Latest update April 19th, 2024 12:59 AM
Feb 08, 2009 Editorial
Tomorrow, the Minister of Finance will present the Budget of the Government for the year 2009. Over the past few years, we have presented an overview of the Budget process and its premises, to assist citizens in evaluating a presentation that will have profound effects on their lives. We do so once again against a background of a financial meltdown of the economies of the developed world that is already reverberating even in fairly underdeveloped countries like ours.
The Budget gives a detailed account of what the Government will spend during the coming year in fulfilment of its mandated task to better the lives of all the citizens of the country. The first thing that we ought to be aware of is the total amount the Government will be spending (expenditure), and from which sources it will obtain the funds to be spent (income).
For this year, we can expect that the total Government expenditure will be increased from that of last year – part of it simply to keep up with inflation of some eight per cent, so do not become too excited about claims of “bigger than ever”.
Another reason for maintaining your equanimity is that all the money that the Government spends will ultimately come from you – even if it reaches your pockets. If the Budget follows the old pattern, much of the money will come from VAT and duties (the latter is passed on to you in the sale price of goods), income taxes (33% of your hard-earned wages), corporate taxes (35 % of their profits) and sales of licences, stamps etc.
With an economic slowdown certainly in the cards, the income, and thus the taxes, of GuySuCo and the bauxite companies will plunge, and the Government will have a greater shortfall or deficit. That deficit, which we believe will be over forty percent of expenditures this year, would have to come from loans and some grants.
The latter are akin to gifts which we can expect to be severely curtailed, since the traditional grantors are in deep funk. Loans, as most of us know to our cost, have to be repaid, and citizens would have to consider whether or not their Government spending over forty percent more than it collects is a wise policy.
Loans, after all, will have to be repaid some day — the days of debt write-offs are now gone.
The other areas of scrutiny ought to centre on the areas in which the Government spends our money. In a mixed economy such as ours, traditionally, Government spending attempts to achieve three goals: attempting to stabilize the macro-economy; assist resources to flow most efficiently to sectors that will deliver the greatest growth rate to the economy; and lastly, to ensure that there is some equity in the distribution of the national income, so that the least fortunate of our society do not get left irretrievably behind.
Among the “macroeconomic fundamentals”, one has to be concerned, for instance, with the rate of inflation – both last year’s actual and this year’s projected ones — since this, in essence, devalues the money one earns to the extent of the rate.
The bottom-line question is: was there growth in the economy? It is accepted that the economy will have to grow at a rate of around ten percent per annum if we are to make any significant dent in our poverty rates in the next decade. Our rate has been less than one percent over the last decade, and with the travails in sugar – and the World Bank predicts a fall in the world’s growth rate — we find it difficult to believe that we will do much better this year.
Finally, we must ask whether any measures were taken to assist the poor. Was the income tax threshold increased? Will the 16 per cent VAT rate be reduced, as so many have pleaded? And for the rich, were there more tax holidays and deferrals? We hope that citizens will become more involved in a process that involves them where it counts most – their pocketbooks.
Where is the BETTER MANAGEMENT/RENEGOTIATION OF THE OIL CONTRACTS you promised Jagdeo?
Apr 19, 2024
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