Opposition leader Dr. Keith Mitchell is of the view that Grenada’s newly elected Prime Minister and Finance Minister Dickon Mitchell is unaware of the macro-economic context in which he presented the 2023 Budget, citing several disconnections between what was stated in the Budget Speech, compared to what is stated in the Estimates of Revenue and Expenditure documentation.
“It is clear that the Minister of Finance and Prime Minister is unaware of the macro-economic context in which this budget is presented”, said Dr. Mitchell when he opened the debate on the 2023 budget in the Lower House of Parliament last week Thursday.
Citing “page 10” of the government’s “medium-term fiscal report framework 2023,” which indicates that “growth is expected to decelerate in 2023,” Dr. Mitchell, who pointed out the disconnection between the statement made by the Minister of Finance “on page six (6) of his budget statement that the economy is expected to expand in 2023.”
In his maiden budget statement, Prime Minister Mitchell revealed that the country’s economy is expected to grow by “6%” this year, with projections of further growth “by 3.6% in 2023, underpinned by continued strong recovery in tourism and robust construction activities.
However, the Opposition leader, who has since the June 23 change of government labelled the NDC as being “inexperienced” told Parliament that he is not convinced of these projections as “future growth prospects in Grenada’s major source markets for tourism is expected to contract from 3.7% in 2022 to 1.7 % by 2025.”
He contended that the “Global recovery on a whole is considered a challenge (considering) the geo-political tensions that exist, the lockdowns in China, the War in Ukraine,” and other external shocks, which he said “will continue to have spill off effects impacting on sectors of our economy.”
“In addition, the St. George’s University (SGU) is now experiencing almost a serious drop in student enrollment for medical school and since they are 25% of our GDP expect that that will have serious impact, not just on the University’s ability to do the things that (they) are planning to do, but also the services leveled throughout the length and breath of Grenada, Carriacou and Petite Martinique,” said the former Prime Minister who was voted out of office six months ago.
The expected revenues of Grenada for 2023 as documented in the budget are driven by taxation and the Citizenship by Investment (CBI) programme with an expected collection in those areas of $739.3 million and $240 million respectively.
The government is hoping to collect $71m more in taxes in 2023 relative to 2022.
However, Dr. Mitchell said that “in a period of an expected decline in growth, a reduction in specific taxes, even if you have increased tax on sugar, sweet drinks and alcohol, the rate reduction of that, and the environmental levy on electricity for households consuming 500 kW of electricity, coupled with tax amnesty…that they (the government) won’t achieve this estimate.”
Notwithstanding Prime Minister Mitchell’s statement that “the 2023 Budget is fully financed,” and “Government operations before financing is forecasted to result in an overall surplus of $62.7 million, among other measures announced, the notion that there might be significant financial constraints on government’s revenue collection and its ability to finance the 2023 Budget as a result of measures such as the $600 million tax amnesty is creating heavy debate in some quarters.
Former Manager of the Grenada Ports Authority (GPA), Ambrose Phillip chimed in on this discussion during Sunday’s The Bubb Report, expressing the view that “the question of raising revenue is an issue in this budget,” citing the many concessions that will be given in addition to the tax amnesty, among other fiscal measures that were announced.
According to Phillip, the 2023 budget “like previous budgets are framed within a particular set of constraints, and mentioned “the issue of the National Sustainable Development Plan 2035, the medium term debt strategy, the Fiscal Responsibility legislation,” among others, which must be laid before the House along with the Estimates of Revenue and Expenditure in keeping with the budget preparation framework agreed to and legislated in 2014 by the former Keith Mitchell administration under the structural adjustment programme entered into in 2013.
However, he contended that while the Prime Minister did in fact outline some of the documents which were background to the budget…when we look at the information that was listed on the first couple of pages of that budget presentation, we will see that the reports are all over a year old.
“So, the report of the last Fiscal Responsibility Oversight Committee (FROC), I believe it was in April/May of this year and dealt with the period ending last year. If you look at the debt sustainability framework, that is again a year old, so, we don’t know exactly what the current situation is with respect to the last 12 months – in other words, we are dealing with a 2023 budget with 2021 information. We do not have full forecast or even proper forecast with respect to 2022 information,” Phillip charged.
He went on to express concern with the financing gap, noting that “when you look at the increases that the government has announced in a number of areas… in terms of the allocations for various ministries, programmes, health and wellness increasing by $17 million, the question of education increasing by 11.4 million, agriculture and fisheries – increasing by $14 million, the creation of the creative economy moving from zero to $3.4 million, infrastructure, physical development, and so on, an increase of $9 million, overall you’re talking about at least a $55 million increase in those areas that did not exist before.”
“In addition, the government is boasting of concessions or reductions in excess of $30,000…a minimum of $85,000.00 more that has to be found from somewhere (and) it is not clear to me where that is going to be coming from” because the budget also says while we’re expecting $81 million in part from the World Bank that the budget would not be financed by increases from domestic sources,” Phillip contended.