Budget 2011 – A most challenging task

07.JAN.11

Newly re-elected Prime Minister, Dr. Ralph Gonsalves, may well find that the task of compiling and presenting the 2011 Budget may be an even more formidable task than leading his party to victory in the recent general elections.{{more}}

With only a month’s breathing space in which to produce the national estimates and fiscal proposals for the new year, the PM and his team must have had little rest following the bruising electoral contest. He is likely to find little more respite in Parliament, given his razor-thin parliamentary majority.

The difficulties of the new government will be compounded by the lingering effects of the destruction brought about by the ravages of Hurricane Tomas. Agriculture, for one, the backbone of the rural economy, has a long way to go towards recovery, and the health of the rural economy hinges on this. The reconstruction of vital infrastructure and housing is ongoing and will demand substantial resources, while recurrent and capital needs will tax the creativity of those in charge of the nation’s resources.

The international and regional context is not very healthy either. As the Budget is being put together, there are reports of steep increases globally in food and fuel prices, both of which will have negative impacts on the local economy; regional economies, too, are still under severe strain, which is not likely to be eased by predictions of further international financial and economic crises. This means that even as we will be forced to pay more for imports, and the sluggish economy needs stimulation, the foreign investments critically required will be still difficult to find.

In spite of these realities, expectations among Vincentians, the younger ones in particular, continue to not only be high, but are increasing as well. The opportunities already provided in Education and Technology have only whetted appetites for more. Those in school are looking forward to the promised laptops, but expecting qualitative improvements in the level of services as well; parents will be clamouring for more support, especially in areas like transportation for students, while the poorest will want to see increases in such areas as school-feeding programmes. All of these have cost implications.

Some major challenges will be getting the agricultural sector revamped to be able to cope with new challenges, to deal with market realities, and above all to develop the entrepreneurial skills of rural folk while concretising linkages with the service, hospitality and manufacturing sectors. Employment creation will be a major necessity. In this, attracting foreign direct investment and creating the enabling environment to encourage locals, here and in the diaspora, to invest more productively and creatively must be high on the agenda. The role of the private sector will, therefore, be critical. Health services are among the priorities of most Vincentians, and given the fact that the government itself has made health its focus area under funding from the 10th European development Fund programmes, it is only reasonable to expect, nay to demand, that the Budget would reflect these priorities.

Amid all these expectations, there is the fiscal responsibility of the government to balance its Budget and to avoid budgetary deficit. The last couple of years have demonstrated that this can be quite tricky, but it is a responsibility which cannot be shirked. Curbing government spending has important social and economic implications and is always politically difficult to manage, never mind how economically necessary it may be. In addition, taxation is not a subject to which the population takes kindly.

This mix of realities and expectations and how best to balance them make the presentation of the 2011 Budget perhaps the most challenging in the post-9/11 era.