Sources for Funding the Budget Deficit

By Stephen Kangal
September 11, 2010

Finance Minister Winston DookeranNever in the annals of the political and parliamentary history of national budgeting in T&T has such a delicately balanced, radically reforming, investment stimulating and confidence building 2010-11 fiscal package been accepted and lauded by so many across the country. This consultative-based, people’s budget was truly a national and grass-roots event with almost everyone except for a few misguided and bazodee PNM MP’s giving Finance Minister Dookeran the thumbs up approval.

The people (marrish and parish) are behind Dookeran’s Budget. This is the difference between the current budget and previous PNM promissory notes. There is ample evidence of the persistence of the air of optimism that ushered the People’s Partnership governance.
Finance Minister Dookeran had been weighed down and stymied by the legacy of nepotism, squandermania and corruption of the previous PNM regime. The budget represents a determined and credible effort to break away from these difficult moorings, to clear the decks as he said to make way for change of course and a fresh start in open people-centred governance.

It is responsible, visionary and innovative budgeting even if the Finance Minister built his fiscal edifice on a few risks. The budget is consistent with the expectations that the Finance Minister generated as an economic guru. His proposed potential sources of funding for treating with the $7.7 bn budget are quite realistic in accordance with new developments.

There are five potential sources for filling the $7.7bn deficit void.

These include the expected $20 bn public/private sector investment outlay that can generate a higher than expected 3-4% growth above the budgeted 2.5%. Government will then collect a larger than expected tax revenues owing to a revitalized construction industry buoyed up by receipt of its $ 5bn outstanding payments. The CLICO/HCU bail-out will also increase consumer confidence and spending and increase the VAT intake.

Added to this is the expected $7bn tax- windfall that could result from the amnesty Dookeran offered to defaulting tax-payers who owe $13bn to Government. In the face of the widespread vocal individual and institutional support for the Budget as well as for the PPG Administration and including the trust, reliance, credibility, acclaimed international status and the appeal for tax compliance of Finance Minister Dookeran a positive response in this area is realistic having regard to the prevailing excessive liquidity situation.

A potential third, energy-based source of achieving a balanced budget is the realistic increases in commodity/energy prices as the expanding economies of China and India begin to consume more energy and as the US economy wriggles itself out of the deep recession. Dookeran’s amended and more attractive fiscal package geared to attract and increase exploration and exploitation in the off-shore deep water horizons and energy co-operation with the Chavez regime can increase the prospects for greater energy-based sustainability and increasing revenues. His proposals for stimulating use of alternative sources of energy can also reduce the onerous $2 bn gasoline subsidy and release gasoline supplies for export.

A fourth source of deficit-spending is Minister Dookeran’s proposal to access local (30%) and multilateral lending agencies (70%) for borrowings.

The fifth is the cutting out of the cost-overruns, graft and corruption of the PNM that is estimated at $4bn in UDECOTT alone.