IN AN expected development, debt continues to dominate the budget. Debt payments increased by $58 billion or 35 per cent over last year to reach $228.4 billion. As a result of this, 70 cents out of every revenue dollar will go to pay debt. Significantly while the total $328 billion budget is 17 per cent higher than last year, with inflation for the fiscal year expected to come out at 15 per cent, the real increase in the budget is less than three per cent.
As a result, increases in the various Ministry allocations merely keep up with inflation and in some instances there are actually reduced allocations. In the case of the Ministry of Industry and Tourism, the allocation is cut by $20.5 million to $1.6 billion.
In this regard it is noteworthy that only recently the director of tourism was on record as calling for more funding for advertising in the European market. It should also be noted that while the allocation to Education, Youth and Culture gets a $677 million increase the increase represented 10 per cent of the total budget lower than the 11 per cent of the total budget that both political parties had agreed to.
Still the budget is not without its bright spots. For one thing the marginal increase in real terms in the budget this year means that the Finance Ministry is prepared to walk the tight rope in balancing the small discretionary aspect of the budget among several competing ends. In short, there is an obvious reluctance to inflate the economy to create an illusion of prosperity. Additionally, the modest increases in interest cost as a percentage of the budget (as interest rates fall) and containment of the recurrent budget because of the MOU, mean that government could potentially divert any saving on non-debt expenditure to its programmes aimed at addressing the social agenda.
Still, given the holding nature of the current budget estimates that are essentially keeping expenditure levels where they were last year, it is difficult to see the basis of Dr. Davies' expectation that this will be the best year for the economy.
All attention will now be focused on how government plans to fund this year's budget. Given the Finance Minister's promise that there will be no big tax package, expectations are that they will revert to overseas borrowing to target the traditional US$400 million financing gap that has been faced for the past three years.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
