(Published in MTimes 03 05 2019)
Despite a massive grant from India at the expense of the DTAA, the public investment splurges – the so-called ‘chantiers’ with billions being spent on the Metro Express , the Road Decongestion Programme, the Safe City project – have not had the multiplier effect that was expected on the economy.
Should we be investing so many billions on prestige projects when the country has other priorities namely, among others, the need to boost growth and create productive jobs? We are paying today a heavy price for that as our elevated level of public sector debt is no longer sustainable, such that the staff report of the 2019 Article IV consultation has recommended that fiscal consolidation should be pursued as from the forthcoming budget itself. The authorities had tried to delay the adjustment two years down the line, but IMF had put its foot down given that the slowdown in the financial sector and the possible contingent liabilities are already posing a risk to the growth outlook and debt sustainability.
The authorities have agreed in their consultations with IMF that they will be taking both revenue and expenditure measures to achieve the desired consolidation: higher excise taxes on tobacco and alcohol as usual, toll taxes on new roads, introduction of property taxes, streamlining of tax incentive framework, targeting of social spending and subsidies, wage growth contained and pension reform including targeting. The largesses of the previous budgets seem to have caught up with us, with more dire times ahead. The prioritisation of expenditure and greater revenue efforts of government mean that they will have to tone down the ‘chantiers’ and the giveaways. The generous scattering of handouts and hints of more to come have sown the seeds of future problems for our economy.
PJ’s generosity was not the result of a sudden big improvement in our economic fortunes; it would seem it has been designed with the sole purpose of swinging voters with a bonanza to be paid later – by you and me.
