As the fiscal year winds to a close, government officials are working feverishly to bring a new budget to parliament at the end of this month.
It is too soon to tell whether the government will meet its revenue projection of $1.005 billion, but collections are expected to exceed the more than the $900 million collected in the 2002-2003 fiscal year, according to Minister of State for Finance James Smith.
“The deficit is likely to be a little larger than expected,” he told the Journal recently.
The 2003-2004 budget projects an overall funding shortfall of $122 million, which would raise government debt by 2.2 percent to 38.7 percent of GDP.
But Minister Smith has indicated that more than $30 million in unexpected expenditure will increase the deficit, unless the projected revenue is dramatically surpassed.
“As usual and without fail, you have the unexpected events that tend to throw it out of whack,” he said. “Sometimes it’s favorable, most times it isn’t. So the challenge is always there.”
The Minister added though that, “What we must bear in mind in trying to reach deficit reduction targets is that it is not a one year exercise.
“We try to do that over several years – three or four years as the case may be – because you really don’t want to choke real development. If we have a run over the year over the projections that means that in framing the budget for the upcoming year, we take that into account and we might have to introduce revenue measures or additional expenditure controls or a combination of both.”
Prime Minister Perry Christie said Sunday while on the Radio Love 97 Programme “Jones and Company” that the government is “severely challenged” by the increasing expenditure and revenue collections.
But he reported that there were signs of improvements.
“We are very happy that we have now seen the beginnings of the turnaround in revenue,” Mr. Christie said. “The last three months would suggest that the turnaround is setting in and that is headed toward obviously a better situation. But even with that, we are going to be severely challenged given the kinds of developments that are taking place on our islands.”
On Wednesday, Minister Smith was unable to reveal specifics regarding collections.
The government is into its final weeks of preparing a new budget, facing a traditional rigidity in expenditure.
Minister Smith has pointed to the difficulties in preparing a budget when such a large portion of expenditure is fixed. It is a situation he said is not easy to restructure.
“I think it’s going to be very difficult because 55 percent or thereabouts are salaries and wages and it’s a very difficult political decision to reduce the size of the public service, so you almost take the wages and salaries as a given,” he noted.
“Added to that would be another fixture of the budget, debt servicing, and that’s about another 18 percent of your budget. So already you’re talking about 75 percent of your budget that’s fixed. No matter how hard you try, unless we were to have some dramatic structural change in the economy, I don’t see that happening. I know of it happening in no economy in the world, really.”
One way of beginning the reversal of this trend is making conditions conducive to the growth of the private sector, he said.
“If you create the jobs in the private sector then there is likely to be a drain from the public sector into the private sector,” Minister Smith pointed out.