The need for a Structural Adjustment Program (SAP) in a country’s economy is government and party neutral, though the responsibility falls on the Government of the day.
Obviously, the reasons behind this desperation-hour course of action will generally be found in the fiscal policies, acts and omissions, borrowing and expenditure conduct of governments during their terms in office, whether thirteen years or less years.
It is hardly beneficial to lament the history of the problem, though it is fashionable and perhaps politically tactical to remind people of the behaviours and decisions that would have caused the problem.
The Prime Minister’s Address put its own gloss regarding the role of the NNP in creating the problem and joined the NDC regime, in respect of “infighting and indecision”.
Since the latter may not be readily understood by the public, the former Minister of Finance may find it prudent to clarify or explain whether this charge is fair. One suspects that the PM might have been so informed by the PS Finance, as it is understood that sometime in 2011 recommendations for serious actions were put on the table.
Before getting to our substantive comments on the Address, it is important that the NDC clarifies itself on the problem of the economy through a frank narrative covering the following:
The collapse of the public finances in 2011- 2012 (due principally to the recklessness of the NNP,1995-2008)
The poor state of the Treasury as at February 2013
Accepting that the Grenada economy in October 2013 is no different from what it was in February 2013
Conceding that if the NDC had retained power, Grenada would similarly now be engaged in a Structural Adjustment Program.
Putting these positions on the table will remedy an ongoing and unnecessary defect in the current NDC narrative. Certainly, no one would then be able to pronounce the NDC guilty of careful omissions of fact which may eventually hurt the NDC’s image and credibility.
In order for one to treat with the Address properly, one may find a useful context in the 2013 budget presentation. Accordingly, there will be no recital of the factors which led us to this critical point in our economic and social circumstances.
The narrative and substance of the 2013 budget address conveyed a message of uncertainty, pretence and denial. There was a deliberate attempt to pretend that Grenada was not a prime candidate for a SAP, as the Government proceeded to share out a package of goodies.
Those who were not getting honey were going to get milk! This, in the face of and full knowledge that the Government was facing severe financial constraints. They even announced a current account surplus! Furthermore, there was a hidden issue of deficit financing, something for which the NDC was roundly condemned by Dr Mitchell in 2012.
Yet Senator Kenny Lalsingh insisted that the “real NNP budget” was coming in December! The Senator was not thinking austerity and hardship and pain and sacrifice! He was thinking largesse, reckless spending and wasteful, imprudent government guarantees. He was wallowing in the old mud pit of spending for the vote!
Other NNP ministers shared his dream! After all many Grenadians believed that ‘when Keith come money go flow’! Old people have a saying that ‘when you don’t hear you go feel’!
Consistent with the campaign rhetoric, the game plan was to talk the right talk, but hide the real substance and significance of things. The intention was to avoid a rush of criticism and public loss of hope so early in its term.
As at budget date 2013, it was still NNP first, Grenada after! It was Project NNP.
So the Government is now delivering its SAP because it cannot keep up appearances any further. The observation should be made that the real monster is not the IMF, but the state of our economy. Stressing that ours is a ‘home-grown’ program is nothing more than good PR for the IMF, who will have their say and pound of flesh anyway!
The exercise of sovereign authority in Grenada has been known to result in economic disaster for the people. So “home-grown”, as a function of sovereignty, has no advantage over “externally-imposed”.
The main themes of the address were pain, sacrifice and eventual benefits; while the sub themes were patriotism, responsible government action, partnerships and consultations. The latter being an attempt to polish the regime’s image in a sea of bad news and to pre-empt protest and sectoral noise.
There were two central issues in the speech, namely; the wage bill and income tax. Clearly, these are only two elements of the SAP, with the remaining elements set for public disclosure in the next budget presentation.
Evidently, the mood and intensity with which the PM described the necessary pain and sacrifices, point to an expectation that there will be additional measures which are going to be very onerous in their demands and impacts.
With respect to the wage bill, the PM did not present himself in a manner that was clear and conclusive. On the basis of the speech itself, the donor organisations have made the wage bill a focal issue of concern. This means that the Government will have to adjust the bill downwards in a significant way.
The profile of the wage bill consists of two components; the current 70 cents on the dollar and the implementation of increases already agreed to with the Trade Unions.
Logically, the bill being already too high must therefore be reduced. So the action required here is to cut the size of the payroll. Secondly, Government cannot go higher than the existing 70 cents figure. The action required here is to abandon the deals previously negotiated.
Taken together, retrenchment is the only means by which the 70 cents could be reduced given the existing constraints. The option of cutting Public Workers’ salaries seems to have been ruled out at this stage.
One suspects that at the right time, the government will find the appropriate narrative by which to sell the retrenchment option. This must be forthcoming as the PM indicated that this matter is critical to the success of the entire adjustment effort and securing the compensatory assistance promised.
One will recall that during the elections campaign, the now PM repeatedly lamented that the wage bill was too high. That bill has not reduced since the elections and may well have increased. Curiously, he kept on circling the issue but said nothing definitive about what action will be taken to reduce the wage bill. We await him on this score, confident that he has a political dynamite in his hands.
The second notable aspect of the speech was the introduction of Personal Income Tax to catch persons earning over $3000 per month. This measure is obviously intended to raise revenues. However, one would have to await the full menu of adjustment measures to properly situate the impact of this measure on the new class of taxpayers.
It can safely be said though that the removal of Personal Income Tax was one of the historic mistakes of governance made by the NNP regime some years ago.
Concluding, these are the only aspects of the Address deserving of analysis. Everyone should bear in mind that the real deal is yet to come. Thus far, the government has chosen to spread the anxiety and to manipulate the emotional impacts expected from the full set of measures. This is partly explained by the attempted overlay of the sweeteners contained in the Address.
So the biggest deal to be delivered by the NNP, a Structural Adjustment Program, has begun to arrive.
It is the Government’s responsibility, but the people’s burden!
THE CONGO PEPPER