Business Page –  Budget - reality or myth?

Sunday, February 20th, 2005

Introduction:

Tomorrow, Minister of Finance Saisnarine Kowlessar will rise in the National Assembly to present Budget 2005. This budget was first intended to be presented exactly one month earlier, but fell victim to the devastating flood which engulfed over one-third of the country's population mainly on the East Coast of Demerara, but also including large chunks of Georgetown, parts of West Demerara and latterly Mahaica and Mahaicony. Yet, according to leading government spokesman, Dr Roger Luncheon, the Estimates, to give the budget its correct name, will not reflect any of the economic, fiscal or accounting implications of the floods - for the budget the floods did not happen!

Under the law, the government has until March 31 to present the budget to the National Assembly. In 2004, the budget was presented on March 29; in 2003, March 28; in 2002, March 15; 2001 (election year) June 15; 2000, March 27, and 1999, March 26. Hopefully the minister would produce the rationale for the haste to present a budget as though the floods were merely a bad dream or some mild inconvenience with not even the slightest side effect. The full month since the floods certainly gave him enough time to begin the process of recasting the figures - however preliminary they may be. It is the type of strategic thinking and executive action citizens expect from their ministers.

I have heard two plausible reasons why the government has taken the position it has. The first is that it allows them time to resolve the confusion over the difference between assistance and compensation, and secondly, it keeps away from parliamentary scrutiny the utilisation of public resources towards the consequences of the floods. These will have to be dealt with through supplementary provisions which will come to the National Assembly after the money has already been spent.

Those surprising numbers :

It is true that over the past several years, the budget has assumed less and less importance as much for its poor content as for the credulity of some of the figures. Last year Focus, an annual review of the budget by Ram & McRae remarked that use of figures by the Minister of Finance might be deliberately ambiguous and confusing. It referred to one particular case in the 2004 speech, when he made a US$2.5M investment into US$4M and purchases of approximately $100M into hundreds of millions of dollars! Already there are signs that the numbers game is being replayed with Go-Invest publishing figures days before the budget showing investments of $9.3B (US$46M) and the creation of exactly 1,686 jobs in 2004.

There is a simple test of the accuracy and reliability of facts and numbers which cover a wide spectrum - look for something that you know for certain. If that is wrong then why believe that the others are less inaccurate? This is the difficulty I have with Go-Invest - the several inconsistencies in the numbers. Every year either the minister or Go-Invest reports hundreds of new jobs, and yet the data from the National Insurance Scheme tell a completely different story. Statistics obtained from the National Insurance Scheme show a depressing tale of contraction in the number of active employees as well as active employers since 1992, especially marked since 1997. And it is not that the many persons who are no longer employed have turned to self-employment, the numbers of which have also declined from 16,589 in 1992 to 8,843 in 2003, a decline of 46.7 per cent.

Looking back:

I went back to the 2004 budget speech to see how the conservancy or Leguan was treated in the 2004 budget and came up with some revealing omissions. On page 37 of the budget speech the minister proudly announced that the government would expend $955M to improve the sea defences. No mention of Leguan which had a breach problem during the year. And the projects listed by the minister on which the National Drainage and Irrigation Board would spend $400 M did not include the conservancy, which contributed so significantly to destroying so many lives and ruined so many livelihoods. Did he have the benefit of the advice of Mr Ravi Narine, the board's Chairman?

And how was the private sector treated? An invitation to meet with the Minister of Finance about one week before the budget was aborted owing to the floods, while the promised convening of the investment conference in the second half of 2004 simply did not materialise. On a positive note, with the support of the USAID, the sector helped to realise the passage of the Investment Act for which it had been lobbying for years, but which ironically did not seem to impress the business community in the survey referred to above. It is another of the ironies that that act actually placed regional investors on the same level as domestic investors.

