Correcting budget contradictions

Perhaps the first and most obvious is a budget deficit touted as a tool that will result in economic growth of 1%. Ironically, the budget, which contained such significant cuts in expenditure and major fall off in revenues, was titled a “Blue Print for Transformation and Growth”. In reality it should have been dubbed “Fiscal Consolidation and Stabilization”. It tackles the massive fall in government revenues, reduces expenditure and attempts to raise new taxes and increase revenues through one-off measures.

Transformation and growth are indeed not one-year expeditions.

Rather they occur with planning over a medium to long term horizon.

Any consideration of growth is predicated on the rebound of the energy sector, as it is hoped commodity prices recover moderately and new discoveries of oil and gas come on stream to stem the tide of decline. This is not an economic plan: it is a wait and see game, an obvious contradiction.

There are plans for infrastructure development which place major emphasis on road and port development. Does this massive investment actually alleviate the traffic congestion that takes place on the main arteries of the country? It would appear that this will simply increase the volume of traffic on the east-west corridor as well as the north-south corridor: another transformation and growth contradiction.

Port development makes sense if some rationale is presented. Where does the Minister see the new exports coming from? In light of the decline of production in oil and gas, the cessation of operations of ISPAT and CENTRIN, and the reduction in real GDP from the non-energy sector, exactly where will the port demand be coming from? Then there is the issue of debt not exceeding 65% by 2020. With the downward revision of GDP in 2016 to $145 billion, our debt/ GDP now stands at 60.8 percent. There are studies which demonstrate that a 56 percent of debt to GDP ratio is the threshold for the Caribbean, above which increases to accumulated debt and result in a reduction in economic growth. Increasing the size of the finance required to bridge the budget deficit resulting in increased debt that surpasses the threshold thus reduces growth - yet another contradiction.

The FATCA debacle and the drive to attract foreign investment is another glaring contradiction. Which foreign investor will take seriously a jurisdiction that has not at this late stage put its house in order to have a full enforced FATCA agreement? How can this country hope to become an international financial center when finance legislation cannot even be agreed upon? What about other types of investment? What has the pattern been? Isn’t the majority of investment focused on the energy sector? How feasible is it to expect that at the low prices of oil and gas there will be investor confidence to take exploratory risk in this country? There is also the obvious contradiction in the argument on online purchases. Very simply goods will either be imported by retailers or consumers. It is questionable what foreign exchange saving will take place. If it is protection of local retailers, what studies have been done to identify the net benefit? How is the Minister compensating the public for the loss of cheaper, possibly better, product and variety? The latter is a conflict.

In such a short space only limited examples can be highlighted but there are so many more, such as recognizing the need for food security but a glaring lack of agricultural incentives.

The Minister has to correct these quickly.