Finance Minister Richard Gibson: “Shotgun budget has a history”POSTED: 02/9/16 7:51 PM
St. Maarten News: Finance Minister Richard Gibson Sr. spoke of “a difficult delivery” and “a shotgun budget” in the central committee of parliament. He explained in more detail how the budget had come about, but he also put it in its historical perspective because the budget has a history.
In 2015, the parliament approved the budget, but it did not get the green light from financial supervisor Cft, “because projected revenue was considered not realistic.” This made it impossible for the government to get access to loans and to finance investments.
“There was an opportunity to amend the budget, but this was not realized,” the minister pointed out. “Advice for changes to arrive at a realistic revenue projection were not followed. Hence the instruction from the Kingdom.”
By September/October efforts were still underway to get the budget approved for a year that was practically ending. “Projected measures to balance the budget proved impossible. Those efforts were abandoned, but the instruction remained,” Minister Gibson said.
The December 15 deadline to meet the requirements of the Kingdom instruction was not feasible, also because the government fell after a motion of no confidence on September 30. “The new government intended to address the financial problems and to comply with the instruction. Up to this day we do not have a 2015 budget approved by the Cft.”
The incoming government asked for an extension of the budget deadline to January 31, while it should have been in parliament in September of last year.
“The 2016 budget will not win any beauty contest,” Minister Gibson said. “This is a shotgun budget. We did not have the time to do this as it normally should be done. It was not possible to get all the information we need to get our policies in line with the budget. We have to make sure that what happened in 2015, does not happen again.”
Minister Gibson expressed confidence that the current draft budget will meet with the approval of the Cft. “The revenue is realistic, because it is based on the average income over the past three years. This will eliminate discussion with the Cft about sources of income it considers unrealistic. From 2010 up to now promises that were made about generating revenue have never been kept. We are not projecting additional income and we have brought down all expenses to the level of realistic revenue. This will remove major criticism by the Cft, that this budget is unrealistic.”
The shotgun budget has obvious consequences. “There is a certain pain in this budget,” the minister said. “The wish lists from the ministries could not be met fully. You cannot spend more than you have and we will only spend additional money after we have produced additional revenue. We gave turned things around and brought expenditures down to the level of real revenue.”
While the budget obviously needs the approval of the parliament, Minister Gibson made clear that it can no longer be business as usual. “We need to make a decision. Do we want to continue with unrealistic revenue projections and keep building up debts? From 2010 until now we have built up 60 million in deficits with that method. That cannot continue. We need to make a 180-degree turn and make sure that our budget is balanced and that we generate income before we spend it.”
Minister Gibson furthermore addressed the payment arrears to social insurance agency SZV and to general pension fund APS. These debts amount to 160 million guilders and based on the Kingdom instruction this money has to be paid back over the next three years.
On Friday, the government signed an agreement with SZV and APS about the sale-and-leaseback construction for the government administration building on Pond Island. The building is sold for 45 million guilders and SZV will invest another 15 million to finish and equip it.
The draft budget has an expenditures ceiling of 438 million and a projected revenue of 458 million – a surplus of 20 million guilders. “If we stick to the budget we will have that surplus at the end of the year. That money is to be paid towards the accumulated budget deficits,” the minister said.
The purpose of the budget is “to comply with the Kingdom instruction and to get an approved budget. “I have no illusion that the Cft could still raise some issues that could throw a monkey wrench in the spokes of the budget,” the minister warned. “But the possibility that this will happen has been minimized.”
The ministry has already sent a copy of the draft budget to the financial supervisor. Minister Gibson expects to receive a preliminary reaction in the course of this week.