Substantial borrowing still required, notes financial secretary

Admitting that the government is behind where it thought it would be in the budget, Acting Financial Secretary Marlon Johnson said yesterday the substantial borrowing needs to continue over the medium term, despite the government’s fiscal strategy which involves $200 million in expenditure cuts and new projected streams of revenue.

In addition to implementing the gaming tax, which the Ministry of Finance projected could add between $10 million and $15 million to government revenue, the government is also seeking to raise fees and fares at state-owned enterprises in an effort to make them more self-sufficient, thereby needing less government funding.

“The fact that we’ve had a slower than anticipated start to the economy, the fact that we’ve had the situation where we had to enhance restrictions that slowed down economic activity throughout the country, that has meant that we’re behind where we had thought we’d be in our budget,” Johnson said during a virtual press briefing on the 2020 Fiscal Strategy Report.

According to Johnson, that means that despite budget cuts more extensive borrowing is on the table.

The government’s borrowings totaled $1.5 billion during this fiscal year.

“The reality is, the government anticipates that the growth next year will be around 2.2 percent. And while that’s positive it means that we would still not get to the point where the economy has recovered fully. So in order to ensure that government services can continue to work as they have been, to provide investments in small business, to do all that government needs to do, you still have that gap that needs to be maintained,” Johnson said.

“That will decrease over time, as per the report, as the economy reflates. But certainly, in the near term and given the precariousness of the recovery, there still will be a requirement based on what the Fiscal Strategy Report would have said for substantial borrowing. And one of the advantages of having a Fiscal Strategy Report and a fiscal strategy is that you can plan for this in a very transparent way.”

On the expenditure side, the government is seeking to cut up to $200 million – $100 million from recurrent expenditure and another $100 million from capital expenditure.

Johnson admitted that the task of curtailing expenses throughout the various government agencies will present a challenge for the Ministry of Finance. However, the ministry is going through the budget with a microscope and it “will find the savings”.

“What the government is intending to do on the capital side is really to the extent possible postpone those non-essential capital projects and larger projects which can be deferred. The Ministry of Finance is working with all of the agencies to identify specific areas for reductions. All of this is to try and bring us back toward our fiscal target of no more than 1.3 billion in deficit,” Johnson said.

“That’s work that’s in progress right now with the Ministry of Finance. Our budget analysis teams are working with the various agencies. We’re looking for discretionary programs. There are a number of programs that the government runs, there are a number of subventions that the government makes to the state-owned enterprises and authorities. So we’re really going through that with a microscope and seeing what can be postponed and what can be deferred.

“It’s very, very taxing and difficult given that we started the year with a scaled-back budget, but I can tell you that my colleagues understand the precariousness of where we are and so we will find the savings. It’s just going to take a bit of extra work. And as that is articulated as we go into the midterm budget we’ll have a much clearer picture as to the specific areas that will be targeted and focused on.”

Johnson said the ministry is also finalizing plans to implement a tax reform committee that would explore new ways of generating government revenue.

Minister of State of Finance Senator Kwasi Thompson stressed government has no immediate plans to increase taxes.

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