments on a timely basis, including to some of its public enterprises. fifth, policy makers were forced to review how longstanding entitlement programmes, particularly for education and health, should be financed in an environment in which financial resources were insufficient to meet demand. sixth, policy makers have had to review the size of the public sector, its scope of activities and its efficiency in delivering its services. jobs were cut from the public sector roll in 2013 and steps taken to identify agencies which could be merged to avoid potential duplication of services. this review is ongoing. in addition, some state assets have been identified for divestment, creating resources to ease short term financing flows. some of the challenges being experienced in barbados are being replicated across the region. deficits, debt and access to low cost finance are interrelated. it is important for us to recognise that every dollar of the fiscal deficit has to be financed or arrears will accumulate. the sale of state assets, when judiciously applied, can enhance cash flow by providing one - time revenue. but in general, only productive assets can be quickly sold for what there are worth, while the sale of such assets may have, inter alia, competition, relative prices, income distribution and foreign exchange effects. moreover, divestment does not substitute for the need for fiscal adjustment. against this backdrop, what therefore

, to their regional partners, branches and subsidiaries, and to their head offices and activities outside the region as well. surveillance must be undertaken in collaboration with other domestic regulators, and a framework must be set up to provide for regional financial surveillance on a sufficiently frequent basis. for this analysis and reporting, data collection and reporting must be more comprehensive, analytical tools will need to be strengthened, some international guidance will have to be revisited, and staff of regulators and financial institutions will need to be trained in the upgraded systems. there is much to be done, and it will be necessary to proceed on parallel tracks, in practical steps. the main items which the public can look forward to in 2010 are : • an action plan for regional financial surveillance, to be undertaken as a collaborative effort of all caribbean regulators, coming out of the march 3 – 5 workshop ; • the publication of financial soundness indicators online by the central bank of barbados, starting with indicators for banks ; and • the publication of the inaugural financial stability report by the central bank of barbados. financial stability is in all our interests, the regulators, the financial institutions and the general public. by actively working together with the institutions we supervise, the financial regulators will be able to keep the public up to date on the health of the financial system, and provide the facts, figures and analysis to support their assessment of its stability.