Opposition Leader Arnhim Eustace says that the 2015 budget presented by Prime Minister and Minister of Finance Dr. Ralph Gonsalves earlier this week does not provide a true picture of the financial situation facing the government.
Gonsalves presented an EC$971 million fiscal package to the Parliament on Wednesday.
The government said that the budget comprised of EC$675 million of current expenditure and EC$296.3 million of capital expenditure. It said Recurrent Revenue is EC$532.3 million, and capital revenue, EC$439 million.
But Eustace, in his response on Thursday, told legislators that the figure regarding the recurrent deficit “is technically correct, but does not give you the real picture of the cash deficit that we face, because, in addition to having these expenditure of EC$560 million, the government also has to pay amortisation — that’s the repayment on our loans — of EC$101.4 million and sinking fund payments of nearly EC$13 million dollars.
“We have to have the cash to pay those also on the current budget. So, when we look at it on a cash basis, Mr. Speaker, you are looking at about an EC$142 to EC$143 million deficit. That’s the real world, Mr. Speaker.
“So, while the technical definition is correct, the reality is [that] one has to find the revenue to meet these expenditures that we have set out in ‘Roman II’,” said Eustace, an economist and former prime minister and minister of finance.
He said he has long spoken on this matter because it is critical that everyone is clear about it.
“It is all good and well to say that is the definition. The question is, where are we going to find the additional revenue? You will probably see some balancing items under the capital revenue or other receipts, which is aimed at trying to meet, or fill the void, but you have to reach it.
“You have to really earn it. Otherwise, what is going to happen, Mr. Speaker, you are not going to reach your objectives in terms of your capital budget, because so much will be taken up dealing with recurrent, you can’t meet your capital,” Eustace said.
“I am not saying this is an easy matter, but we must recognise it,” Eustace said, pointing out that Prime Minister Gonsalves had said that the nation needs this year EC$30 million, plus EC$101 million for amortisation and EC$12 million to E$13 million for the sinking fund.
“Those are monies that you have to find; the government has to find, Mr. Speaker, if you are going to meet the targets that you have set out here in relation to expenditure.”
He noted that this fiscal year, the government has to find EC$274.5 million for wages and salaries, EC$58 million for pensions and National Insurance Service payment, EC$102 million for other transfer, including monies to the University of the West Indies, the Roads, Bridges and General Service Authority (BRAGSA) and to the Tourism Authority, EC$52 million for interest payment on the National Debt, and EC$73 million in goods and services for the various government ministries.
“So just in these five items, you need to find EC$562 million dollars for this year’s budget. And as I indicated, Mr. Speaker, you still are faced with the payment of EC$101 million dollars to pay the principal on your loans and to pay your sinking fund contributions to cover your bonds, and so forth, which means that recurrent expenditure, if we are to meet all those commitments in 2015, has to be in the order of 625 million,” Eustace told lawmakers.
“You can’t be in a position where you are not able to pay wages and salaries. You have to pay them. You have to pay your NIS, but, as we have seen, Government try to hold it back, both in 2013 and 2015,” he said in reference to the EC$15 million in workers contributions that the government did not pay into the NIS — EC$23 million according to opposition figures.
“Our NIS pensioners are dependent on that, not only for pensions but also for other benefits that come from the National Insurance Services,” Eustace said.
He said he was particularly concerned that government is able to meet the transfers that it is proposing, adding that BRAGSA has to have funding in addition to whatever loans may be raised to do roads and infrastructure work.
He said the Tourism Authority must have funding to promote, that sector, noting that the sector is vital to the Vincentian economy.
“So these figures are not just here for a joke. I assume that they are very serious and they have to be met. If they are not met, we cannot achieve our goals in terms of growth and improvement in those sectors … If they are not met, we will not have the growth that we project for our economy,” he said.
Eustace said that looking at the proposed capital expenditure, the government expects grants of EC$91 million, external loans of EC$72 million, local loans of EC$71 million and capital revenue of EC$43 million, and “other receipts”.
“Well other receipts, you know, does hide a lot of miseries in the budget as you try to bring a balance between the capital expenditure and what we propose for our capital projects. It is important that all of us understand exactly what these things mean,” he said.
The Unity Labour Party government has in each budget included an “other receipt” amount that is significantly higher than it collected the previous years.
Eustace said that a lot of assumptions are made based on the contents of the capital side the budget, adding that behind those assumptions are targets for economic growth and increased employment.
“So the basis on which these figures stand must be sound. We must know that we are able to achieve it. We must know that the chances are good that we will achieve the targets that we set here,” he told legislators.
Prime Minister Gonsalves has said that this is likely to be his last budget before general elections, constitutionally due my March 28, 2016.
The debate is continuing.