The New Today

Commentary

Budget 2023 – Part 1: Some observations

The Budget is a country’s most important policy document. It indicates what the Government considers priorities and will spend money on. If one participated in the consultations leading up to the Budget presentation, one will be looking closely to see whether or not the ideas/suggestions offered at these consultations were taken on board.

While pronouncements are made in the Budget Speech, the devil is in the details. So in this regard the Estimates of Revenue and Expenditure will be most significant. The Budget is a means by which the Government “walks its talk”. It is therefore necessary to follow the money…..what the Government said it would do and what it will actually do and how via the spending as set out in the Estimates.

Another thing to bear in mind is that government is a continuum so that, notwithstanding election campaign blah-blah, some things do not change. The lack of transparency in respect of how government affairs have been conducted by the prior NNP administration is a real worry. What agreements did NNP administration enter into and with whom? What were the conditions attached to these agreements? What has the administration already sold or given away? Are there Build, Own. Lease Transfer (BOLT) financing arrangements in respect of significant heritage assets?

The following are some observations and/or queries based on the Budget 2023 presentation.

  1. Budget 2023:

According to the information in the 2023 Budget Presentation:-

Total Budget: The total budget of XCD 1.35 bn. is fully financed;

Budget Surplus: There is an overall budget surplus of XCD 62.7 mn.

Overfinancing: There is overfinancing of XCD 33 mn. (in the context of Grenada, this is quite an unusual situation……overfinancing??!! As the former Head of Government would say moneeey!!)

Current Surplus: There is a current surplus of XCD 308.9 mn.

Capital Expenditure: Capital Expenditure is 313.9 mn.

Total Grants: Total grants are XCD 67.8 mn.

  1. Sources of Funding:

In order to have a full picture, one needs to know the sources of funding, information that the Estimates of Revenue and Expenditure will provide. For the time being, based on references in the budget presentation, the following have been noted:-

2.1. National Transformation Fund (NTF)

Non-tax Revenues/Recurrent Revenue: It has been announced that in the interest of transparency all citizenship by investment revenues will be reported as non-tax revenues. Donations to the National Transformation Fund is one category of CBI receipts. Previously, the funds of the NTF were classified as grants. Therefore, in Budget 2023, the anticipated (?) receipts of the NTF probably makes up a significant percentage of the recurrent revenue of XCD 1.1 bn. which is approximately 85 percent of the total budget, XCD 1.35 bn.

NTF and Post Disaster Financing:   It was announced that the NTF regulations will be amended to set aside at least 10% of receipts from contributions into the NTF, specifically for post-disaster financing, to be managed by the Eastern Caribbean Central Bank.

NTF and Transformative Capital Projects: The remaining 90% of NTF receipts will be allocated for transformative capital projects as identified by a Cabinet appointed committee. Two projects identified for funding via the NTF are the construction of the state of the art teaching hospital and the technologically advanced public library.

  1. Comments/Queries

Ten Percent (10%): What is the estimated/forecasted value of ten percent?

Recurrent Revenue/Capital Revenue: If 90 percent of NTF is to be allocated to transformative, capital projects, how will this revenue be reported? As capital revenue or as recurrent revenue?

Debt Repayments: One recalls that the initial NTF regulations – put in place during the period of the Structural Adjustment Programme 2014-2017 – required the first XCD 40 mn. be set aside for contingencies and debt repayments. What is the provision for taking care of the amortised principal in respect of debt repayments?

Share of CBI receipts to the Creditors of Restructured Bonds: A condition of debt restructuring re the external bond holders/creditors is that if the CBI receipts crossed a certain threshold, a percentage of those receipts had to be shared with these external creditors.

Exclusion of National Insurance Scheme/Domestic Bond Holder: It should also be noted that the National Insurance Scheme, a domestic bond holder/creditor of these restructured XCD and USD bonds was excluded from this arrangement. Will this requirement in respect of CBI receipts and debt repayments be amended to include the NIS? Notwithstanding the small payouts, the NIS is a very important local institution to the older persons who have made NIS contributions.

2.1.2. Approved Projects/Passport Sales

Transparency: Transparency in respect of the CBI must also address the approved projects of private investors. How much are they allowed to raise via the sale of Grenada’s passports? How many passports can they sell? There are many lessons are to be learnt from:

The Grenada Sustainable Aquaculture Project aka the Shrimp Farm; the dispute with developers of the Kimpton Kawana Resort.

