Yatani budget plans disappointing

I thought that one of the main highlights of this year’s Budget would be a stimulus package to compensate businesses that have suffered most from lockdowns and movement restrictions to contain the Covid-19 pandemic.

We expected Finance minister Ukur Yatani to introduce support measures to give some respite to sectors such as hospitality, entertainment, tourism, leisure and travel.

At the height of the Covid-19 pandemic, the government rolled out a comprehensive rescue package to support businesses from the pandemic.

But the moment we signed up to a new programme with the International Monetary Fund (IMF), the tone and emphasis of economic policymaking started changing with the emphasis shifting to the mantra of fiscal consolidation — expenditure cuts, higher taxes , and the dismantling of subsidies.

It is clear that with respect to businesses in sectors such as hospitality, tourism and entertainment, the government withdrew support before the scars had fully healed.

Yet we all knew that damage to the wellness of businesses in some of the most robust sectors of our economy and the leading employers of labour would be felt for many years.

And with talk about a fourth wave of the virus already in the air, it seems that we are moving into a prolonged period of movement restrictions, curfews, and work-at-home orders.

As things stand, a business in the hospitality and entertainment sector does not have an idea when they can even begin to recover from the wipe-out they are facing.

None of it is the fault of business owners or workforce.

Yet the fact that the minister has proceeded as if he was oblivious to the dire predicament of the tourism and hotel sectors does not surprise.

When you are unable to face up to the scale of your economic problems, our policymakers resort to putting off hard decisions in the fatalistic hope that the problems would disappear on their own.

Today, public finances are in the red. This is what is limiting the Finance minister’s ability to use fiscal policy to make decisions that will make a difference in the life of the citizen.

If you asked me to summarise what has happened in this economy in the past 15 years, my observation will include the following.

First, investment and growth in the private sector has been stagnant.

Secondly, manufacturing continues to decline.

Third, the low-growth and low-investment private sector has spawned an economy with no great engines to make it leap.

Fourth, you don’t see serious efforts to re-invigorate the economy and to bring us the sort of jobs that can give the citizen secure and rising living standards.

Fifth, falling tax revenues and reckless borrowing have caused persistent and large fiscal deficits and unsustainable public debt levels.

This country needs to witness an outbreak in honesty about the true economic situation.

Nearly all proxies of growth — such as declining corporate profitability, an upsurge in the number of companies issuing profit warnings, stagnant uptake of credit by the private sector, an increase in redundancies, decline in electricity consumption by big manufacturers — show that things aren’t going well to us.

GREEK DEBT CRISIS

Yet official statistics keep putting out rosy growth figures.

We have major credibility issues with the numbers and statistics not only on the public debt but on the true size of the fiscal deficit.

We are yet to appreciate the fact that part of the Greek debt crisis came about because of the credibility of the macroeconomic figures.

With exaggerated GDP growth numbers, we produce budgets that show hyped revenue targets and unsustainable budget deficits. We have been crafting spending plans that we are incapable of funding.

This year’s budget is not different at all.