Delaying The Inevitable

No one spends someone else’s money as carefully as they spend their own—which is why it’s so easy for governments to present bloated budgets that inevitably send us deeper into the debt trap.

Twice a year, the Minister of Finance gets to play Santa Claus with our money. Some billions here, a few billions there and before we know it we’ve spent more money than the previous year to get the same results.

Those who believe the Minister’s job is to carefully manage our finances are sadly mistaken. The role of the Finance Minister is to justify the wastage of taxpayers’ dollars and convince gullible minds that the government can simply throw money at a problem and make it disappear.

The TTPS will receive $600m this year and with that, the Minister has solved the problem of ‘underfunding’. Of course, when you get to play Santa Claus with taxpayers’ money, ‘underfunding’ is a very easy problem to solve. The real challenge is solving the problem of crime. No amount of money can solve it but there isn’t an amount that cannot be overspent to at least pretend that something is being done.

The Minister is also “hopeful” that WASA will reduce its dependency on taxpayers. Is this really how the country is being governed? What is hope? We all hope that we will wake up tomorrow. What does ‘hope’ guarantee anyone?

Like the shrewd politician he is, Colm Imbert explains “Economics 101” for those who have never sat in an Economics class—or simply those who do not take the time to think about things. Does anyone really believe that an IMF loan can only be accessed when a country has run out of foreign exchange? If there’s one US Dollar left, do we wait until the government buys a cheeseburger from McDonald’s to then qualify for a loan?

But these are the little lies that the Minister must tell if he wants to make his big lie convincing. Despite the restrictions on foreign exchange over the past six years, we’ve suddenly reached the point where there is “more than sufficient” foreign exchange. Our banks are telling us something different. We’ve spent just over a month on lockdown with the vast majority of retail stores closed. Skybox companies are an essential business. How much foreign exchange has this lockdown alone burned up?

The biggest fear of this administration is the structural adjustments that are usually recommended by the IMF. Getting government to spend less is like getting someone to attend an Alcoholics’ Anonymous meeting—you can’t force them to, but it’s probably best if you do.

A reduction in public sector staffing and wages, as well as reduced expenditure on social programmes, would save us a lot of money—but it would also cost the government a lot of votes. Should the IMF intervene, unemployment may follow but does this necessarily mean that the IMF causes unemployment as so many third world politicians would have their populations believe?

The main cause of unemployment is the government. None of us have the power to make the economic decisions that would attract investors or create a booming economy. For several years, downstream manufacturers in the energy industry have been complaining about the high corporate tax rates and NGC’s monopoly on gas prices. Yet the government prefers to have investors leave our shores than operate NGC like a real company.

Few, if any, state enterprises are profitable. Several loans are taken, not to fund infrastructural development but rather to pay wages in the public sector. In any country, government-run ‘businesses’ operate inefficiently and unprofitably but we have a lot more Ministries and nationalized industries than many countries.

At some point, we’re going to exhaust all the possible avenues to keep up this façade. Retrenchment and salary cuts are inevitable. However, public sector employees could have been absorbed by the private sector had there been a more attractive climate for investors. Start and stop lockdowns over the past year have done the private sector no favours either.

Thirty years ago, there was a massive lay-off in the public sector. Shortly afterward, state enterprises were once again overstaffed. History is bound to repeat itself but only because we continue to ignore the lessons of the past. An IMF loan can be avoided, but our fast-climbing debt cannot.

Whether or not the money is borrowed from the IMF or under a mattress, we are still borrowing money and it makes no difference to our accounts. If the government is trying to avoid IMF-like adjustments, then they are only delaying the inevitable. Of course, we can continue to maintain the façade but it would certainly come at the price of negative economic effects such as inflation. We can’t have our cake and eat it too.