THE HOYOS FILE: Time to end the blame game
“. . . (B)y the end of the 19 months’ timeframe, the deficit could be reduced to 2.8 per cent of GDP (or around) $416.7 million. (From) September 2013 to March 2014, the size of the deficit reduction would be $213.8 million or to an estimated 5.4 per cent of GDP in line with the target set for this year’s Estimates of Revenue and Expenditure. (In the) next Financial Year, it is estimated that the reduction will be $217.8 million.” – Minister of Finance Chris Sinckler, Budget Speech, August 2014
It seems fair to say that the Government, thanks to the intervention of Prime Minister Freundel Stuart late last August and again near to Christmas, blew off any chance of achieving a deficit reduction of over $200 million in the last two quarters of the present financial year, which, of course, ends on March 31.
Two thousand and thirteen was in fact a disaster for the very Government finances Mr Sinckler was trying to reconstruct: the fiscal deficit has been provisionally put at eight per cent of GDP, which is where it was heading when the minister of finance presented his budget in August, and which he said had to be brought down urgently. Hence the 19-month adjustment plan.
But Mr Stuart and other bureaucratic bungling effectively halted the progress of arms until January this year, so instead of two full quarters-plus in which to start the economy on the road to recovery, Mr Sinckler has about ten weeks.
So instead of ending up with a deficit of around $470 million, which is the 5.4 per cent he wanted, the hapless finance minister is looking at close to $700 million, or roughly eight per cent, according to the central bank’s projections.
This may be the $700 million of which Minister of Agriculture Dr David Estwick was speaking so eloquently last week. Why didn’t the doc speak out earlier? Who knows? But the concerns he raised last week as reported in the MIDWEEK NATION (Wednesday, February. 5, 2014, page 3) were all on point. Except that they were already made by Mr Sinckler last August.
Achieving the budgetary goal will require additional revenue over the 19-month period of just over $150 million, but since the net take in the first few months of that period was less than the previous year, what new measures can the beleaguered finance minister come up with to haul in the same amount in less time?
Just to remind you, the goal, Mr Sinckler said last August, was to raise this new revenue “in a way that shares the burden among all members of the society so as to lessen its impact”. Some of the “impositions” would be temporary. So far we have had the additional tax on incomes over certain amounts, and the garbage tax. I guess we will see how those performed last year and are expected to perform in the coming year, when the Estimates are published next month.
As for spending less, Mr Sinckler said that “the measures aimed at reducing current expenditure by $285 million over the adjustment period” would be applied to “personal emoluments, subsidies and transfers, grants to individuals and organisations,” along with other areas of spending. We are seeing that side finally being implemented, and there is a lot more to come.
The report on how to rationalise those 19 or 20 statutory corporations and government entities is at Cabinet and as I understand it, the full plan must be implemented starting April 1. So hopefully we will be able to see some of what is planned showing up in the Estimates next month.
As Mr Sinckler said in his budget speech, “we are firmly of the view, as expressed in the MGDS [the Medium-Term Growth and Development Strategy document, published in June last year], that for there to be any sustainable growth in the Barbados economy, fiscal prudence must be the overarching macro-economic fundamental . . . ”.
He added: “The reality is Sir, that an ill-disciplined fiscal stance by government, however well-intentioned, will act as a constraint to both public and private investment and hinder our efforts to get growth early.” And then his government went ahead and hindered things all the same for another few months.
In the lazy, ill-plotted, indisciplined melodrama or soap opera that characterises this government’s internal bickering over what to do, there is no shortage of people saying “Anything you can do, I can do better.” The chief performers of this song appear to be Ministers Donville Inniss and Estwick.
As minister of finance, Mr Sinckler’s words have sometimes burned holes in pages awaiting implementation. I blame him as well for this sorry drawing out of things because he is part of the government, but it is pretty ridiculous for the other ministers to be coming out and saying indirectly what we need to do when their minister of finance has already said it and for some reason it is not yet happening.
I wouldn’t know whose fault that might be; but in our system, while Cabinet is collectively responsible, the prime minister is the first among equals.
Mr Stuart, for his part, told the chamber of commerce recently that he realised he had to act when our foreign exchange reserves took a precipitous dive around May last year.
Yet still, the 19-month programme of adjustment was held back another four months, and in the meantime the country has suffered more downgrades and become the laughing stock of a region it used to dominate in terms of good economic governance.
I am not assigning blame to anybody. I just want them to get on with what they know they have to do.