Hope still in deficit

THE GOOD news is that revised figures suggest the budget deficit for the last fiscal year has all but vanished, thanks to higher-than-expected revenue.

The bad news is there is no guarantee the government will be able to repeat such a trick.

The fact that it is the first time in almost two decades that the deficit has been so low tells us something about the structure of our economy and the way it remains subject to international market forces, including energy prices and multinational interests.

According to the Ministry of Finance, the Board of Inland Revenue’s final figures suggest actual revenue for fiscal 2022 was $2.57 billion higher than anticipated. Based on an expenditure estimate of $54.54 billion, the deficit is now estimated at $329 million, less than 0.2 per cent of overall output.

But that’s an estimate. Actual expenditure will no doubt be confirmed in due course.

That has not stopped the Government from crowing about the numbers even as it maintains its call for caution and economic restraint.

This approach has resulted in many figures, including former minister in the Ministry of Finance Vasant Bharath, pushing back. Mr Bharath accused the Government on Thursday of an attempt “to hoodwink the population into a false sense of security when our reality is the complete opposite.”

The truth is, the low deficit is due in part to stale policies which have seen state expenditure cut.

From the gradual shrinking of subsidies to trimming various transfers and development programmes, the overall spending pattern has been such as to tip things in this direction.

On the other side of the ledger, however, is the fact that revenues have fluctuated upwards owing in large measure to the global economic and political factors that have sent commodity prices spiralling.

Those very factors are what have resulted in a rising cost of living, eating into the purchasing power enjoyed by people all over the world.

Though deficits are a matter of concern, they have long reflected the need for bolstered state spending and for greater economic stimulation.

It is also the case that the need for more state spending has also increased dramatically owing to the impact of the pandemic and the resultant economic fallout.

Telling people the deficit has shrunk is not going to help them buy food, pay rent, fuel cars, do home repairs, fund their education or secure their families.

Nor does it reflect the need to better allocate where existing spending is directed. If anything, focusing on balancing the books diverts attention from the need to home in on what is being spent, when, why and under what terms.

If the deficit is shrinking, so too is hope of the possibility of real change in our fiscal management that will make a difference to the population’s quality of life.