- RUDOLPH BROWN/CHIEF PHOTOGRAPHER
Dr. Omar Davies, Minister of Finance and Planning gestures as he opens the 2006/2007 Budget Debate in Gordon House on Thursday.
Don Robotham, Contributor
AMID THE detailed discussions of the Budget and the Memorandum of Understanding (MoU), we have lost sight of the fact that this is very likely the last budget of Dr. Omar Davies.
Nobody has given me any message, least of all Dr. Davies. But it doesn't require rocket science to figure this one out. With Jamaica House pulling in one direction and the Ministry of Finance pulling in another, something has to give. My guess is Dr. Davies sees the writing on the wall and wants out.
On a related point, I am willing to bet that we shall hear not one word about any nonsensical alternative economic model from Andrew Holness, Audley Shaw or Bruce Golding in their budget speeches; nor any rubbish about fixing the exchange rate. Senator Williams, level-headed as usual, has let the air out of that balloon.
NORMAL BUDGET
Dr. Davies is making his exit with a normal budget. On the face of it, there is nothing remarkable here. The total expenditure is $358 billion. The contingency fund is $9 billion, to tide us through untoward events such as hurricanes.
There are no new taxes. The budget deficit target is negative two per cent and, if the expenditure guidelines are held to, it should be possible to hit this target as well. It is very likely that, if we stay the course, we shall achieve single- digit inflation this year.
What is remarkable about this budget, therefore, is not the detail. It is a larger fact. In the middle of the current euphoria, Omar has stuck to his guns and refused to depart from the projected deficit target of two per cent. He has rejected the mad pressure from Jamaica House to use government funds to guarantee the small business loans to be financed from the $1 billion extracted from the National Insurance Fund.
More importantly, he has set a course for the budget for the following financial year to return to the target of zero deficit from which we have departed. In our current situation, this latter point is the essential one.
If things fall apart, therefore, don't blame him. There is only so much one human being can endure. When collapse comes, place the burden where it belongs.
IMF STATEMENT
This was the significance of the statement issued by the International Monetary Fund (IMF) on the eve of Minister Davies' Budget presentation. The report in The Gleaner of April 27, states that "if the economy shows more improvement than is expected, the IMF directors suggested that the authorities target a balanced budget for this financial year. They said it was critical to achieve a balanced budget as soon as possible and to avoid recurring fiscal slippage."
The IMF plainly sees the desire of Jamaica House to argue that sufficient balancing of our books has already occurred. According to this view, the time has come to stop balancing the books and to start 'balancing people's lives.' Translated into plain language, this means the following: The deficit target for 2006-2007 is as tight as we need. We can stop at that point. We shall tighten the budget no further. We shall be looking for more ways to spend.
CRASH PROGRAMME
Already $1 billion is to be diverted from the NIS Fund to finance microenterprise in the inner cities. More is coming.
The Dutch poured millions of guilders into microenterprise development in the 1990s far more than $1 billion and what was the result? The money came and went like the proverbial 'Sammy mout'. We are about to witness a repeat performance.
The proposed small business programme is simply a crash programme by another name. Why bother invent cumbersome euphemisms such as 'social intervention?' Why not call a spade a spade? All Jamaica knows a crash programme when we see one!
All this means that any hope of resuming our deficit reduction course and cutting the deficit to zero in the near future is in deep trouble. But it means more. It means that, given this addiction to consumption, the two per cent deficit target for the current budget is also likely to be exceeded.
If you were the Minister of Finance and saw all of this coming, wouldn't you head for the exits?
FATAL CONSEQUENCES
Such an orgy of deficit-financed expenditure will have fatal consequences for our economy. I repeat what I have said before: Poverty in Jamaica has not been reduced by school feeding or food stamp programmes. Social interventions of this nature stop a gap for the recipients but are insignificant in the total scheme of things. Total expenditure on food stamps, school feeding and the Social and Economic Support Programme (SESP) is about US$33 million or J$2.1 billion. Our budget deficit alone is $31 billion!
Poverty in Jamaica has been reduced by the policies tenaciously pursued by three individuals: Derrick Lattibeaudiere, Shirley Tyndall (the former Financial Secretary) and Omar Davies. These people have earned their national honours.
Please don't argue that you don't believe that poverty levels now are down to 15 per cent. You cannot believe the poverty data when it shows climbing to 45 per cent in 1991 and reject it when it shows poverty declining to 15 per cent in 2005. It's the same data set. If the data are wrong today, then it was wrong in 1991 also. You cannot cherry pick the data like that, unless you are an opposition politician, a bottom-up developer or, perhaps, a talk show host!
You can argue that this is churning around the poverty line and is not all that significant in real terms. But it still has occurred. And it is this anti-inflation model which has brought about the dramatic reduction in poverty levels, not economic growth. This is indisputable.
Wasting $1 billion on dubious social interventions will win applause from the gallery. Some pastors and PNP dons will be ecstatic. Advocates of bottom-up development will be in their ackee.
But this is simple demagoguery which ignores out fundamental social problems. It would have been far better to spend this J$1 billion on really overhauling our education system. One third of the transformation fund has already been spent. Zero transformation is under way. But serious education overhaul is tough work. It wins no immediate applause from the multitude. People's National Party (PNP) dons couldn't care less about that. It won't put their pot on fire or help to win the election.
So short-term outlook rules our politics as usual. Nothing new here. Something or somebody therefore has to give so that the expenditure taps can be turned on full blast. It is Dr. Davies who will give. He has served his country selflessly and with distinction. His flaw has been his profound unsuitability to politics. Lacking the required Anancy qualities, he shot from the hip and did not suffer fools gladly.
So this is Omar's last stand. Fare thee well, valiant knight, true and faithful to your trust. Jamaica's loss, your family's and friends' gain.
