By Observer
Earlier this year, we presented two pieces where we highlighted some of the details from this year’s (2023) estimates. Most of you found some of the numbers and the purpose of the spending quite interesting. That time is almost here again. The 2024 Estimates and Budget will be presented to the country soon. We encourage you to pay attention to the presentations, in particular the allocations that you found to be interesting for 2023 — things like the traveling budget for the Office of the Prime Minister and outstanding loans to the NIS and so on.
We also implore you to interrogate the allocations for offices and departments that are supposed to be independent. Offices like the Electoral Office that had its financial allocation listed under the Ministry of National Security. Let’s hope that relationship between the ministry and that office remains strictly a financial one and nothing more. These offices are to be strictly independent. We encourage you to pay attention to those things and ask the necessary questions of your parliamentarians. Better yet, seek a copy of the Estimates, and the Budget when they are published and peruse them for yourselves. 2023 is almost to its end, yet its Budget Address is still not digitally available to the public.
In this piece, we’re asking the question: how bogus will the 2024 budget be? We are referring specifically to the capital side of the budget. The budget numbers are presented in capital on one side and recurring on the other. Recurring budget is for things that happen, let’s say, monthly, like salaries that must be paid every month. The capital side covers projects, like roads and buildings and so on. Put both sides together and you have the total budget for the year. The estimates list the details of the proposed spending and receipts, while the budget is a summary.
Last week Thursday, Nov. 23, Shevrel “Candy Man” Mc Millan, who is the prime minister’s “press officer” responding to a question from the hosts of BOOM FM’s OMG, said, in part: “… one of the issues we have now … is that we have a serious deficit at the moment … in terms of capacity, to carry out these major projects at once…”.
He was trying to explain why all the promised projects have not been completed. News flash! This is not new. In fact, implementation capacity of the government has been a perennial problem.
Anyone who followed the teachings of Arnhim Eustace would know this implementation issue is not new. Searchlight newspaper in this 2014 story quoted Eustace as saying: “No government has spent more than 160 million dollars in any budget”.
After the 2013 floods, the government went back to the Parliament to seek further funding for rebuilding and so on. Eustace raised questions then, about the government’s ability to spend all that money in 2014, and whether the people would see the benefit. iWitness News’ coverage of that parliamentary session is also here.
In addition, as recent as 2020, the minister of finance acknowledged this issue in the budget address. It stated this:
“The Government’s last two Budget Speeches have stressed the importance of implementation, and the work being done to improve the amount of money spent on capital works each year. While the implementation problems have not been solved, our focus on removing bottlenecks is promises continued improvements in the way we get things done.
There are specific threats to our 2020 implementation ambitions that require focussed attention. One is the status of certain ‘problem projects’ that are facing external administrative hurdles that we cannot resolve on our own. Last year, the Natural Disaster Management Programme and the Kuwaiti-funded road repair programme experienced these external challenges. Due to the conscientious work of the Honourable Minister of Transport and Works in reforming the administrative arrangements, we hope to significantly accelerate these programmes in 2020.”
It went on: “Another significant potential hurdle is the availability of aggregate — a basic building block of roads and most construction projects. There is simply not enough aggregate on-island to satisfy the demand that this capital programme will create…
“Of course, it is highly unlikely that we will achieve every single one of our implementation goals in 2020. In the last 30 years, no government has ever implemented more than two-thirds of its revised capital budget in a 12-month period. Unpredictable events could derail or delay our plans, from natural disasters to lengthy dispute settlement procedures. But our 2020 target is realistic and, with sustained hard work, achievable. To those who reasonably ask us ‘can you do it?’ Our answer is ‘yes, we can.’”
Even as the government acknowledges its limitations in capital spending, it continues to present to the Parliament a capital budget that is far more than what it knows it can spend in a year. $471.5 million was the estimated number for this year’s (2023) capital expenditure.
Add to that, the timing of the budget presentation. The government has gotten in the habit of presenting the budget in the year of the budget, rather at the end of the previous year. 2020 budget address, for example, was presented on Feb. 3, 2020, rather than at the end of 2019. That left only 10 to 11 months for implementation, so that you already have an implementation issue with a full year (12 months), but they still finalise and pass the budget with only 10 to 11 months left in the year. That adds to the bogusness of it. They know that it’s not possible to spend that much in 12 months, let alone 10 or 11 – give and take government bureaucracy and other procedural overhead. We’ve seen reports of how long it takes to obtain a signature, for example.
Why is it important to have a more realistic budget? Government’s word means something to investors. Think of the story of Ken Boyea and KFC, covered here by this 2015 iWitness News story of 2015. According to Boyea, the government had been talking about a city at Arnos Vale. He heard that and decided to get a jump on it with the building out there. Turns out he couldn’t rent the building like he thought, as there’s yet to be any sight of this city. Instead of a new city, years after, Abijah said he saw two plywood schools instead. So, Boyea was left nursing investment wounds.
Going back to the 2020 budget address, it stated: “…private contractors need to expand their capacity. Heavy equipment — trucks in particular — may be in short supply once the multitude of private and public sector projects come on stream. The Government is incentivising the purchase of heavy-duty trucks. In this Budget we will slash the excise duty on those trucks — which stood at 60% two years ago — all the way to 30%. This will make it cheaper for contractors to import those vital vehicles. In light of the predicted construction boom, the Government is beseeching local contractors to ramp up their capacity. We have the plans. We have the money. We need you to have the equipment.”
Footnoted in 2020 budget: “The 10 largest capital projects, totalling $158.4 million, are: RDVRP (Regional Disaster Vulnerability Reduction Project) — $50.2 million; Port Modernisation — $24.4 million; Secondary and Feeder Roads Programme — $13.9 million; CARCIP — $13.9 million; Geothermal Development –$11.9 million; Natural Disaster Management Project — $10.4 million; Mt. Wynn Hotel — $10 million; Diamond Hotel — $9.6 million; BNTF 9 — $7.2 million; Technical/Vocational Project — $6.9 million”
Now, imagine a small business owner who, upon hearing a big capital budget presentation, decides to borrow funds to stock up on building materials and heavy equipment with hopes of supplying to the government, only for the projects not to materialise as expected because the government lacks the implementation capacity; what becomes of this business? What is the explanation to the bank that provided the funds to purchase this equipment? Such a business may more than likely run into trouble just like Mr. Boyea did. That is the significance of having a more realistic and timelier budget, on a government’s word that can be trusted.
Let us hope that the government presents to you a more realistic 2024 capital budget. It should have enough experience and historical data to build itself a scientific model that can guide its budgetary process. Let’s hope we won’t see another bogus and political budget for 2024.
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