Monday, 11 November 2013

Fiction or Troubled Reality

Grenada’s Home Grown Structural Adjustment: Fiction or Troubled Reality

Prime Minister Dr. Keith Mitchell delivered his much anticipated National Address on October 30th 2013. The address started off with self characterizing reference as the “Chief Public Servant” a term never before used in his political career. One wonders if that was a form of psychological preparation in anticipation of the pay hike for ministers based on public sector wage settlement

In my previous commentary prior to the address, reference was made to the Prime Minister’s strategy of “Drip Disclosure”. The speech proved beyond reasonable doubt that the assessment is and was correct.

The main objective of the address was to announce a major policy reversal of reduction in the Income Tax Threshold. Undoubtedly, this would have been a painful moment for Dr. Mitchell as the promise to raise the threshold, if elected, in 1995 was pivotal to his electoral victory. The rest of the speech was pretty mundane.
Observers say that this measure is only the “tip of the iceberg” as the rumored increases in Property Tax was not addressed. User fees are being addressed on the stealth. One such example is the proposed enactment of an embarkation tax by Parliament which will result in an increase from $1.00 to $20.00 for persons boarding ships in Grenada travelling to other destinations.

The Prime Minister confirmed that the “Letter of Intent” was not finalized as he again reiterated that the austerity programme is “Not an IMF programme” and it is a “programme of Grenadians for Grenadians”.
He went on to gloss over as to the real reasons why the country is in this predicament by saying that “Grenada’s Public Debt includes the borrowings of all Governments”. This statement is as factual as it is deceptive. He sought to distract the public gaze from the fact that the crux of our debt problems is the borrowings contracted at commercial rates under his watch. “We can affix blame or fix problems” he argued, however the two are not mutually exclusive.

The Permanent secretary in the Ministry of Finance, in a presentation to the Social Partners, said that a national consensus is a “Critical Success Factor” for the austerity programme. Can Dr. Mitchell provide the requisite leadership required, at this time, to achieve this? The approach to governing the country since his reelection does not help. The severing of thousands of persons who they believe are non NNP supporters within the state sector has wreaked havoc on the income base of many families. The attempt to link success or failure of the austerity measures to the resolution of the wage bill issue has infuriated some trade union leaders. This thinly veiled attempt to scapegoat the unions is not a way to build consensus.

On Friday last, the nation learnt that the Cabinet approved a 6% pay hike for Ministers of Government. My initial reaction to the news was one of disbelief. Impossible, I thought. I had just read in the Prime Minister’s address where he pointed out; “I ask the Labour Unions to exercise restraint in respect to wage demands”.
The pay rise for the ministers comes against the back drop that, on assumption of office , the NNP reversed the 5% wage reduction for ministers which was implemented by the Tillman Thomas led administration. The reaction of the unions is understandably hostile as the call for sacrifice should apply to all, our leaders included. This action has the potential to derail the process of engagement with the social partners. Reports indicate that this measure does not enjoy majority support.

The June 2013 Economic and Financial Review which was conducted by the East Caribbean Central Bank  indicates that government’s decision to suspend interest payments as a result of the declared debt restructuring intent is the main reason for the reduction in expenditure in the first half of the year. This means that the government has not paid $7.3 million of interest payment on debts which continues to accumulate. At this time this writer does not know if there are any applicable penalties for default and or late payment of our debt obligations.

The “Home Grown “package is still to be completely defined and time is running out. The budget is expected in the next few weeks. We do not know whether the measures to be implemented will allow for a significant turnaround in the next three years. Drip disclosure will only add insecurity and undermine confidence. We the people will have to wait for the next national address to know finally, what will be the new property tax rate and which user fees will be increased.

There is no doubt that sacrifice is required to get the country out of the current economic mess. Our leaders must do what is right and they must lead by example. Every citizen must contribute to the national effort. Why must public servants, wage earners over $ 3000 per month and businesses bear the brunt of the austerity measures? If the lowering of the income tax threshold is a significant component to government’s revenue raising initiatives, then why should we not use the experience of the Debt Service Levy or for that matter the National Reconstruction Levy?

Moreover, the nation accepts that everyone should make a sacrifice, but on the surface it seems that less than 20% of wage earners will feel the direct pinch on their pay packets. Is that fair or is it that equity is not in active consideration? Dr. Mitchell is acutely aware of the numbers game. He seems hell bent to his political base, largely believed to be low wage earners, from the austerity measures.
Towards the end of the address, the prime minister said that “When I took the oath of office, I took a solemn pledge to put Grenada first”. It is high time that he does.

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