Budget Outlook: Intent and Performance in 2010

ANY brief comment upon the national budget, especially so relatively soon after the public disclosure of its contents, runs the very real risk of misconstruing, or certainly doing less than justice to the influence its measures are intended to have upon the country’s future affairs.

What might seem to have high priority, for example, at least according to the monetary weight assigned to the funding of particular activities, is not always an infallible guide to the likely fruitfulness of the respective financial provisions.

This is not so much because economics is an inexact science but because choice in the allocation of resources can also be exercised to destroy, instead of enhancing, material welfare as the woeful experience of the nation, particularly since the mid-1990s, so cruelly illustrates.

Such considerations, however, have not totally aborted all carping at the budget proposals which have been accused of doing little or nothing to improve the real earnings of the lowest paid, and are thus inconsistent with its stated theme of providing a “pro-poor, broad-based and inclusive development framework”.

Despite this, few people of goodwill are likely to take serious issue with any steps, however halting, which seek to ameliorate the lot of the population’s 85% “‘submerged and drowning poor” or even their 13% “floating or dog-paddling middle class cousins”. The brutal reality of the situation the country — and the minister — currently faces is that the genuinely foreseeable growth in revenue provides no room for magnanimity.

Projected expenditure in 2010, including the US$810 million vote of credit (essentially aid funding) is only US$2,25 billion against combined ministerial, departmental and parastatal bids of US$12 billion. Allowing for the fact that the demand for public funds almost invariably exceeds whatever is available the situation can only be described as dire.

The priority given to health, education and social welfare spending in both the budget allocations proper and the vote of credit thus provides little to cavil about beyond making the trite point that few, if any, of the available means are anywhere near adequate to address the ends being sought — hardly a novel conclusion.

Where reservations over the budget proposals do seem likely to have somewhat greater legitimacy over the latter’s quite possibly over optimistic assumptions concerning the country’s short-term economic outlook. This is seen as consisting of nominal GDP growth in 2010 of 7% predicated upon strong real performances in the three materially productive sectors agriculture, mining and manufacturing complemented by a buoyant performance in tourism.

Although a caveat is recorded in so far as anticipated weather conditions are concerned insufficient allowance is likely to have been made for the uncertainty invariably present in respect of the outcome of the summer cropping season where rainfall totals and distribution patterns are notoriously erratic.

Moreover, since the country’s agriculturally useful rain is usually confined to just four consecutive months (roughly mid-November to the following mid-March) the probable farming outcome cannot be foreseen with anything like accuracy as early as December when the initial Budget forecasts have to be made notwithstanding an increased reliance upon irrigation.

Since farming still provides an estimated 40% of secondary industry’s inputs and constitutes a market for, perhaps, some 10% of its output as well as earning an albeit-much reduced income from exports, the effects of fickle weather conditions are not confined to agriculture alone.

To the uncertain influences of the weather have more recently been added those arising from the agricultural season’s net impact upon money supply in a situation of ongoing liquidity restraint and its implications for the balance of payments.

The budget acknowledges the country’s acute dependence upon grant aid and investment inflows in a situation in which there is effectively no lender of last resort.

While the scope for fiscal policy initiatives is extremely limited the budget does not overlook either the essential role in stimulating growth which “a conducive business environment” will be required to play.

It is here that the necessary reinforcing relationship between economic, social and political objectives is obliquely alluded to.

For far too long ministers of finance have been expected to advance economic growth and development in the most inauspicious of circumstances when developments outside their portfolio have frustrated, impeded or totally undermined attempts to promote the more efficient operation of market forces to the national benefit.

Money alone can be of no use in a country without laws, property rights or trust in institutions as ordinary citizens have found to their cost.

Notwithstanding payment of lip-service to the needs of “the economy”, timid politicians irked by the difficulty of making enough money honestly have been continuously able to bring sufficient short-term influence to hijack any moves viewed as likely to cramp the lifestyle of “the 2% prawn-eating free stylers”. The underlying message of the 2010 Budget is not sufficiently spelt out. It needs to be.

 

Jimmy Girdlestone

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