Economist and UWI Lecturer Dr Dhanayshar Mahabir says the 2009/2010 budget is a gamble on gas prices holding. Mahabir said the Finance Minister, Karen Nunez-Tesheira, based the budget on the premise that the oil and gas prices would recover soon. He was talking on CNC 3 following the delivery of the budget on Monday. Admitting that the budget which was predicated on an oil price of US$55 a barrel and a natural gas price of US$2.75 per million cubic feet seems appropriate, Mahabir said the minister was playing a gambling game, since she would not be aware if the oil and gas prices would recover soon.
“We are able to weather the storm during the financial crisis because we are in low debt, but if oil prices do not recover, we will find ourselves in a precarious position.” He added that if the gas reserves should become exhausted, the country would also be in serious trouble. Mahabir said it appeared that the minister was hoping for more revenue based on a GDP growth of two per cent, which he said was “quite optimistic.” She was hoping for the best,” he said.
Mahabir advised that the Government should reduce its expenditure on a year-to-year basis for approximately three years until the economy stabilises, as it was currently spending more than it expected to receive. “But if the Government continues like this, we would find ourselves borrowing.” He added that it was safe for the country to hold a pessimistic view as the economy was not as “secure” as the minister has led the population to believe. He said with the imposition of increased penalties, such as for the illegal use of the bus-route, the Government was scraping at the bottom of the barrel for revenue. Mahabir said his major concern though was the increased property taxes. This was the most contentious issue, he added. Mahabir said he was concerned about citizens like retired persons affording this payment. However, he commended the Finance Minister for:
• the pension reform
• not introducing new income taxes
• no reduction in tertiary allowances
• concrete measures in agriculture
• the construction of homes that provide for employment.
Salient issues
Mahabir said there were issues which were not raised by the minister in her budget presentation.
• Exchange rate: is it going to be threatened?
• How much of the $36 billion revenue is coming from the energy and domestic sector?
• What percentage is being allocated for the agricultural sector?
• What measures are being used to increase revenue domestically and what mechanisms were in place to increase revenue?
• What is the cost of the Clico bail-out?
• No mention of opportunities in information technology.
Recommendations
Mahabir said the minister needed to change her modus operandi of how government does business. He recommended that there was a need for tripartite discussions: between the labour and business sectors in order for the country to move forward. He added that it was important that the Government reach out to the unions.
