GOVERNMENT IS apparently serious about its commitment to cut its expenditure under its current IMF Staff-Monitored Programme.
Last week, it presented its modest $210b Expenditure Estimates to Parliament. This new figure reflected a $9.7b or four per cent reduction in the $219.77b revised budget for the just-ended fiscal year (March 31).
These reduced expenditure figures raised many eyebrows given the expected increases usually associated with an election year. Of course, while the Finance Minister has repeatedly stated his commitment to his budget deficit targets with the IMF, given Government's recent proclivity to using off-budget "differed expenditure schemes" to mask real expenditure, this is an area that requires careful scrutiny. Nonetheless, the Government must be complimented for this signal that it wants to cut its fiscal deficit.
In terms of the actual expenditure numbers, there were few surprises. Debt costs continue to dominate the budget, with the Ministry of Finance getting the largest amount of $148.8b that accounted for as much as 70.1 per cent of the total budget. Education was next in the pecking order with an allocation of $21.7b, followed by National Security, with $12.9b.
Of particular significance is the decline in the tourism allocation that was cut by $45b. Coming so soon against the background of the events of September 11 and given the sector's importance to the economy, a cut in its budget, when it seems to be just turning the corner, is indefensible. However, the Finance Minister has already hinted that the increased expenditure that had to be pumped into the industry after the events of July 7 and September 11, had contributed to the increased spending that caused Government to exceed its budgeted fiscal targets. The bottom line here is that faced with competing ends for State funding, tourism lost out.
Another significant point regarding the budget allocations is that the Capital budget has again been cut, this time by $21b or approximately 20 per cent. This is always a bitter pill for the economy to swallow as it is increases in capital spending that will provide the fillip for growth.
The latest budget estimates merely reinforce the limitations that the economy faces when a disproportionate amount of the budget is allocated for debt-servicing.
