Latest update June 16th, 2026 12:40 AM
Budget Blahs 2009
We look at the Budget presented by the Hon Minister of Finance Dr. Ashni Singh, using the framework we proposed in our editorial “Budget 2009” at the beginning of the week.
The budget was presented under the theme Working Together – Reinforcing Resilience. Overall, the budget was pretty ho-hum without any major fireworks…which might not be such a bad thing in our present circumstances.
As we predicted, total expenditure – projected at $128.9 billion – is larger than last year’s. But it was a bit hyperbolic to trumpet it as the “biggest budget ever” when one discounts the 8.1 percent increase by the announced final inflation rate of 6.4 percent for 2008. The government, at best, will be just keeping pace – hence the lack of any fireworks.
The revenue of the government is projected at $90.3 billion, almost all of it coming ultimately from the pockets of the citizenry – which is good reason why everyone ought to be very concerned with how the money is spent. $37.4 billion will come from your income taxes (personal and corporate) while $41.9 billion will be squeezed from VAT and excise taxes. The latter had been eased with the precipitous rise in fuel prices but will be slapped on again so that we may expect some price increases from that direction.
This still leaves a shortfall of $38.6 billion – as we predicted, more than 40 percent of what will be collected as revenue – which will have to be covered by loans and grants. We had asked the question as to whether you would be comfortable if you were consistently spending forty percent more than you earned.
The ineluctable build-up of debt that is becoming threatening – US$833million by the end of 2008, necessitating $6.5 billion in interest payments. The days of debt relief are over – especially in the climate of a global recession. The projected shortfall is very optimistic since we know that on more than one occasion the government will be returning to Parliament to approve “supplementary appropriations” to cover supposedly unforeseen contingencies.
Because of this shortfall in revenues, it was most optimistic for some to believe that the 16 percent VAT would have been shaved or that the income tax threshold would have been raised once again. We believe that even maintaining the status quo is optimistic since it is based on what we consider to be optimistic projections for sugar and rice and bauxite – even in view of the conceded anticipated poorer performances for 2009.
The travails of the expected expansion at Skeldon (even with the new three-year scenario for reaching optimum production) are not confined to the commissioning of the factory and, as with the field-related problems that have snowballed in the other estates, will push production down and costs up. We project that the $5.7billion deficit piled up by GuySuCo in 2008 will double in 2009.
The announced deferred acreage in rice cultivation on account of the present flooded conditions especially in region five and six will push down rice production further. Bauxite production will be slashed even farther, not only on account of the global collapse of demand but on account of Rusal’s own problems.
Fishing and forestry and manufacturing all declined in 2008 and that trend will continue. Nothing has changed with the running of GPL and the theft of power combined with the corporation’s inefficiencies will most certainly see it running back to the government for a subsidy – hopefully less than the $3billion it extracted in 2008.
In terms of new investments that might generate income and jobs, the budget was very reticent. The hydroelectric project is once again deferred for another year because of “financing” constraints as is the much-touted alumina plant.
If even the sun-swept beaches of our Caribbean neighbours are not attracting their usual hordes, it would be quite a stretch to expect us to buck the tide. The Minister confirmed that personal remittances were down for 2008 and that the trend will be accentuated in 2009.
With all of the foregoing we find it hard to accept that overall, our GDP is targeted to grow by 4.7 percent in 2009. Where will the growth come from? Financial services? CLICO’s fiasco should put a damper on that hope. We will certainly need to work together and be resilient in the months ahead.
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