Gareth Manning, Sunday Gleaner Reporter

Despite attempts by Finance and Planning Minister Dr. Omar Davies during his Budget presentation last Thursday to brush aside perceptions that this year's budget is election driven, analysts have described his strategies to finance the 2007/2008 budget as electioneering and disastrous.

Some say while the strategies appear workable, there is no doubt the Government will have to go the route of borrowing to finance the $380 billion budget to make up for shortfalls, sinking the country further in economic debt.

On Thursday, Dr. Davies outlined a number of tax measures to finance the budget that should yield a total of $216 billion in revenue. These include an environmental levy with a cess of 0.5 percent of the CIF value of all imported goods, which should yield revenue of $1.2 billion. A sharp 20 per cent increase in special consumption tax on cigarettes is expected to yield a further $500 million in revenue.

Concern for the economy

"The present budget is a disaster, as far as I am concerned, for the economy," respected financial analyst John Jackson tells The Sunday Gleaner. "We are entrenching, it would appear, poor financial management by continuing to perpetrate the enormous level of deficit," he continues.

During his Budget presentation, Dr. Davies announced an upward revision in the revenue shortfall target, moving it from last year's figure of 2.5 per cent to 4.5 per cent of gross domestic product, which is a measure of economic performance.

"To close the fiscal deficit or gap is going to cost us $4 billion to $5 billion in interest for the year and that doesn't make any sense," Jackson points out. He chastises the Finance Minister for failing to find the funds to facilitate the raising of the threshold, which would exclude low-income workers from paying income tax. Yet, Jackson charges, Dr. Davies has been able to "mortgage away the future of the country to creditors."

"I am really astounded to hear the Minister of Finance telling me that he cannot afford to increase the threshold for workers because it is going to cost $4 billion, but in a wily nilly way he just gave $4 billion to $5 billion to creditors of the country. Who should get higher priority?" asked Mr. Jackson.

The financial analyst argued further that the budget in general lacked credibility and was being manoeuvred by weak policies and political expedience that pushed the Government's priorities upside down.

Debt too enormous

He said at the heart of the budget should be taxpayers, but the country's debt was far too enormous to allow them to benefit from government spending. Public debt currently stands at $923.1 billion.

"The system has been totally prostituted and is meaningless," raved Mr. Jackson. "The Finance Minister, just as he has been in charge of a sharp devaluation of the Jamaican currency, so has he ruled over devaluing the whole purpose of the budget," he bluntly criticised Dr. Davies' economic strategies.

While not as harsh in his comments, economist Errol Gregory says the budget was, essentially, an election budget.

"[Regardless] of whatever we say, it is an election year, irrespective of how the minister tries to cut it or put a spin on it. In an election year, we don't expect certain things to happen," he opines.

He says while it seems the Finance Minister has reduced expenditure, that cut might seem less when the supplementary budget is tabled later during the financial year.

"I think the budget was just consistent with what we expected," he adds.

Head of the business faculty at Northern Caribbean University, Dr. Audley Eccles agrees.

He opines that the proposed level of expenditure was being suppressed because an election was impending. As such, no new taxes were introduced to the masses. He notes that the platform has been already set for this in last year's budget and this was only a continuation of the Finance Minister's 'no new tax' regime.

Dr. Eccles surmises that borrowing or grants would be needed to fill the holes in the budget, though the Finance Minister spoke little of such financing. Dr. Eccles also says the Finance Minister had once again failed to provide incentives for the productive sector and that was a disappointment.

"This is a common pattern of the budget over the years and the only way the country can get out of this debt trap, is for there to be an incentive for persons to produce and not to rely on the imported items," he states.

See related stories in Sunday Business and In Focus.