Civil wars, insurrections, uprisings,
protests, workers’ strikes, all are rooted in the distribution of wealth. This
is the responsibility of the nation's elected executive; to design, adopt,
fine-tune, implement and revise policies, which would encourage and reward
risk-takers' investment while, maintaining a measured standard of living
through employment and the uplifting of the vulnerable in society. Investment,
Employment and Social Benefits are the opportunities essential for nation
building. However, the nation's capability to earn from its present or
projected revenue streams, increasing productivity, currently carries much less
influence, when compared to the nation's power or ability to borrow and, of
course, service and repay the debt. In other words, it is presently easier to
borrow than to diversify.
News from the previous period
The Ministry of Finance withdrew from the
Nation’s Heritage and Stabilization Fund, for the second time in two years, to
subsidize projected revenue shortfalls, following many of the world’s top, Oil
and Gas, energy producing nations. The Ministry reformed the Value Added Tax
(VAT) regime in 2016 from 15% to 12.5% and included many 0% rated items on the
list of Vatable Products to reduce, the across the board, social impact and promote
better collection. The Ministry revised its annual budget mid-term estimates in
an effort to reduce and align expenditure with projected falling revenues and
minimize borrowings. Extraordinary, one-off, capital revenue continues to be
estimated by the Ministry, which foresees income from settlements or sales of
assets. The Ministry also entered into new borrowing arrangements with local
commercial lenders to consolidate some short term, high interest debt and to
fund its recurrent cash flow needs, and with international lenders to raise
foreign currency debt to strengthen its reserves and stabilize the value of its
local currency.
Charges on Account of the Public Debt refers
to the debt repayment– the repayment of principal amounts in full or in
installment and debt servicing – the interest charges and other fees associated
with the debt. The nation issues three types of debt instruments; Treasury
Bills – short term less than 365 days discount bills to finance Central Bank
operations, Treasury Notes – medium term 1-5 years discount notes to finance
Central Bank functions, and Government Bonds – long term durations for specific
and defined purposes. Such financial instruments can be privately held by
commercial lenders or publicly traded with clear transactional terms.
Pension and Gratuities, responsible for the
administration of Public Service Pension Schemes in accordance with numerous
pension laws, regulations and policies, refers to the nation’s obligation to
its public officers having served and retired with promises of a calculated
income for the rest of their, and in some cases their spouse’s, natural lives.
Within this current period
The Ministry of Finance, with 34.02% of the Fiscal
Policy funding, most of which services and repays debt; Crystallized
Guarantees/Letters of Comfort the original borrowing entity could not repay,
the associated interest and Interest on the overdraft held at the Central Bank,
hopes to reduce this burden and stop the issuance of any new Guarantees/Letters
of Comfort. The ministry continues to work closely with the Central Bank, the
protectors of the local currency and architects of Monetary Policy.
Charges on Account of the Public Debt, with
49.40% of the
Fiscal Policy expenditure, is estimated to grow if revenue remains flat or
declines. The independent National Office of Budgets (NOB), with similar
non-political standing and respect as the Central Statistical Office (CSO),
forecast additional deficits two to three years before traditional revenue
sources recover. NOB forecasts; with expenditure held flat and diversification
efforts starting now, new sources of revenue, to repay debt and debt servicing,
is 6-10 years in the future.
Pension and Gratuities, with 16.58% of the Fiscal
Policy funding, obligated to be paid on a timely basis, must undergo some reform
to improve accuracy and efficiencies.
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.
