Budget Balancing

Many intelligent minds express a view of balancing a budget; is to borrow to fill the revenue shortfall, this is wrong and comes from the cash accounting that is employed by the Auditor General office. The term budget balancing is very much about reducing expenditure to match, real income, proven revenue estimates. Hence, if revenue is predicted to fall by 10% from the last period, the plan must not be to borrow but to cut expenditure by the same 10% in the current period. Noting that, borrowing adds fees and interest charges to further increase the expenditure, so the borrowing requirements, in this example, can easily be 12 to 15% to achieve the desired balance.

Therefore, to balance the budget the revenue must firstly be examined, knowing that, the further back in history one looks and the wider view one takes of economic conditions relating to that time period is the better, with which one can predict the future. The expenditure is mostly seen as controllable. This is not the case, in practice, for it is basic human nature to resist change, especially negative effects on one’s current lifestyle.

Forecasting TOTAL INCOME (a): From the last Actual audited figures to the last Revised Estimates showed that year on year real income declined by (21.27%), and required TOTAL FINANCING of 30.11% of expenditure to balance. While, in this current period published Estimates, year on year real income is expected to grow by 5.58% but still short by 17.28% of estimated expenditure, to achieve balance. This is mainly due to economic mismanagement and the rippling effects of lower international commodity prices and if trends continue, TOTAL FINANCING of 14.45%, 10.99%, 4.91% of planned expenditure will be required to balance the next three budgets. By utilizing diversification, short and medium term, strategies, income is projected to equal or surpass estimated expenditure, resulting in a minimum average annualized growth of 6.68% by the 10th year.

Estimating TOTAL EXPENDITURE (b): From Actual to Revised Estimates had to address public officers' salary increases, back pay, contractual account payables and other cash flow issues, and adjusted estimates down by (10.06%) year on year. While, in the current Estimates a small margin for adjustments (1.51%) is allowed to stabilize, year over year, mainly through refinancing strategies, prepare for unforeseen circumstances and to achieve balance. Targeting managed inflation annualized at 2.20% over the next 10 years.

The resulting NET SURPLUS/(DEFICIT) (a-b): In the last Actual audited figures, this was calculated at (9.15%) of actual expenditure. In the last published Revised Estimates, it was (20.47%) of expenditure in the same period, while, in the current Estimates it is (17.28%) of expected expenditure. And in conclusion, as previously stated, if global and local economic trends continues, deficits of 14.45%, 10.99%, 4.91% of expenditure are predicted for the next three years, but annualized surpluses of 12.50%, in modest growth, are expected over the next ten years, most of which is scheduled to retire debt, with little to no adverse effects on the wider population as targeted achievements are clearly and continuously communicated and celebrated.

Rationale

T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.