Government has been talking austerity for the past two years, and living it for at least the past 9 months. Living it with such dedication that it seems the familiar refrain of "no money noh deh", popularized under the lean times of the Esquivel administration, has morphed into the far more direct: "money done." And so it may be, but the real crunch is yet to come. Cabinet yesterday agreed to a major spending cutbacks, to contain a burgeoning fiscal deficit, which is estimated
to be hovering near to an alarming 8%, this when government had committed to the IMF that it would cut it to 3% in this fiscal year.
Where will the cuts go? Well 7 news has learned that government wants to cut capital two and three budgets by over thirty million dollars, nearly a third, while also cutting recurrent expenditure by 5%. The problem is that despite glib pronouncements to the contrary by former finance minister Fonseca, 7 news is reliably informed that government is running a recurrent deficit - which, simply put, means it spends more than it earns.
Now it wants to cut back the recurrent budget by 5%, which will be realized by cutbacks in fuel and supplies. But of course, the greatest fixed cost in the recurrent budget is government's massive payroll for 11 thousand public officers and teachers, who have all been promised a raise next year. Speaking with us today the prime minister says neither retrenchment nor a wage freeze are options:
Hon. Said Musa - Minister of Finance
"It's part of our reducing the fiscal deficit. We are working towards bringing down the fiscal deficit to within 3 percent of GDP…"
Alfonso Noble
"How much is it at?"
Hon. Said Musa
"It's difficult to say right now but it might be 5, 6 percent at the present time, aiming for 7 but we believe we can still work towards bringing it down to 3 percent or below that. And the only way to do that at this stage in the budget cycle is to reduce on the public expenditure. And the way we are going about it, as we discussed in cabinet yesterday, is to reduce recurrent expenditure by; across the board 5 percent. This 5 percent will be in the way of reducing on fuel consumption for public government vehicles. Reducing on the use of electricity, water, telephone; all the things that eat up, add up on the recurrent side of things. It has nothing to do with reducing salaries or benefits that public officers or teachers or anybody enjoys. It's to do with goods and services, reduce in those areas."
Alfonso Noble
Q: "Is the government at this point admitting that we are at basically at a point of crisis when we have to reduce recurrent expenditure? We can understand Capital 1, Capital 2 expenditure reductions but when we are reducing recurrent expenditure we are at a point of crisis."
Hon. Said Musa
"No, not at all, what we are saying is that there has been waste and abuse in the use of public resources."
"That is not the path we are going down: retrenchment or wage freeze and all that. We have given so far two salary increases to public officers and teachers and we are trying our best to maintain our commitment that we have made to public officers and teachers. So we believe that the way we can go about the cuts is cutting back on the capital expenditure mainly which will be about 30 million and about 5 million more or less from the recurrent expenditure in conserving on fuel, electricity, telephone, water."
In today's cabinet brief, government also announced that it will increase collection of taxes and duties and cut back on tax exemptions. And work with international agencies to develop self-monitored program for fiscal and debt management, which sounds a lot like a do-it-yourself version of IMF-style structural adjustment.