January 26, 2018
The Budget realities

Over the next few weeks, attention will be focused on what the Budget has in store for the country. The IMF 2017 Article IV Consultation will undoubtedly provide the framework that will inform and guide the Budget. The press release put out by the IMF on December 18 does not offer a lot of hope for us. As is to be expected, it looked at prevailing trends and made recommendations on the assumption that several things will be put in place to facilitate economic advancement. In SVG, as we know by now, politics intrudes into everything and things happen not because they are in the best interest of the economic development of the country, but that they are politically correct. One wonders if the architects of these prescriptions understand fully the dynamics of these countries, the pace at which things move and our ability to implement policies agreed on.

For workers in the country, the warning is clear. It states, “Containing the wage bill and curbing the growth of public pensions should be key pillars of the fiscal consolidation strategy.” This will, of course, be of concern to workers and will feed the debate that is ongoing about public pensions. Our new airport is supposed to be part of the launching pad for economic take-off, but the report warns that “the operating losses at the state owned- and -run airport needs to be addressed.” The question is how? We hope to see how this will be factored into the overall economic package. As the authors of the report look at medium-term growth, they are hoping for “strong spill overs from the new airport”, the proposed construction of a modern port and the launching of the geothermal project. Added to this will be the benefits of “improved connectivity” and the expected reopening of the Buccament hotel. Now, I am not aware of any airport in the region, much less a new one, being able to cover its operating costs. We will look to see what is likely to happen for the rest of the tourist season, since those who have so far taken advantage of “improved connectivity” are mostly Vincentians returning home on holidays. Is the geothermal project going to be a reality in the short term? Additionally, is the expected reopening of the hotel likely to be realized in 2018, given the fact that it is heavily tied up in court?  There isn’t much hope for a reduction in public debt. Instead, “under current policies,” it is expected to continue to rise “from its already high level”. It suggests too, the “swift execution” of a World Bank Project “to reorient the (agricultural) section from subsistence to agribusiness and strengthen its links to tourism…”  In all of this, it is expected that there will be a decline in current account deficit “as food imports diminish and tourism takes off”. Diminishing of food imports! How long have we been talking about this? Just accept that it is not going to happen soon. Furthermore, is our tourism infrastructure at the level that will allow it to take off?

The expectations of the IMF represent a tall order. Is our public service so structured to take up the challenges being presented to it? Expect that politics will get in the way and decisions will continue to be made based on politics, rather than on sound economics.  The IMF prescriptions will bear little fruit, since, in the final analysis, it fails to understand the realities of the country and the state of play. Furthermore, one of the issues that we have not sufficiently addressed is the reliability of our statistics that feed the analysis and inform the recommendations.

Dr Adrian Fraser is a social commentator and historian.