The focus of the 2023 national budget on the six priority areas, and the emphasis on the development of linkages which, if successfully implemented, should increase value added in the domestic economy and provide a path to transforming the economy.
The transformation of an economy would take time, but the economic and social changes must be evident during the transformation process.
The impact of policies, programmes and projects for transforming the economy would depend on effective implementation based on consultation and coordination among Ministries and government entities and with the private sector.
A common feature of Small Island Developing States is the high dependence on the importation of a wide range of goods and services.
Grenada is no exception, and similar to the other countries of the Eastern Caribbean Currency Union [ECCU], Grenada imports a variety of goods and services. A component of transforming the economy should be to curb the growth in payments for imported goods and services by utilising local resources.
The dominance of economic reports on merchandise trade and tourism conceals the payment to external providers for services such as repairs and maintenance services, construction services, financial services, use of intellectual property, and personal, cultural and recreational services.
Therefore, the education policies to synchronise the school curriculum with the education and skills requirements of the economy, and to develop vocational training should increase the availability of these services locally and curb the growth in the use of foreign exchange for their importation.
Increased inflows of foreign exchange from trade in services could also be boosted by the development of the creative and digital economy. These industries, not only have the potential for increased exports of culture, recreational and personal services, but for utilising untapped human resources to reduce unemployment, particularly among the youths.
An integrated economy would be manifested by increased value added through linkages between agriculture and tourism; with the tourism industry also benefiting from the creative and the digital economy, and supported by the reforms in the health and education sectors.
As part of the strategy for the development of the creative and digital economy, an interim package of tax incentives was granted. The technical committee for reviewing the fiscal incentives would need to work diligently to undertake a comprehensive redesign of the fiscal incentive regime to support the emerging sectors.
Along with the economic policies that could lead to an integrated economy, are the supportive policies for governance and institutional rebuilding, foremost of which is pension and public sector reform.
It is hoped that the Pension Committee would bring closure to the issue of pension reform, which has confronted all the countries of the Eastern Caribbean Currency Union.
As early as 2005, the Monetary Council of the Eastern Caribbean Central Bank established the Commission on Pension and Pension Administration Reform [Pension Commission] to address the issue of pension and pension reform in the ECCU, and its report was submitted to the Monetary Council. However, the Grenada situation is complicated by the ruling of the Court and the Constitutional provisions, which would inform the work of the Pension Committee.
In the provision of public services, the public sector reform would need to include streamlining the public service to focus on its core functions of providing professional services as envisaged in the Constitution. Much could be done on reforming organisational structures and streamlining procedures and processes, this is necessary but not sufficient for an efficient public service.
Public officers must take personal responsibility for being professional, but this must be supported by good management and accountability through a robust performance appraisal system.
Under the pillar for ‘Strengthening Regional and International Cooperation’, I make a stronger plea for strengthening the OECS Economic Union. There are benefits to be derived as a country and for individuals who do business and interact within the OECS Economic Union. A public awareness programme could contribute to people maximising the benefits of the Economic Union.
As the country develops agro-processing and the creative and digital economy the benefits from operating within the wider CARICOM could also be exploited. The scope and avenues for penetrating markets based on CARICOM agreements with the Dominican Republic, Costa Rica, Colombia, Cuba, and Venezuela could be explored.
The policies for addressing the current inflationary period focused on providing targeted relief. The exemption of the sanitary products which is described in economics as inelastic in demand, that is, whatever is the price, the products are needed and must be purchased, should bring some relief to the lower income groups.
In this environment, where social and business transactions are undertaken electronically, electricity and internet services are also necessities, and the relief has both social and economic impact.
The increase in the tax on alcohol and cigarettes, which serves as a revenue raising measure and a deterrent should be monitored. It could have unintended impacts such as illegal trade, and a reduction in household disposable income as there is increased allocation for the products, accommodated by the reduction in the purchase of other consumer items.
Government finances were stable, with a current account surplus of $308.9M or 8.9 percent of GDP. The comparatively high current account surplus was due to higher non-tax revenue as a result of the reclassification of inflows from the Citizenship by Investment Programme from grants to non-tax revenue in 2023.
This reclassification does not affect the overall balance after grants which is an indicator of the impact of government operations on the public debt. The overall surplus after grants is estimated at $62.7M or 1.8 percent of GDP for 2023.
The information on the public debt continues to be restricted to the Central Government, and this could be one area for education of the public on the concept of the public debt.
The focus of the budget on increasing linkages and improving value added in the economy should lead to an integrated economy, with the capacity to increase output, exports and employment. The achievement of a well-integrated economy with low levels of unemployment and poverty should be the outcome of an integrated approach to development.
Knowledge is power and experience is the greatest teacher.
Laurel Bain is a Grenadian-born former economist with the St. Kitts-based Eastern Caribbean Central Bank