THE DEVASTATING flood rains will have severe implications for the economy. In fact, it is an ironic twist of fate that the rains came so soon after BOJ Governor Lattibeaudiere was on record as arguing that the economy should grow by 2-4 per cent this fiscal year. This is an assumption predicated on vibrant domestic agricultural production that accounts for some 10 per cent of Gross Domestic Production. Now the likely negative economic impact of the rains threatens achievement of this target.
There are some obvious lessons the rains should teach about the economy. In the first place they indicate the fragility of the economic recovery. Just as some successes in the macro-economy were being celebrated, the flood rains dramatise the limited play available in the budget for any contingencies triggered by nature. This is so, of course, given the dominance of the national budget by debt payments. The authorities will be hard-pressed therefore to divert funds for relief from an already lean budget.
Additionally, the rains are a further reminder of the failure to attach sufficient importance to proper maintenance of the physical/social infrastructure with roads and gullies being prime examples. Allied to this is the failure to enforce proper standards especially from providers of services to the government.
In this instance however private developers seem equally guilty of compromising standards. The negative economic impact of the rains should therefore serve as a call for a greater focus on improved efficiency in service delivery by the public and private sector.
A main positive that is possible in all this, however, is that, even if substantial assistance from overseas donor agencies is not received, government has demonstrated its ability to get the IMF/World Bank to adjust their targets (mainly fiscal ones) in light of events such as natural disasters.
The administration should ensure that if this occurs they are in a position to benefit from any temporary reprieve the economy may receive from the international lending agencies. This could be the silver lining behind what now appears to be a dark cloud.
