THE EDITOR: As we anxiously await the presentation of the 2017-2018 Budget, it may be worthwhile to consider a more conservative approach to this fiscal package.
For years now across different administrations, we have been having deficit Budgets. In other words, we are living beyond our means.
This shortfall is made up by a combination of borrowing (locally and internationally) and taping into our limited savings (the Heritage and Stabilisation Fund). Both measures seem to be not only unsustainable but possibly dangerous. I say this for the following reasons:
As we borrow, our debt/GDP ratio increases. This may lead to not only higher borrowing costs but also exceed internationally agreed threshold levels for this key macro-economic indicator.
What if commodity prices (the basis of our economy) do not rebound? Loans have to be repaid by the taxpayer (present and future). Do we run the risk of default? Are we borrowing for productive ventures that can diversify the economy, lead to growth that can mitigate against the increased debt or is it for recurrent expenditure?
Our sovereign wealth fund is already way too low given the economic rents accrued over the years. Furthermore, it serves a dual purpose that to me is not compatible. A Heritage Fund suggests savings for the future (inter-generational equity) and should not be lumped with a Stabilisation Fund that suggests savings for a rainy day (macro-economic instability).
Will this fund be depleted if this recession becomes protracted despite the short-term recovery periods associated with bumps in the hydrocarbon sector?
Our economy is dependent on a non-renewable resource that will inevitably become depleted some day.
Are current gas shortfalls and falling oil production indicative of this?
It has been suggested that austerity measures are being managed with a human face. The population, especially the economically underprivileged, must be cushioned from harsh measures. I agree fully but can we as a nation maintain the extravagant lifestyle that we are accustomed to? Should we not consider raising taxes on high-end luxury items such as fancy cars, electronic gadgets etc?
Thus gaining revenue for the Treasury and possibly conserving foreign exchange by lowering consumer demand for non-essentials.
While unpleasant to consider, should the exchange rate be allowed to equilibrate to its real market value?
Certainly this may help curb unsustainable aggregate consumer demand and trigger more local consumption that can boost the economy. Are we really serious about economic diversification? Do we really need all of the subsidies?
My fear is that we are simply kicking the can down the road. If we continue along this trajectory, we may find ourselves back with the IMF as we were in the 1980s. The conditionalities may be far harsher for a population softened by years of prosperity. It may be better to wean ourselves into a lifestyle more in line with our economic realities while we have the chance.
SOCHAN LALTOO (via e-mail)