The poor workers:

The less said about the trade union movement the better. It appears to have lost its appetite for struggle, its focus of its constituents' interest and its voice for advocacy which even the floods did nothing to restore. True, Norris Witter from the Guyana Labour Union was very prominent in the recent Banks-Ansa episode, but was he spent by the time the floods came? It is truly a sad reflection of the current crop of leaders that the nonagenarian, the late Joseph Pollydore appeared more agile, active and always full of ideas. Who will represent the workers who can hardly pay their medical bills, let alone repair their modest homes, replace furniture and pay for school books and basic household items?

These are not alternatives, but yet many are forced to choose between food and medical treatment for the simple reason that they cannot afford to have all these necessities. Did the unions see the several letters in the press asking for tax considerations or heard reports of several employers who callously decided against paying their employees for absence due to the floods?

Legislation without action:

And how did we do legislatively? On the insistence of the international financial institutions, a number of acts were passed into law, but the major ones are yet to be given effect. For example, the Investment Promotion Council envisaged by the Investment Act is yet to be established, as is the Small Business Council under the Small Business Act, 2004. Other legislation passed but not effected includes the Audit Act which seeks to strengthen the independence of the Office of the Auditor General, and the Public Procurement Council designed to reduce the constant accusations of impropriety associated with the award of government contracts.

On the other hand, months after passing the Fiscal Management & Accountability Act No 20 of 2003, with its noble purpose of enhancing accountability in public finances, the same legislature passed the Infrastructure Development Fund Bill allowing the government to place public monies outside of the Consolidated Fund, thereby reducing parliamentary oversight and accountability. Rumour has it that President Jagdeo was cautioned by the donor community against assenting to such legislation. The first non-constitutional body to bring about a veto on legislation was the right-wing Christian fundamentalists, and now we have the donor community. So much for constitutional reform!

What to expect:

So if the budget ignores the floods what can we really expect? These days we have pre-budget tax increases to allow the minister to boast of a tax-free budget - more sound-byte than reason. Should we not start thinking of a levy to address the threat we face from the ocean in the north and the conservancy in the south? And why not impose a tax on the plastic bottles which do so much harm to the drainage system and damage to the environment?

It would be unusual if a pre-elections budget does not contain lots of carrots and goodies to help the re-election effort. We cannot, however, ignore the IMF's displeasure with the government's spending profile and more especially the big-ticket items such as the Berbice bridge and the cricket stadium. Berbicians would regard the failure to deliver anything less than the bridge as a broken promise, and with Messrs Nagamootoo and Ramjattan waiting to pounce in Berbice, the government has painted itself in a corner.

The floods were the ideal face-saving opportunity to abandon the idea of the cricket stadium - effectively betting on sunshine. We can respond to any penalty threat by the plea of an 'act of God' and there is always the Archangel IMF to veto it in the light of the recent catastrophe - force majeure. If in the first place the stadium was incomprehensible to continue with, it now is reckless. Let us ask the Indian government for the grant/loan to be redirected to the conservancy.

Minister Jennifer Westford told parliament that the government would give assistance to those affected by the floods (all three hundred thousand of them?). If the Head of the Presidential Secretariat is correct, however, there will be no funds allocated for this assistance in the budget being presented. Where will this money come from and is there some central, non-political body which will be charged with assessing the needs and deciding on the quantum of the assistance? Is the government willing to consider the establishment of an independent Reconstruction Commission with a finite life and responsibility to direct the reconstruction effort?

Conclusion:

As usual, the speech will be full of platitudes and politics, two things we least can afford at this stage. Despite its length it will be more noted for its omissions than its contents but more than anything else it will be unreal. Last year I commented that it must have been uncomfortable for the minister to speak of accountability while one of his most senior officers was implicated in a much publicised corruption issue. This year he faces a different type of discomfort - presenting a budget that ignores the financial consequences of the floods. It will be a challenge for those who have to support it as a matter of party-line. For those who have to critique, criticise or oppose it will be a formidable task indeed. It is not something to which one looks forward