Mr Speaker, Hon colleagues, as I indicated
at the beginning this was indeed a difficult budget to put together. On the expenditure
side, we have a budget dominated by debt servicing with the result being that virtually
all sector ministries have been allocated resources significantly below their
expectations.
At the same time, we are faced with the imperative of reducing the
fiscal deficit to a level which will give our creditors, domestic and external, the basis
for confidence in the economy and the society. We feel that a deficit target of between 5%
and 6% of GDP for the fiscal year and a primary surplus in excess of 12%, facilitated by a
credible revenue programme, will provide the reassurance needed.
This adjustment, which is unavoidable, is taking place in the
context of an international scenario which is hostile in every sense. There is a slowdown
in the world economy and in particular, in the national economies of our major trading
partners; there is a drastic fall out in the travel trade as reflected in the critical
financial state of virtually all the major airlines and at the same time, no one can fully
determine what will be the consequences of the war in Iraq or the possible continued
spread of the SARS epidemic.
This is against the background of a difficult 2002 with floods, the
lingering after effects of the 9/11 attacks on the US, increases in world oil prices and a
reduction in the price of bauxite/alumina.
Those are the bald facts. A further fact which we must acknowledge
is that we are essentially on our own. There are no major donors waiting and willing to
bridge the financing gap which I have outlined. In any event, even if there were some
institution/country willing to assist us for one year, the elimination of the deficit is
not a one-shot activity. Rather it requires a sustained programme over the medium-term to
increase revenue and contain costs.
I have not sought to sugar-coat the problems which we face, as there
is no point in so doing. However, whilst the problems are difficult, we have faced more
difficult ones and we have overcome. The severe problems which threatened to wreck the
financial sector in the mid 90s, represent a case in point. There were many, at home and
abroad, who felt that we would not have survived.
We are confident that the measures which I have just announced, will
allow us to maintain the confidence of our creditors which, in turn, will result in a
return of stability to the foreign exchange and capital markets.
However, the programme cannot just be seen as one advanced by the
Administration on its own. The financial markets are looking for any disruption which
would undermine our claim that we are presenting a credible financial programme in a
context of social stability.
If, as a society, we refuse to accept that adjustments must be made,
our creditors will simply walk away leaving the country without the wherewithal to meet
its obligations. This is not theory, we have seen it happen in many other countries, most
recently Argentina.
The fact is that despite the rhetoric which would seem to separate
various contributors to the debate, there can be no disagreement that there is a need to
reduce and then eliminate the budget deficit. Whilst we all acknowledge that in the long
run, expanding the economy is the only sustained answer, in the short and medium-term, we
must demonstrate the willingness to take the actions needed.
I have deliberately refrained from embellishing these closing
remarks with anything which would smack of partisan rhetoric because the objective reality
is that we do have a national problem which has to be treated in a serious and
analytic way.
For those observers who feel that the budget should have been
smaller, I respect your opinions. However, we sincerely believe that we have presented an
expenditure budget, which represents the minimum which could be allocated to the various
sector ministries, once debt servicing is taken care of.
We know that our creditors are demanding a significant effort in
reducing the fiscal deficit; that is non-negotiable and we have responded. We feel that
the revenue measures, which have been announced, will allocate the burden in an equitable
way.
At the same time, we have preserved and expanded the safety net
aimed at protecting the most deprived in the society.
We have put in place measures to increase efficiency and
accountability. It is a long journey but we have taken several steps.
Mr Speaker, we make no claim that we have found the perfect
combination of programmes and revenue measures, but I will say that we have given it our
best effort. We are confident that the package can succeed if we work together in the
interest of our country. And it will surely fail if we pull in different directions.
The world is watching us.
