On October 5, Finance Minister Colm Imbert will present the 2020/2021 national budget in a time when both the local and global economies have been ravaged by the effects of the covid19 pandemic. At the post-Cabinet media conference last Thursday, Imbert announced Government will be moving ahead with its plans for the implementation of the property tax. But what else can citizens expect when the budget is presented in two weeks' time?
In the 2015/2016 budget presentation the estimated revenue was $60.287 billion. This plummeted to $47.441 billion in 2016/2017 (Imbert cited the lacklustre performance of the global economy and turmoil in the global oil markets), dropped more than two billion the following year and then stabilised at $47.7 billion for the next two years.
In the mid-year review Imbert reported the International Monetary Fund projected a global recession in 2020 worse than the 2009 global financial crisis with recovery expected in 2021. PRNewswire said of all of the industries oil and gas were the hardest hit by the pandemic with energy companies cutting back on operations due to declining demand, partly caused by travel restrictions, and facing crashing energy prices. Imbert had reported a 40 per cent decline in natural gas prices (our major revenue earner) since September 2019, so things were already bleak pre-covid19.
And the non-energy sector has suffered as well. The covid19 lockdown instituted in March negatively impacted the entire economy and saw a number of businesses reducing operations, cutting staff and, in the case of some smaller and medium-sized businesses, closing their doors entirely. And with the restrictions still in place the earnings of a number of businesses, including restaurants, bars, casinos and cinemas, have been significantly reduced or stopped entirely. And the travel restrictions, both domestic and international, have left tourism, especially in tourism-dependent Tobago, in an economic chokehold. With less being earned by the majority sectors this means fewer taxes. So citizens should not expect good news on the revenue side.
One thing the current People's National Movement (PNM) can boast about (and have boasted about) is keeping expenditure relatively low, achieved partly by cutting costs at government ministries and agencies. Following estimated expenditure of $63 billion in 2015/2016 it has been below $55 billion for the next four years, with $50.5 billion in 2017/2018 being the lowest. Economists and political analysts Newsday has interviewed have all predicted a tight budget, so it is likely the estimate will be below the $53.036 billion in the 2019/2020 budget but unlikely to be below $50 billion.
From his inaugural budget presentation, Imbert announced his plan to close the deficit gap and announced government finances would be brought into approximate balance by 2018. But as the old Yiddish saying goes "Man plans, God laughs" and that obviously did not happen.
Imbert said at the post-Cabinet media conference the 2020 deficit is about $15 billion and back in April he said this was from the original $5.3 billion as well as the $10 billion from covid19-related losses/expenditure. Economist Marla Dukharan in a previous interview with Newsday predicted it would be $20 billion though it would be understated by the Finance Minister. And what about the deficit for the new financial year? Well a balanced budget is definitely out of the window, and Imbert at the media conference reiterated that a balanced budget now would mean cutting salaries and reducing benefits like old age pension and public assistance. But with his trademark conservatism it is unlikely to be a very large deficit. And, as economist Dr Indera Sagewan previously told Newsday, that deficit is likely to be financed by more draw-downs from the Heritage and Stabilisation Fund, borrowing and possible sale of assets. And could two of those assets be the Long Circular Mall and Trincity Mall owned by CL Financial subsidiary Home Construction Ltd? Imbert had denied any decision had been made to sell the properties and it was just a valuation being done. But it is likely there would be the announcement of some type of asset sale to close the deficit gap.
Imbert has already confirmed there will be a property tax in the new budget but it has been mentioned in previous budgets and whether there will be implementation in this financial year is anyone's guess. Political scientist Dr Indera Sagewan, in a previous interview, predicted the return of property tax as well as increased corporate tax in a budget that would be especially difficult for the middle and upper classes. She also predicted a possible reduction in the Government Assistance for Tuition Expenses (GATE) or a closure of GATE entirely. She did not, however, predict any further reduction of the fuel subsidy as that would put pressure upon all classes. So it is likely much of the load will be placed on the shoulders of the middle and upper classes who theoretically would have been better able to weather the economic hurricane of covid19.
Next week Sunday Newsday will take a look at the PNM general election manifesto and what aspects are likely to feature in the budget presentation.