The New Today

The unknowns in the 2021 budget!!!

As expected the 2021 Budget presented to Parliament on Wednesday by new Finance Minister, Gregory Bowen has begun to generate a lot of discussion in the country.

It was the first budget to be presented by Minister Bowen in his long political career as he took over the Finance portfolio just over a month ago from Prime Minister Dr. Keith Mitchell, his long-standing political colleague.

The two are considered as the main pillars of the ruling New National Party (NNP) government over the past 30 years and the central figures that guide the policies, plans and programmes of the administration.

It was also the first budget to be presented by government since the Coronavirus pandemic showed its ugly face on Planet Earth and virtually wiped away government’s revenue intake in the past eight months.

THE NEW TODAY paid close attention to the figures as presented in the budget by the Minister of Finance and took careful note of the number of things that he did not touch on given their financial implications for the country.

Topping the list was the fact that he made no mention of the Bill prepared by the Attorney General Office and sent to the Ministry of Finance to give authority to the Minister of Finance to borrow EC$330 million to finance the $1.2 billion dollar budget for fiscal year 2021.

The existence of the bill cannot be denied by the powers-that-be and it is a clear indication that the plan is to borrow heavily to finance the budget.

This bill from the AG office that was prepared for Parliament speaks of raising EC$330 million through several forms such as loans, bonds or promissory notes.

It is noticeable in the document that the Mitchell government plans to approach a number of financial institutions for the money such as the Caribbean Development Bank (CDB) and the Eastern Caribbean Central Bank (ECCB).

It seems strange that the NNP regime is looking to borrow money from the ECCB to help finance its 2021 budget.

The Minister of Finance will have to explain to the people of Grenada, Carriacou & Petite Martinique how it intends to do this since the ECCB act makes no provision for any such borrowing to member countries.

A few years ago, the government of Dominica had erroneously announced that it would ask the ECCB to lend some of its reserves to the government of Antigua.

Many persons with knowledge of the bank will inform that the Reserves at the ECCB do not belong to any of the governments within the Organisation of Eastern Caribbean States (OECS).

The pool of Reserves held by the ECCB is allocated among the members and do not belong to any single country to use as they see fit.

What happens is that for Balance of Payments purposes, the ECCB will allocate its pooled reserves among all the countries, making an accounting entry into the balance of payments known as an imputed reserve.

In addition, the ECCB usually makes loan payments on behalf of the member countries in relation to all foreign currency-denominated loans. Hence, the ECCB makes these payments up front on behalf of the various governments.

These OECS governments including Grenada will have to pay back the ECCB who would have paid out these monies in advance for them.

It is also a known fact that Grenada has often been in arrears with these kinds of payment due to the ECCB and the bank has often been calling the Ministry of Finance to make good on these outstanding payments.

As seen in the Bill prepared by the Attorney General, if the government of Grenada is going to borrow money from the ECCB to help finance its 2021 Budget then the Minister of Finance needs to tell the country how he proposes to do just that.

There is no facility or law that provides for any of the OECS governments to borrow money from the ECCB.

This 2021 budget was presented against the backdrop of some heavy financial commitments of the government within the past 10 months.

There is the EC$185 million loan to be taken out by government from the Exim Bank of China to facilitate work on the Maurice Bishop International Airport (MBIA) and EC$200 million to be paid to Grenlec to buy back the government shares in the electricity company.

The Finance Minister did not address this massive debt owed to the U.S-based company WRB Enterprises which took the NNP government before an International Tribunal panel in the face of constant attacks and threats over the years by the NNP leaders who were annoyed at the sale of Grenlec by the 1990-95 Congress administration.

THE NEW TODAY has always held the view that the egos of both PM Mitchell and Minister Bowen on the Grenlec issue would prove to be financially painful to the taxpayers of the country in the years to come.

This debt to WRB has to be put in the mix of the 2021 budget as it is now part of the national debt of Grenada.

The bottom line is that long after Mitchell and Bowen leave office the issue that will face the country is whether many of these loans contracted by NNP in recent years make any sense financially in terms of yielding fruits to be paid back without additional burden and hardship on the backs of the people.