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On July 28th 2020, the Prime minister of the Commonwealth of Dominica gave the customary address in parliament in relation to the national budget. He presented the budget for fiscal year commencing July 2020 and ending June 2021 (FY20/21), under the theme – the road to dynamic Dominica; fostering economic resilience.
Lack of reporting on sustainable development outcomes
In most of the Prime Minister’s 16 previous budget presentations, he may have used “good words”; but the policies and strategies herein – when judged a year or more after, largely failed to propel the country forwards towards desirable sustainable development outcomes. This 2020/21 budget appears to be similar to the failed previous budgets in term of the rhetoric compared to the expected results. The annual national budget should be a tool for implementing the nation’s medium-term strategic development plan that ideally should be connected to a long-term vision. That vision must essentially be about improving the quality of life of the people and future generations, and there are three contributing inter-related and inter-dependent dimensions to this – the economic, the social and the environmental dimensions. Hence a good budget must contemplate funding allocations towards policies, strategies and programmes that will push the country towards greater achievement of its sustainable development objectives. In that context, the 2020/21 budget address, while it indicates outputs achieved (example hospital and health centres built) during the previous fiscal year 2019/20, it does not make the connection to how all the various outputs from previous years contribute to the development outcomes desired and in that regard the budget address provides no objective indicators of progress. Likewise, new proposals for the upcoming fiscal year must be in the context of the kind of development outcomes desired. Several questions can be posed in that regard related to the desired development outcomes. What has been the country’s progress in reducing poverty and unemployment? Has real per-capita income (a measure of the standard of living) increased? Are our people enjoying living in our country as may be expressed by indicators of the level of crime and participation in community activities, among other indicators of social connectedness and well-being? Is the physical health of our people improving as may be expressed by life-expectancy, morbidity and mortality indicators? Is the tertiary education of our young people redounding to the progress of the economy? Is our natural environment adequately managed so that its use as a basis for sustaining the generation of income is optimized while preserving and enhancing the enjoyment by our people? Pursuing those kinds of outcomes is what budgeting should ultimately be about. We have to judge the success of annual national budgets against the degree to which they result in such progress. But this 2020/21 budget presentation, like many previous budget presentations, woefully lacks reporting on outcomes achieved and that are being pursued. There could be several reasons for such lack, including; the administration’s lack of understanding of the basis for effective planning and budgeting; the administration deliberately not reporting on outcomes given that the indicators are not flattering; the administration’s continued push to manage the country in their own self-interest with brazen displays of extreme corruption which make it impossible to pursue effective planning and budgeting.
Excuses for failure
Having set that foundation, it is clear that the current political regime is out of their depth and have merely thrown out a bunch of nice sounding words to deceive the public. To begin with, they continue to make excuses for Dominica’s lack of progress, even though they have not reported on the indicators of progress. Over the last decade and more, the regime has moved from blaming the 2008 financial crisis, to blaming Tropical Storm Erica, then Hurricane Maria and now the COVID-19 Pandemic. Of course, these external shocks to our economy are real, but it is the regime’s failure at economic management and governance in general that has led the country to a point of extreme low resilience. For instance, the administration had ample time and opportunity to establish a reserve fund for addressing unforeseen circumstances and for saving towards undertaking critical but costly infrastructure projects, but they did not have the foresight to do so and they were motivated by re-election considerations rather than by the interest of the country. Such a fund would have allowed the country to deal with extreme climate events and other unforeseen events. The use of such a fund to finance critical infrastructure such as the international airport would have made the country more internationally competitive, make its people more prosperous and ultimately result in greater fiscal capacity. A more prosperous country with reserves set aside would have been better able to deal with all the shocks to the economy that the current ruling regime so eagerly embraces as an excuse to mask their massive failure.
