The following Ministerial Statement was delivered by Minister of Finance Chris Sinckler this morning in the House of Assembly.
Mr Speaker, you will recall that on August 13 this year, I presented to this Honorable Chamber, on behalf of the Government, the Financial Statement and Budgetary Proposals.
That statement and the measures which accompanied it were cast against the backdrop of the continued negative impact which the unsettled global economic climate is having on our domestic economy.
Indeed Sir, it can now be said without serious contradiction that such a challenged and unhelpful environment has coughed up not one or two, but more than five years of consistent undermining of our own efforts to reinvigorate externally-led growth through the foreign exchange earning sectors.
While it is also fact that when compared to previous deep recessions such as in 1981-82, or 1991-92, we have managed to avoid any potential dramatic economic decline relative to GDP (Gross Domestic Product) growth, except for 2009 at the height of the global financial and economic collapse, the continued depressed international demand for our goods and services over such a prolonged period has continued to take a heavy toll on our fiscal, debt and now external current account positions.
It is for these reasons, and the need to continue to stabilize our economy, while accelerating our economic growth programme, that government unveiled a revised Medium Term Growth and Development Strategy (MTGDS) to take the country through to 2020.
That Strategy set the main national tasks as:
a) Returning the economy to a sustainable growth rate of three per cent while maintaining macroeconomic stability;
b) Facilitating broad based adjustments and reforms in the economy;
c) Enhancing social and human development and;
d) Enhancing energy and environmental sustainability in the context of the Green Economy.
Based on those tasks, the broad objectives going forward are to:
1) Reduce the Fiscal Deficit to below 2.0 per cent by 2020/21;
2) Achieve a more comfortable level of Debt Sustainability;
3) Strengthen the Net International Reserves position to at least six months or 24 weeks of import reserves cover;
4) Reduce the unemployment rate to 7.0 per cent over the planning period through private sector job growth;
5) Reduce the cost of doing business and the cost of living;
6) Increase the exports of goods and services;
7) Enhance international competitiveness, national productivity, efficiency and service excellence;
8) Enhance business facilitation;
9) Expand and accelerate public and private investments;
10) Preserve a strong social safety net.
In the context of planning for the achievement of these objectives, and cognizant of the unsettling deterioration in the country’s fiscal, growth, debt and international reserves position, particularly from April this year, government designed and presented as part of the Budget a 19-month fiscal consolidation and economic growth programme to arrest the slide and turn the situation around.
That programme has been designed to accelerate fiscal consolidation over the adjustment period while seeking to facilitate faster and more sustainable rates of growth through the planning cycle for the MTGDS.
We indicated that our overall targets are to reduce the fiscal deficit to below three per cent by end 2014/15 fiscal year, arresting the loss of reserves while rebuilding the same to at least 14 weeks of import cover, and returning the overall economy to modest growth of 1.5 to two per cent from 2015 onward.
On the fiscal side the programme is a combination of both revenue and expenditure initiatives calculated for overall savings of $435 million dollars: $150 million dollars in extra revenue and $285 million in expenditure reductions.
Mr Speaker, at the time of the delivery of the Budget, I gave this House and the country as a whole the assurance that we would give periodic updates on the implementation of the various measures outlined and any adjustments which we believed would be necessary to assist the country in achieving its objectives.
In keeping with that commitment, and mindful that we have completed the first three months of implementation of the programme, I am happy to lay, along with this statement, a report in matrix form, outlining the progress we have made to date on the implementation of the measures.
In that report, Sir, members will see that, contrary to the perception being given in some quarters, government has in fact made a solid start to the implementation of most, if not all, of the nearly 50 initiatives outlined in the Adjustment Programme.
To be sure, based on an analysis from the Division of Economic Affairs, in the short three months that have elapsed thus far ending November 30, 10 initiatives have been fully implemented while 40 others are at various stages of implementation. All of the tax measures set for implementation in 2013, with the exception of one, the tax on lottery winnings, which we expect to have passed in this House in January, have been implemented.
The Finance Division has indicated that to date the returns from those measures are trending close to predicted performance but of course it is still very early and data is only preliminary at this stage.
On the expenditure side I can report the following: All ministries have made cuts and have reported on the areas of adjustments recommended by the Ministry of Finance. Based on those adjustments in the areas of Other Personal Emoluments (OPE), Goods and Services, and Transfers, and with no further intervention, we would fall $32 115 Million short of our target of total savings demanded over the adjustment period.
This would be as a result of a shortfalls in OPE of $12 568 million; Goods and Services of $5 098 million and Transfers of $14 448 million. This Mr Speaker is not acceptable.
Indeed given recent data on the continued challenges with both the underperformance of revenues and continued hemorrhaging of international reserves albeit at a slightly slower rate than earlier this year, it will behoove the government to not only impose the cuts set out in the August Budget to get the complete savings as forecast, but also institute additional expenditure reduction measures to accelerate the fiscal adjustment, plug the outflow of reserves, and stabilize the overall economy.
For the avoidance of doubt allow me to briefly contextualize why we have to expand and intensify our actions in the short term to achieve these objectives. The provisional fiscal data available to the Ministry of Finance up to the end of October have shown a continued and worrisome deterioration in our revenue performance, even as expenditure has declined only marginally.
It is important to note that these figures do not include the results from the August measures but the projections to the end of the fiscal year at March 31, 2014 will take account of them.
