The Minister has his work cut out for him
Next Monday, the Estimates of Revenue and Expenditure for 2018 will be laid in Parliament, then the following Monday, February 5, Minister of Finance Camillo Gonsalves will present the 2018 Budget in Parliament.
In the preparation and implementation of the Budget, the newly minted minister has his work cut out for him if the International Monetary Fund (IMF) 2017 Article IV Consultation Staff Report is anything to go by.
There has been much discussion over the past week or so about this countryâs high (46 per cent) level of youth (15-24 years of age) unemployment. This is concerning, for it is at this stage of life when some young people, particularly the males, may be influenced to embark upon a life of crime.
But in relation to this statistic, it would be interesting to learn what are the absolute numbers making up our unemployed youth, as many within that age group would not be considered part of the available labour force, they being enrolled full-time in educational institutions.
The report also validates the administrationâs aggressive thrust towards increasing the number of Vincentians who enrol in institutions of higher learning, as it showed that most university graduates are employed.
Not much has been said, however, about the other serious economic challenges facing the country, which have been pointed out by in the IMF report.
St Vincent and the Grenadines (SVG) has the highest tax revenue and wage bill to GDP of the East Caribbean Currency Union (ECCU). While this reflects SVGâs higher cost of delivering public services in a multi-island state, it also suggests that containing the wage bill is essential to the fiscal consolidation strategy.
The IMF staffers pointed out the need to continue to align labour costs with productivity, if we are to address competitiveness challenges. In other words, our public servants need to be more productive and every effort should be made by the administration to contain both the size and salary bill of the civil service. The report also reinforced the need for pension reform, given the growing outlays for public pension and retirement benefits.
The report also cites a below average (in the ECCU) ranking of this country in the World Bankâs âDoing Business Rankingâ, with our major weaknesses being âgetting electricityâ and âregistering propertyâ.
And although we have seen great improvement in our tourist arrivals, we are still well below the ECCU level. Hopefully this year, we will begin to reap benefits from having constructed the international airport, not only in terms of more international arrivals by air, but in the reopening of the Buccament Bay resort and the construction of additional hotels and resorts for management by internationally recognized upmarket brands.
The report also spoke to the need to improve the design of the tax system and to enhance its revenue yield. It spoke specifically about improving the progressivity of the income tax, reducing ad hoc exemptions and reviewing the VAT structure.
These are all very serious matters and give clues about what the new Minister may tackle in his 2018 Budget. But this will not be easy, given the economic times in which we live and the peculiar circumstances associated with administering a multi-island state; selling a mostly mountainous mainland with black sand for tourism development; and re-invigorating a depressed private sector and finding markets for agricultural produce.