The New Today

Commentary

Analysis of the 2023 Estimates of Revenues and Expenditures – The Budget – Part One

The current global economic environment characterised by rising energy and food prices, persistent supply chain bottlenecks, and increasing recessionary pressures the result of a slowdown in economic growth presents a challenging macro-economic environment for Grenada in the medium term.

And open and heavily dependent on imports of goods, rising global inflation has led to a serious cost of living problem in the tri-island state.

The 2023 budget as outlined in the Prime Minister’s presentation to Parliament should be examined on how well it seeks to protect vulnerable households and maintain a tight fiscal policy stance to avoid jeopardising recent macro-economic gains and reduce built up resilience in the economy.

Based on the presentation by the Prime Minister and review of the medium term strategy paper, the 2023 budget is anchored on a sound macro-economic framework that is intended to ensure fiscal stability. If the figures as presented by the Prime Minister holds true, government should realise an overall surplus of sixty two million dollars which will be impressive in light of the challenging macro-economic environment.

Rising inflation manifested locally in surging food and energy prices that amplify the cost of living crisis, places a disproportionate burden on poor and vulnerable households who spend more on food than any other demographic within the population. Therefore, the package of targeted social programs outlined by the Prime Minister along with existing social safety net programmes will go a long way in relieving the burden on the poor.

In the situation of high inflation, rising interest rates slowed economic growth in advanced economies, the new government is right to emphasize macro-economic stability and pursue targeted programs such as VAT exempt food items disproportionately consumed by the poor and vulnerable.

Placing greater emphasis on food security and agricultural production, in particular for local consumption, is the right way to go. The new government only in office just over five months must be commended for seeking to pursue prudent macro-economic policies aimed at ensuring fiscal stability while protecting the poor and vulnerable from the ravages of high and increasing cost of living.

Notwithstanding a well put together budget, the challenge for the new government is implementation to ensure the budgeted expenditure is spent on time and within budget while keeping cost overruns and project delays to a minimum.

By the Prime Minister’s own admission the implementation rate is woefully low and unacceptable. Having highlighted one of the consequences of low implementation in the huge commitment fees government have to pay for slow drawdown of loan funds from international donors, he is well aware of the challenges that lies ahead for implementation of the 2023 budget.

Many of the shortcomings of the transition process will now be laid bare as the rubber meets the road with implementation of the 2023 budget. These shortcomings are primarily to do with personnel for the lack of capacity in Ministries goes beyond large number of vacant positions to the capability of many persons in senior and mid-level positions to do the work required to implement the budget and advance the transformational agenda.

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The defeated regime shot themselves in the leg by removing capable public officers from key positions to advance implementation of projects and replace them with others considered loyalists or supporters but overlooking whether they had the capabilities to perform in those positions.

In addition to large number of vacant positions, the public service is riddled with persons considered “square pegs in round holes” that is occupying positions in which they are not able to properly function.

The Prime Minister indicated that in addition to focusing on macro-economic stability and targeted programs within the context of tight fiscal and budgetary management, the budget prioritises healthcare, education, agriculture and climate change.

If the projects and programs in the budget under these priority sectors have to be implemented in a timely manner, there must be sufficient capacity and capabilities in the related Ministries to do so. Therefore, the absence of Implementation capacity within the public service is a serious risk to the successful implementation of the budget.

This is concerning because building a resilient economy requires government not only to protect vulnerable households against the corrosive effects of inflation, it requires action in other areas: healthcare, education, adaptation to climate change, national disaster and access to resources for small business.

The Prime Minister mentioned the pivotal role to be paid by the new Ministry of Implementation, Transformation and Mobilisation, however project implementation requires action by several stakeholders and the executing Ministry. Therefore, if efforts to strengthen priority Ministries are not stepped up, implementation of the 2023 budget will be in serious jeopardy.

In light of the presentation of the 2023 budget and pending passage it is high time efforts are made to get capable and competent senior managers in priority ministries to commence work towards advancing the transformational agenda.

The Estimates of Revenue and Expenditure comprise recurrent and capital expenditures. Recurrent expenditures are principally wages and salaries, debt servicing payments, interest and principal, payment of contributions to international organisations among other recurring expenditures. Capital Expenditures is intended to fund projects that are either ongoing or new ones to start in the year of the budget.

Ministries such as Infrastructure, Education, Health, Agriculture and the Environment are the ones normally with the largest capital budgets while the Ministry of Economic Development performs a resource mobilisation, coordination and facilitation function in managing the portfolio of projects called Public Sector Implementation Program (PSIP).

If the new government wants to significantly improve implementation the mentioned Ministries should be strengthened as soon as possible with public officers who have the capacity and capabilities to implement projects.

Failure to do so will result in continued low implementation rate and a continued failure to provide goods and services to the population that will result in loss of support for the new government.

Special Correspondent