Misleading use of data
In the 2020/21 budget presentation, the Prime Minister uses the International Monetary Fund’s (IMF) GDP growth projections figure for Dominica to say that prior to the COVID-19 pandemic that the government was doing extremely well. He indicated that in January 2020, the IMF forecasted that the Dominica economy was set to expand by, 5.5%, 4.5% and 3.6%, for the years 2020, 2021 and 2022 respectively. In the wake of the COVID-19 pandemic, the IMF has revised its projection to negative growth for 2020. But to conclude that Dominica was doing well based on what the IMF said prior to the COVID-19 crisis is the furthest thing from the truth. First, the IMF’s growth projections would have been against the backdrop of a weak economy reeling from the loss of Ross University, and the impact of Hurricane Maria. In agriculture we are only recovering to a prior weak state. Imaging how it sounds to someone who does not understand or know of the true situation, when the government boasts that export of bananas and agricultural output in general has recovered to pre-Maria levels as appeared in an international publication. Maybe it did; but the level it recovered was a low one and there needed to be creative policies to grow the sector and make it vibrant prior to the impact of Hurricane Maria. The recovery of output to pre-Maria levels is not a feat or something to boast about. Clearly, the government is engaging in trickery to make it look as if the country is doing well. Secondly, the level of economic growth projected by the IMF was possible only if the CBI inflows continued. Prior to the December 2019 general elections, the DFP had warned that CBI inflows would decline and as a result the economy would be devastated as CBI revenue was the only significant thing supporting the economy after the loss of Ross University. We notice from the figures presented by the PM that our prediction was accurate. Indeed, CBI receipts declined significantly and chances are that they may continue to fall in succeeding years - due largely to the corrupt management of the CBI programme by the current political regime. The regime knew that the CBI flows were in trouble, but the IMF may not have been aware of the specifics or the degree of the risk at the time of their January 2020 projections. The IMF had on previous occasions raised concerns over the uncertainty of CBI flows. That risk is clearly coming to past.
Even if the COVID-19 crisis had not occurred, the economy of Dominica would have shrunk with the loss of CBI revenues. If CBI flows continued at 2018 levels, economic growth could have been sustained – through public sector funded construction, continued construction of CBI funded hotel projects and a COVID-19 stimulus package that would have prevented significant private sector deterioration. Further, greater growth could have been sparked if the CBI funds were used to prepare the country to become internationally competitive and to be better positioned to take off once the pandemic has been overcome. Additionally, had $1.2 billion of CBI flows not been misappropriated, there would have been adequate fiscal reserves to sustain the growth of the economy during this COVID-19 crisis years and to enhance its international competitiveness.
Indeed COVID-19 is sparking a massive global economic crisis. Many of our tourism dependent Caribbean neighbours will be greatly affected. Dominica will also be affected; but the Dominica economy was already on the brink of collapse; it just got worse given COVID-19 and the ensuing global economic crisis. Sadly, COVID-19 is an excuse that the ruling regime embraces.
Addressing the challenges that the country was already faced with prior to the COVID-19 crisis, and on top of that addressing the challenges brought on by COVID-19, requires a government that is capable and creative, one that has integrity and legitimacy to govern- which is critical in uniting the country and using all its talents. The ruling regime has none of that.
At this point, let us address the PM’s stated intention to commence activity on the international airport. First, given the many times that the Skerrit-led administration had indicated that the construction of the international airport was imminent, this time around we will wait to see to believe. But notice the weak indications in the budget of Government’s seriousness on this matter. The PM indicated that the properties to be purchased are worth $50.7 million; yet there was little budgetary allowance for this and the impression is this project is imminent! This surely looks like a smoke screen and we will look out for future excuses.
However, the construction of an international airport at this point in time would be a good thing for Dominica and all political parties support that idea. Even if the current administration is actually going to construct the airport this time around, they should not gloat over that since the airport should have already been constructed or construction should have been well on its way if funds that the regime indicated that it had set aside for that purpose were used as intended.
Moreover, the PM indicated that it is the intention for the Chinese to construct the airport; but this must be viewed very suspiciously by the people of Dominica. Fellow Dominicans we must not sell out our country to China. The Chinese are looking out for their own people, which would be expected; but so too, the government of Dominica should be looking out for the welfare of its people. Yet, the 2020/21 budget address does not contain much details in relation to the engagement of the People’s Republic of China regarding the construction of the airport. Will the Chinese be funding the airport construction in addition to constructing it? If so, under what terms and conditions will the financing be provided? Certainly, if the PM were serious, such simple details, among others would have been provided.
As a Dominican people, we must insist on total transparency when it comes to allowing the Chinese to finance and construct the international airport. If loan financing is involved, what exactly are the conditions to the loan? Will it cost Dominica more to allow the Chinese to finance and construct the airport versus other options? Will our people find work through the construction of the airport or will much of the effort be undertaken by Chinese labourers? If the country cannot repay China, then what would be the consequences? Would control of the airport switch over to China if Dominica can’t repay the loan? There is indeed a great likelihood of that given the weak economic leadership of the country by the current regime. We have heard of the experience of other developing countries when they could not repay loans from China with some disturbing cases involving the underlying asset passing over to the control of China as a result. People of Dominica, we must never accept Chinese colonialism or be subjugated to any other country; we must remain an independent people.
