Waiting for the budget
The government faces another challenging year in crafting a budget to meet the demands of running the country, even as the economy continues to be in the doldrums we have got used to over the past three years.
Persistent high employment, the closure of many small business, reduced activity in the rental property market and a general fall in business confidence are but some the issues that have kept our financial outlook grim.
This week, the World Bank, in its Global Economic Prospects (GEP) report, June 2012, warned developing countries to be prepared for “a long period of volatility on the global economy by emphasising medium-term development strategies, while preparing for tougher times”.
The World Bank projects that growth in developing countries will slow to a relatively weak 5.3 per cent in 2012, before strengthening somewhat to 5.9 per cent in 2013 and 6.0 per cent in 2014. Growth in high-income countries will also be weak, 1.4, 1.9 and 2.3 per cent for 2012, 2013 and 2014 respectively – with GDP in the Euro Area declining 0.3 percent in 2012. Overall, global GDP is projected to rise 2.5, 3.0 and 3.3 per cent for the same period.
Countries like ours may well heed the World Bank’s warning and prepare for tougher times. We have to be concerned about the projections for weak growth in high-income countries, given our dependence on investments from such economies as well as tourist traffic and spending. Without such investments and without continued growth in the tourism sector, we are at risk of losing vital revenue on which our economies depend.
Already, we know that we have not too much room for manoeuvring when it comes to the local budget. The government’s fiscal plans require review and approval from the UK and it is bound by the three-year plan it presented and signed with the UK in 2010. This committed the government to certain medium term strategies to return the country to fiscal health. They include reform of the public sector, with a view to reducing operational expenditure and improving efficiencies, a limit on new borrowings and major new capital projects, re-alignment of the country’s revenue base, reducing operating expenditures and opting for the use of private financing initiatives for capital financing.
A few weeks out from the due date of the next budget, little is being said by the government about what can be expected for the new financial year. Rather than a surplus as it had projected in its 2010 three-year plan, reports suggest that government could be facing a shortfall at the end of the current financial. How will this be made up must be a ticklish question for all concerned with the budget exercise.
Meanwhile, we wait to see what steps government will take to bolster its revenues. One wonders it these could include an increase in the various fees that we pay for services from government. Given the fee increases of two to three budget cycles ago, one can expect that any new increases would add to the strain being felt by businesses and consumers generally.
Then again, we also wait to see what further cuts will government implement to reduce its operating expenditure and how seriously it will take this aspect of its three-year plan in this particular budget cycle. What measures will be in place to promote growth in the economy, which in turn will translate into increases in government revenue?
One expects that the new budget will reflect government’s priorities, for this, the fourth year of its elected term and it will no doubt want to assure the country that its policies and programmes are sound, feasible and beneficial and will return the country to better times. Anything less will be an indictment on the government’s stewardship over the past three years, which could likely affected its chances in elections due in May 2013.
We do not envy the many contemplations and the serious challenges that the government faces in trying to manage the country’s finances, while still planning for medium and long term development.
Whatever the budget turns out to be, we hope that it will be something that the entire can get behind and support, for the good of all.