Identity of Passport Holders: Another issue of concern in respect of transparency is also the identity of persons who have acquired Grenadian passports and citizenship via approved investment and donations to the NTF. After all, “is we damn passport and we damn country” (or perhaps not?)

2.2. Overfinancing:

According to the Budget presentation, the overfinancing surplus is accounted for by the following:-

Domestic Sources (Central Bank, Commercial Banks, Regional Government Securities Market): – No domestic sources of funding projected. What does this mean? Does it mean that government will not seek to raise debt funding via the domestic market?

The policy of the last administration has been to restructure its short term domestic debt, Treasury Bills, to longer term domestic debt with lower interest rates via the Regional Government Securities Market. The amount of domestic debt has risen significantly.

External Sources: Note the clarification offered in the Budget presentation re external sources of overfinancing surplus – new loan disbursements less principal repayments. There is a budget support arrangement with the World Bank, the net amount being approximately XCD81 mn. This therefore represents loan financing from the World Bank for Budget Support. Are there any other external loans, for what and what are the conditions of these loans?

Drawdown of Consolidated Revenue and Disposal of Assets: Note well, disposal of assets!

Which assets does the government plan to dispose of?

Are any of these assets state-owned entities whose performance will be reviewed as announced by the Budget 2023 presentation?   Marketing and National Importing Board? Gravel and Concrete Emulsion Plant? Other?

3. Fiscal Responsibility Framework:

Over period, 2020 -2022, Grenada suspended its fiscal targets as required under the Fiscal Responsibility Legislation, in responding to the many unplanned for/unanticipated challenges of the COVID-19 pandemic.

With the removal of the State of Emergency, that period of suspension ended and fiscal targets have been re-instated. The Budget presentation has been mum on this issue of fiscal targets. It is expected that the Fiscal Responsibility Legislation will be reviewed and amended as has been recommended in a number of reports of the Fiscal Responsibility Oversight Committee (FROC).

New Framework Effective Budget 2024: The Budget presentation notes, “with the support of our development partners, we will improve the current framework to ensure that it supports our transformation agenda while simultaneously reinforcing fiscal and debt sustainability. The new framework will take effect in the 2024 Budget cycle”.

4.Citizenship by Investment/Residency by Investment

Expansion of the CBI/RBI Programme: The Budget 2023 presentation announced the intention of the Government of Grenada to expand its Citizenship by Investment and Residency by Investment Programmes:-   “The Government of Grenada will be moving purposefully and systematically to strengthen and market our CBI programme and NTF to ensure that we prudently grow our market share of the estimated USD20 billion, CBI and Residency by Investment (RBI).   Government is fully committed to working with all stakeholders to adapt and/or develop the necessary standards, regulations, and internal control systems to reduce the risk profile of the sector and mitigate existing risks on an on-going basis. “

Money/Scandal: The Citizenship by Investment Programme is an addiction of the OECS passport selling countries (except St. Vincent and the Grenadines). To date, the CBI programme has brought money and scandal to these islands and sullied their image and reputation and is creating an underclass of the real citizens whose “nabel string bury here”!

Elections 2022: Was the Election 2022 campaign of the principal political parties manipulated by CBI interests?   Were commitments made to increase the passport/citizenship selling business?

5.Where is Forests/Forestry?

A cursory look at Allocation by Votes in Appendix 1 of the Budget suggests that the Department of Forestry is not accounted for.

  • Vote 64, Budget Estimates 2022 is the Ministry of Agriculture, Lands and Forestry.
  • Vote 64, Budget Estimates 2023 is the Ministry of Agriculture, Lands, Co-operatives and Fisheries.
  • National Parks: There is a note which advises that National Parks have been transferred to Vote 64 but is not named.
  • Our forest resources are important in respect of watersheds and water production, biodiversity, climate change, recreation, the possibility of trading in carbon credits etc. We have a Forestry Policy that was updated in 2017. WHERE is the Dept. of Forestry (re)located?

To be continued: Part 2 will offer more comments/observations on the Budget Presentation 2023.

Sandra Ferguson