Misappropriation of funds
It should be noted that the Dominica Freedom Party has concerns over whether Dominica got good value for money with respect to the construction of the Roseau River Promenade to include a river wall. The project was reported in the budget address to have costed $15.6 million. By comparison, the defence river wall and road defence work undertaken west of Layou bridge (a seemingly more complicated engineering project compared to the Roseau promenade project) costed $5.7 million and was funded by the Caribbean Development Bank. The Dominica Freedom Party will seek further clarification of this seemingly overpriced Promenade.
Facilitating a dynamic Dominica and fostering economic resilience is not just about addressing the direct policies as may be reflected in plans at the sector level, but it is also about addressing the root causes of failure to achieve development outcomes and such root causes cuts across the whole of government and affect its effectiveness. For instance, Dominica will never have adequate finances to make our infrastructure truly resilient if, a good portion of the funds are misappropriated. Furthermore, achievement of outcomes will continue to be less than desired if political considerations keep preventing the hiring of the right people and if existing civil servants are not motivated to perform optimally given the lack of effective political leadership. Additionally, the government won’t be able to raise adequate revenue if investors have no trust in the integrity and capability of the country’s leadership. Such constraints will never be reflected in a budget address by the PM that lacks integrity, but they are among the real issues that keep our country from making great progress.
The Public Sector Investment Programme out-turn of $158.6 million for Fiscal Year 2019/20 was significantly lower than the $389.4 million for the previous fiscal year. The reason for that appears to be the corresponding decline in non-tax revenue which is dominated by receipts under the CBI programme. Yet the PM appears to deceitfully explain that such decline is due to slower work output as a result of COVID-19 social distancing requirement. Clearly the ruling regime is withholding the truth as it related to likely receipts under the CBI programme. There is great doubt that the projection of non-tax revenue receipts (mostly CBI receipts) of $330.5 million for budget year 2020/21 compared to actual receipts of $171.0 million during FY 2019/20, would be attained given the challenges being experienced with the CBI programme that resulted in the lower receipts in FY 2019/20. Much of this challenge has to do with banking challenges related to concerns with the integrity of the CBI programme. Yet the PM is not offering any explanations of the decline in CBI receipts during FY 2019/20 but goes on to project a rebound in receipts during budget year 2020/21. It is clear to the Dominica Freedom Party that the government knows that receipts under the CBI may fall further, but they seem intent on deceiving the people. Chances are that they are already concocting an excuse that they will give to the people once it becomes clear to the people that the government can’t fulfil its promises.
Moreover, recurrent spending for FY 2020/21 is projected to decline. Based on the government’s spendthrift approach when they were washed with CBI receipts, they would have never allowed a decline in recurrent spending if they were confident in receiving the level of CBI receipts they have projected. Prior to the 2019 general elections, the DFP had warned that the government would be forced to cut expenditure, but not because they want to do so, or because they are prudent! It is because they knew that the CBI receipts will continue to decline and a point could be reached where the programme could be essentially lost if the EU takes measures to protect its security. The regime continues to be aware of those risks but they are pretending that all is well, while fine-tuning excuses to be used at the appropriate time. But it is likely that recurrent spending during the fiscal year could fall much more significantly that the budget projections currently show.
Unless there are significant CBI receipts or grants receipts, the capital expenditure programme for the 2020/21 budget year could be even lower than the actual expenditure in the previous year. Therefore, the government’s plan for simulating the economy through infrastructure is likely to fail and unfortunately, the current corrupt government has no robust alternative financing options.
Other specific proposals
Some of the specific proposals contained in the budget presentation are ok in themselves. In relation to these, the real issues are, whether the government can secure adequate financing; whether there are adequate mechanisms in place for effective implementation; whether the right staffing is in place; whether existing civil servants are adequately motivated; the way in which partisan politics causes even projects that can be good ones to fail; and the general lack of confidence in the current regime. Some of the specific proposals offer little to bring real change, though they appear on the surface to give people something.
The truth is that our country needs to be saved from the ruling regime that holds power illegitimately and are clearly out of their comfort zone. We warn that our country is headed to a great disaster and that the bad governance of the Skerrit-led administration will make it worst. Let us seek God for our deliverance.
Dominica Freedom Party