Last week we noted that even if there is an overarching plan like Vision 2030, the annual budget should be the instrument through which the Cabinet exercises its mandate and through Parliament.
S75 of the Constitution requires the Cabinet to exercise its “general direction and control.” In practice, this is exercised through its annual budget. Hence the budget speech is a general statement of intent and prescription.
What steps are required to achieve Vision 2030? Is the country progressing? What are the weaknesses that must be addressed? What problems will it help solve? Or will it maintain the status quo?
Long-term issues are about positioning the country to compete and survive in a dynamic and disruptive world. This means ensuring that the nation’s citizens, its true natural resource, are adequately trained to survive in the global world. Citizens must be responsible and do their part too.
However, the State must ensure the education and healthcare systems are adequate. The State must also address the demographic issues caused by a rapidly ageing population and the accompanying social security and health challenges.
The bread-and-butter task is to keep the economy moving in the right direction. This requires a real partnership between the private and public sectors to ensure that it is easy to do business and that people have the confidence to invest. Safety and security, an effective justice system, and the development of an efficient public sector that facilitates the process are the bedrock for public confidence.
Therefore, the key concern is not how much money will be spent, but spent on what and what change the expenditure will cause. What will change for the better? This requires both qualitative and quantitative analysis.
A review of the outcomes and results of the previous year’s expenditure decisions and the corrections made to keep public policy on track to its long-term goals. For example, in the 2025 budget speech, the Finance Minister recounted many infrastructural projects by constituency. The “softer” infrastructural projects like upgrading the CSO and the National Statistics Institute were ignored.
How can the minister support the vulnerable if he does not know how many are vulnerable or who they are? He could not know because the CSO operations are still challenged, although this was a policy imperative identified in the first budget in 2015. How do we know if the grants are appropriate since the last budgetary survey was completed in 2011? Are the various government grants adequately designed and targeted? What is the poverty line income and the number of people who are in this category? In this context, what does raising the minimum wage of government employees to $22.50 an hour mean?
The minister pointed to positive development in the non-energy sector as evidenced by growth in the manufacturing sector. He noted that the economy had returned to growth and that the country was progressing notwithstanding the challenge created by falling natural gas production and weak energy prices and concluded that this was due to prudent management of the economy and the country’s finances.
The evidence of a prudently managed economy, the evidence of progress, is the size of the national debt and its foreign reserves. When a country’s budget position is continuously negative (deficit), its national debt will rise and be financed by borrowing or by depleting reserves like the HSF.
Except for a small surplus in 2022, GORTT deficits have been continuous for the last 16 years. Therefore, the national debt as a percentage of GDP has been rising continuously.
(Figure 1) Deficits are expansionary and stimulate growth, as did higher energy prices in 2021-23. The positive economic growth identified by the finance minister should translate into increasing net official reserves.
Instead, Figure 2 shows that the net official foreign exchange reserves are in continuous decline. Shouldn’t economic growth also lead to a healthier foreign exchange position? The two key issues are time and leadership. Do we have enough time to reverse the decline, and who will provide the leadership? Which comes first, the political interest or the national interest?
Mariano Browne is the Chief Executive Officer of the UWI Arthur Lok Jack Global School of Business.
