In the wee hours of the morning on Wednesday the prime minister made his long-awaited contribution to the debate on the First Supplementary Estimates for fiscal year 2009-2010, in which he laid out for the nation the perilous state of the country's financial situation.

In making his case, Golding did not say anything that was not already known. The key point in his presentation is that projected revenues will not cover the cost of debt repayment. The Government expects to raise $310 billion in taxes, whereas debt repayment is estimated at $325 billion during the current financial year. There are limited options for further tax measures, as despite the fact that the expenditure estimates have increased by a further $6 billion, the new tax measures for increases in departure tax and tax on telephone calls and instruments will only yield a further $1.7 billion. As a result the deficit is expected to balloon to 8.8 per cent of gross domestic product.

Revenue collections

Already, for the first five months of the financial year 2009-2010, revenue collections are running $10.5 billion below projections. And this is against the background that the revenue shortfall for the previous fiscal year was $29 billion below target. As such, any detailed analysis of the budget presented in April 2009 should have shown that the revenue estimates were significantly overestimated, while the expenditure targets were grossly underestimated.

At the heart of the Government's dilemma is the fact that the two largest calls on the Budget are debt repayment and wages and salaries. Golding, therefore, indicated that the only way out of our present situation is to reduce the size of government (including public entities outside of the Consolidated Fund), and to try to reduce interest rates.

Given the lack of specifics on the way forward, the prime minister's presentation represents a basic introduction to the problem. It is the presentation that he should have given in December 2008, and the last nine months should have been spent having meaningful discussions with the social partners - the trade unions and the private sector.

Concrete directives

Instead of setting up another task force at Jamaica House, the following are examples some of the types of concrete directives that one expected to hear outlined in the prime minister's presentation:

"The boards and executive management teams of all of the public financial institutions have until December to come up with new consolidated structure that would see the merger/elimination of several of the entities leading to a smaller, leaner structure. Bank of Jamaica, the Financial Services Commission, JDIC, Development Bank of Jamaica, and Ex-Im Bank need to look at functions that are currently duplicated, where synergies can be effected, etc. Set a target for staff cuts, organisation amalgamation, etc.

"All agencies dealing with poverty alleviation, social intervention, etc., should also come up with a plan to mergre their functions by December. If not, they have to present a compelling argument as to why they should remain separate.

"No vehicles being purchased using public funds with a cc rating greater than, say, a Vitara. No car loans to public officers and other officials, with immediate effect for more than the cost of a new Vitara (S amount) - in other words, set limits that can not be breached. This goes for all heads of agencies, ministers and permanent secretaries.

"Arrears build-up with the public utilities in all public bodies should be monitored on a monthly basis by the Ministry of Finance. All utility companies will be asked to send summary statements of monies owed each month by all state agencies to the Ministry of Finance. Similarly, all permanent secretaries will be required to send monthly statements of other outstanding payables to the Ministry of Finance."

This list is by no means exhaustive. However, these types of directives would have centred the cost-cutting exercise on a set of a meaningful objectives, with a time deadline that while already being late, would at least allow for some decisions to be taken by Cabinet prior to the final casting of the budget for the next fiscal year. As it now stands, the first calls for the Budget exercise for financial year 2010-2011 have already been sent to the various ministries and agencies, without the benefit of the technocrats knowing the direction of the government in terms of the yet-to-be shared Medium Term Economic Programme.

Shortfall

On the latter matter, the silence of the prime minister and the minister of finance on providing any details about the Medium Term programme was deafening. Nor was any firm indication given as to how the Government intends to finance the shortfall in the Budget for the rest of the fiscal year.

As it currently stands, the Budget numbers presented in the First Supplementary Estimates are very shaky, and the Government will undoubtedly have to present a Second Supplementary Estimates before the end of the current fiscal year.

There are great holes in the current Budget.

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