The New Today

Commentary

This 2024 Budget should be a Watershed one for the Government

At the end of the 2024 budget period, the government would be at the critical midpoint of its tenure in office. Therefore, the Estimates of Revenue and Expenditure for 2024 and the Budget Statement that is scheduled to be read in Parliament on December 4 should be the most consequential for the NDC government. 

Political pundits would be listening closely to the speech and subsequent debate in Parliament to analyse the new programs and projects of the government. The population would also be waiting with bated breath for the presentation by the Minister of Finance.

The macroeconomic environment continues to be a challenging one. Inflation across the economy continues to erode workers’ spending power. High unemployment, in particular among young people, is a challenge as well as low productivity.

St. George’s University (SGU), which accounts for twenty-five percent of the economy, is struggling to return to its pre-pandemic levels of annual intake of students. 

The tri-island state is still considered in debt distressed by multilateral organisations and has borrowing constraints placed on it under agreement with the IMF and World Bank. This has impeded the government’s ability to borrow to finance the country’s development agenda.

The budget would, therefore, be judged on how well it responds to these challenges and provides direct benefits to various segments of the economy.

Apart from the macroeconomic situation, there is a political economy context that has to be taken into account. The negative fallout from the collapse of the banana industry some three decades ago and decline in cocoa and nutmeg production continues to reverberate as successive governments failed to find a viable alternative that provides the level of economic stimulus for the rural economy. 

This has turned once thriving areas in St. Andrew, St. Patrick and St. John into vulnerable communities as huge swaths of residents depend on the state to eke out a living, and multiple generations of young people are stuck in a vicious cycle of unemployment and under-employment.

The political situation in the constituencies within these three parishes have changed as a consequence of the change in economic conditions. The opposition NNP, with its welfare approach to governance, has dominated politics in those areas with the governing NDC only able to win seats in times of huge swings in popular support towards them.

The budget should focus on addressing both the prevailing macroeconomic challenges and the depressed conditions in the marginal constituencies that is the corridor that runs from the parishes of St. Andrew through St. Patrick to St. John. This corridor makes up a significant share of the rural economy.

Political economy refers to how politics affects the economy and, in turn, how the economy shapes politics. The current state of politics in those constituencies that comprise the rural economy is heavily influenced by political economy concerns since the demise of the banana industry.

The macroeconomic policy framework pursued by successive governments in partnership with multilateral organisations has created a dichotomy in thinking between policymakers and experiences of the citizenry, particularly those, in vulnerable communities where the rural economy has collapse.

People are confused and have become cynical of the economic praise heaped on successive governments by the IMF and other multilaterals in spite of the biting economic conditions they have to endure on a daily basis. 

The reality is that improvements in public finances, a main objective of the macroeconomic framework sold to developing countries like Grenada by the IMF, have come about as a result of austerity and not real economic expansion.

Public finances have improved due to reduced spending on debt service from debt restructuring, increased government revenues from CBI, and high taxes while the boost in foreign reserves comes from loans and grants from the World Bank and other multilaterals.

The tourism and construction led growth can’t boost productivity since the jobs are low paying, and the benefits unequally distributed.

The first line in the recent press release from the Prime Minister’s Office on the just concluded IMF staff visit to Grenada says, “the Grenadian economy continues to grow robustly, supported by public and private construction and sustained strong tourism growth”. 

Related:  Missed opportunities and more missed opportunities

The buoyant economic activity the statement speaks of is not being experienced in rural villages across the island like Paraclete, La Fillette, Chantimelle, Mt. Horne, Tivoli, Telescope, La Poterie, and Clozier.

The electorate in those depressed villages is not going to judge the government on the basis of a positive report by the IMF or announcement of the achievement of a fiscal surplus during the budget presentation, it will be based on how the budget directly benefits them.

The late George Brizan stood at a meeting in St. Paul’s, during the 1995 elections campaign and waved a copy of a letter from the President of the Caribbean Development Bank in which he commended the government for returning Grenada to creditworthiness and macro-economic stability – days later he and the NDC were voted out of office with the NNP winning most of the constituencies in the rural areas.

At the end of the 2024 budget period, the government will be going into the second half of its tenure. Therefore, if it fails to pay adequate attention in the upcoming budget to constituencies in the corridor between St. Andrew, St. Patrick and St. John, that is a sizable share of the rural economy, the ruling NDC party will lose support in those areas and not be able to hold on to the constituencies in the corridor it won in the last general elections.

The electorate doesn’t like it when the government tries to win their support with a flurry of projects a year and a half out from elections. On the last two occasions when the NNP lost in the polls, they implemented quite an impressive amount of capital projects in the period leading up to the elections, and the electorate still rejected them. 

The 2024 budget is consequential because it leads to the mid-point of the government’s tenure in office and provides an opportunity for the government to begin a determined and serious effort to provide sustained tangible benefits to the rural economy. 

A lot of politics, after all, is concrete and visible, and the government must take these steps to address the depressed state of the rural economy in this budget if it is to win the next general elections.

The two flagship rural development projects – SAEP and BNTF, which started under the previous government, have not created the kind of impact that was expected, and the anticipated investment in agriculture to boost food security will only impact a limited number of farmers. 

The government ought to do more to revitalise the rural economy. Taking seventy million from the CBI and allocating twenty million of it to a revived CESS program, focusing on young people, and investing the rest to improve the livelihoods of people in the marginal constituencies which comprise a significant share of the rural economy, and extending the tax amnesty for a further six months to allow businesses to pay out their arrears will go a long way in helping the NDC to retain the marginal constituencies it won in the last general elections and even add one or two more seats to its tally. 

Could you imagine the optics of the government bearing down on small businesses and garnishing their revenues two years out from an election? This will give the transactional opposition leader an opportunity to win back support from the private sector he lost during the last elections.

The technocrats who are advising the government must understand that politics is about preserving power. It is all about gaining and maintaining power. For power in politics refers to the ability to help people and achieve national objectives.

If NDC wants to maintain power and drive the development agenda for Grenada, it must win the next general election, and reviving the rural economy is critical in doing so. This is exactly why this 2024 budget should be considered a watershed one for the government.