Will the economic crisis be reflected in the 2021 budget appropriation? |14 January 2021
As the country gears up for the 2021 budget presentation on January 28, Minister for Finance, Economic Planning and Trade Naadir Hassan yesterday said the country’s financial situation is critical, and it is imperative that this year’s budget allocation is lean and well-thought out so as to offset the projected substantial deficit and drop in government revenues.
According to Minister Hassan, the government presently has no financial resources on account of increased spending over the past year as a result of the Covid-19 pandemic, and is having to borrow to meet its financial obligations. As such, the government has had to seek from the Central Bank of Seychelles (CBS) a credit line of R500 million to honour all of the government’s immediate expenses.
“If we look at receipt of money that enters into government accounts, under normal circumstances, in January around R500 million comes in but the projection for this January is just above R200 million that government will collect. If we look at government expenditure in a year, its expenses budget is about R12 billion and revenue that we will collect, what is projected for last year and this year, is about R7.5 billion, which means there is a R4.5 billion deficit projected on the initial figures for the 2021 budget allocation,” said Minister Hassan.
“I would like to say that the government is continuing discussions on how to reduce the deficit, and you can see that R4.5 billion is quite high. Normally when you have a deficit, you have to borrow. Normally, the government borrows through the domestic market through treasury bills and treasury bonds, but when we look at the financial situation in the country, there are certain limitations for the government to borrow R4.5 billion from the system today,” Minister Hassan stated.
In light of the substantial deficit, the ministry is striving to ensure that the government can maintain its financial obligations and that the economic situation is not further exacerbated. In order to achieve such, it is imperative that there is a comprehensive reform within government and structures in place, cutting back on unnecessary expenditures and better management of the limited available resources, he said.
“As I mentioned, the 2021 budget will be submitted to the assembly towards the end of the month, and there are measures included in the budget. In fact, the Cabinet met for the most of last week and this week to discuss at length the measures to reduce costs and secondly, to explore the potential sources of revenue. Yes there will be measures and the president will outline the most major ones in the state-of-the-nation address, and the measures will be announced in the budget speech,” added Minister Hassan.
From extensive discussions and auditing reports, the largest government expenditures relate to salaries and wages which amounts to R3 billion annually and the procurement of government services. On cleaning services alone government spends R301 million per year and a further R195 million on hiring security personnel for government assets. Housing for expatriates is also appropriated R124 million per year while office rent amounts to R183 million annually.
“There are many examples that I could give where there are inefficiencies and mismanagement. Another example, under State House, when we are conducting the inventory, there are 88 vehicles, but we are not aware of their whereabouts. And of those, some have been abandoned, but we are still paying insurance for them. So we need to carry out a comprehensive exercise to reduce all these useless expenses, because we do not have the resources to afford these kinds of expenses that are not bearing any fruits. So when we are discussing the 2021 budget allocation, these are things that we need to consider cut-backs, as we cannot sustain such expenses, especially when revenue has significantly dropped,” he added.
With regard to revenue collection, Minister Hassan also asserted the need for better management and efficiency within public services at departments and agencies such as the Industrial Estates Authority (IEA) where there are no clear records of leases and repayments, the department of local government where there is gross mismanagement of funds, as well as the Agency for Social protection (ASP) which is allocated a big slice of the budget allocation exceeding R1.5 billion for the 30 or so social and welfare programmes which the agency administers.
While he acknowledged that gainful occupation permits (GOP) do generate some revenues for the state, the current situation calls for priority to be given to the local labour force to ease pressure off the government which has put in place numerous employment schemes aimed at getting more Seychellois in employment, at a significant cost to government.
“There are 15,000 GOP holders in the country, and there is still the pressure to grant more GOPs but at the same time, we have Seychellois on the Unemployment Relief Scheme (URS) and there are some who need to pay salaries based on the Financial Assistance for Job Retention (FA4JR) scheme. If there are employment opportunities within the private sector whereby Seychellois can be employed, does it not make sense to ease the pressure off the government who now finds itself in financial difficulties, and the existing employment given to Seychellois?”
Despite the bleak outlook and uncertainty as to what 2021 will bring, Minister Hassan is of the view that the economy can recover and pick up again, especially now that the national immunisation campaign has officially kicked off in Seychelles, as is the case in other countries across the world.
He further advised that citizens not be overly selective about job opportunities and that those already in employment need to valorise their jobs. Over coming months, re-skilling programmes are to be intensified to cater to those whose jobs have been impacted for placements in other productive sectors. Minister Hassan also advised that citizens show solidarity towards one another, for instance by lowering profit margins.
“I think it is important to have a plan as to how to reopen our economy, as if we continue to remain closed, we will run out of financial resources and I think it is clear in this moment that the only way out of this crisis is the vaccination programme, because Covid-19 is not going on its own. I think we need to have a sense of urgency on the vaccination issue. We cannot take six months to vaccinate, we would die economically if we take that much time. So we need to move fast on vaccination,” Minister Hassan concluded.
Laura Pillay