Budget Emptiness Tomorrow | Columnist

Tomorrow, there’s another budget speech to be endured.

More hours of the high-sounding, hollow verbiage heard for nine years. After their nine budgets spent over $400 billion, what have Prime Minister Dr Keith Rowley and his Finance Minister Colm Imbert produced? Decline and disaster in the country’s stalled economy, decaying society and dysfunctional institutions.

On the ground, economic contraction has produced business closures, increasing unemployment, a shrinking middle class and growing deprivation, also reflected in families facing eviction for inability to pay their rent; and greater demand for lunch boxes in schools as household incomes decline.

An Express editorial confirms that “along the highways and by-ways, in mall car parks, outside supermarkets and banks, people down on their luck are congregating in increasing numbers. The explosion of beggars and homeless people in public places across the country tells a very different story about the state of the economy from that presented by Government officials.” Indeed. You will hear their rosy pictures again tomorrow.

Rowley and Imbert have been scandalously irresponsible. In 2015 they met a 40% drop in national earnings of $20 billion, from $57 billion to $37 billion from structural changes in the global energy industry. Boom times were not returning. We needed new foreign revenue streams more urgently than ever before. Diversification was critical to keep our life-saving foreign reserves strong.

Our reserves have saved this country from the Rowley/Imbert inadequacies. In 2015 they met US$10.4 billion in reserves and used up the economic space it allowed, spending primarily to protect their political careers by “maintaining our lifestyle”. They paid absolutely no attention to the critical issue of replenishment.

In 2019 when reserves had already dropped by US$3.5 billion, Imbert uttered the absurdity that we had enough foreign savings to defend the currency for 23 years, having “defended it for 26 years, from April 1993 when it was first floated.” I had to remind him that during that period, foreign currency inflows exceeded outflows from an energy boom, the gas price moving to $US7 per mmbtu and oil crossing US$100 bpd several times. Additionally, we were leading exporters of ammonia and methanol and supplied 80% of US LNG imports. We consequently built reserves, established a Heritage and Stabilization Fund (HSF) and increased budgets from $12 billion in 2000 to $63 billion in 2014. All that had changed, permanently.

But they refused to recognize the new reality. In 2019, while the ship was sinking beneath them, Imbert also boasted of eight months import cover from reserves which had dropped by then to US$6.9 billion. The situation was far worse, folks. As I pointed out in “Fading Strength”, those reserves included Imbert’s “massive foreign borrowings.” I asked, “What is the true state of our foreign reserves? How much was earned and how much borrowed? We have been spending foreign exchange far in excess of both earnings and borrowings combined. We are in deep trouble.”

We now see the depth of that trouble. Our reserves are today the weakest ever because Rowley found economic diversification “annoying”! For nine years, he sang “Dragon Gas coming” and developed no new foreign revenue streams. Small wonder, our foreign reserves are now the lowest in 17 years.

It was US$5.6 billion in March this year. I warned then those reserves were mainly from foreign borrowings and withdrawals from the HSF! As leading economist Vaalmikki Arjoon said then, when we factor in US$5.2 billion in foreign debt, our foreign reserves stood then at US$400 million. “Half-a-month import cover,” he said. And he warned, “this economy is on life-support!”

It is now even worse. Our foreign reserves are today US$5.5 billion and our foreign debt also stands at US$5.5 billion. Indeed, we have already borrowed US$858 million for this year so far. Arjoon says “foreign debt props up the reserves” though “it doesn’t mean all the reserves came from debt. However, the balances of reserve and external debt are now approximately equal, so if we net the reserves after external debt, then the net reserves are zero!” Hear that, people? Frightening. Can we go any lower?

Now, after nine years of scandalous, almost sinful improvidence, Imbert was forced to confess in an affidavit that “The Government cannot continue to sustain budget deficits by increasing Government borrowing and debt much longer.” He was arguing for the Revenue Authority to further tax the population. This will accentuate the suffering, deprivation, hunger and homelessness. After ducking the challenge of diversification they met in 2015, Rowley and Imbert will now punish the people for their own scandalous nine-year ineptitude.

A government must collect taxes due to the State. But you don’t increase taxation when your economy is down. You then further stifle growth possibilities. That clearly doesn’t trouble Rowley and Imbert, now salivating over an annual increase in tax revenues between $3 billion and $10 billion they expect from new taxes. They obviously see themselves at last producing a balanced budget and redeeming their disastrously failed tenures as prime minister and finance minister—while bringing more pain on the people.

Prepare for more budget emptiness tomorrow.