Government makes savings in its expenditure for the first six months of 2022   |22 September 2022

• Savings to be re-allocated through supplementary budget

The government has recorded a fiscal surplus of R580.5 million or 2.1% GDP, compared to a R693 million deficit or 2.5% projected for end of June 2022.

The Minister for Finance, National Planning and Trade, Naadir Hassan, made the statement yesterday morning before the National Assembly, when presenting the  financial performance for the first six months and budget review for the remainder of the year.

“This means we have been able to collect more revenue than what was forecast and spent less than expected,” explained Minister Hassan.

He added that following the review done with the participation of other ministries, departments and agencies, the government has been able to reduce its spending and save on certain projects or programmes that will not materialise this year.

Half of the savings will now be redistributed to government entities through a supplementary budget.

“We have to carry out a budget re-allocation and government is requesting a supplementary budget in line with Section 154(6) of our constitution, for a sum of R472,807,401.81. This will be financed by a reduction in budget expenditure for a sum of R887,451,324.04,” said Minister Hassan.

This means a reduction of R414,643,919.23, in the 2022 budget.

According to Minister Hassan, government is making the following requests, which includes the sum of R1.26 million under salaries related to additional support for the Intelligence service, and a transfer from the Fair Trading Commission (FTC) to the judiciary, based on its new function under the new law.

However, a sum of R63.9 million under salaries for ministries, departments and agencies is being cut as recruitment for those government entities did not take place during the first six months.

Under ‘Goods and Services’ a sum of R279.7 million is being recommended as supplementary budget for the following entities, namely: Department of Defence, for R5.0 million to cover deficit in electricity and fuel expenditures; Department of Information, Communication Technology for a sum of R9.3 million for the e-ID platform and management system for e-passport; Department of Police, a sum of R10.5 million for additional resources for homeland security; Department of Agriculture, the sum of R73.1 million to cover expenditures for farmers’ subsidies.

According to Minister Hassan, the present scheme is not sustainable and it was being reviewed by the department and other stakeholders.

The Anti-Corruption Commission is receiving a sum of R63 million that will go towards additional resources, for investigation work.

The Land Transport Agency is expected to receive a sum of R4.2 million to maintain various infrastructure such as ‘crash barriers’.

A supplementary budget of R109.6 million is being proposed for the Health Care Agency.

“The agency needs R123.6 million to finance additional resources under Good and Services and the balance, which is around R14 million, will be done through virement under salaries. Part of the supplementary budget will be used to purchase a new MRI, which we estimated will cost around R50 million,” explained Minister Hassan.

The Health Care Agency will also be spending on:

• Dialysis treatment for R25 million

• Security service for R8.5 million

• Additional repair for R12.7 million

• Fire safety equipment at a sum of R3.8 million

• Electricity at a sum of R8 million

The supplementary budget also makes provision for the sum of R3.99 million for the election of Mayor of Victoria.

Under Capital projects, a sum of R48.6 million is being proposed and there is also a budget cut of R736.7 million. According to Minister Hassan, these are projects that will not be completed this year and those that will not materialise this year, which are mostly projects financed under grants.

Supplementary budget will also go towards the temporary measures being implemented by government where there will be a R48.7 million expenditure this year.

“However, because of savings made under other government programmes, we are requesting only R13.9 million in the supplementary budget,” he added.

There is also a sum of R123.75 million under subsidies for public enterprises namely SPTC, which will get a total of R11.1 million to cover this year’s operation cost, due to an increase in fuel, as well as Air Seychelles.

It should be noted that the National Assembly approved a budget worth

R10,091,651,146 for 2022. The government had predicted a fiscal deficit of R232.1 million  or 0.81 percent in GDP.

“Based on our performance for the first six months and new projection for the year, we are expecting a fiscal deficit of R256.4 million or 0.91% of our GDP which represents R24.3 million more than the 2022 budget,” said the minister.

In his statement, Minister Hassan also highlighted that the tourism sector was doing better than what was forecast. The government had predicted a 7.9% GDP for 2022, however with new development in the sector, this has been reviewed to 10.8%.

He said all indicators show that there could be a 75% increase in visitor arrival this year compared to 2021.

For the first six months of 2022, revenue in the sector has increased and reached US $257 million compared to the same period last year when it was US $87 million.

With regard to government debts, at the end of June 2022, it stood at R17.2 billion or 61.9% GDP, compared to the end of 2021 when the total debt was R18.9 billion or 76.9% of GDP.

“We recognise that we will be receiving loans during the fourth quarter of the year so we forecast that our debt will be 66.5%,” added the minister.

As for taxes and non-taxes, he said government had forecast an increase of R164 million compared to the initial budget. However, there was a R20 million reduction in tax revenue compared to the 2022 budget.

“We had forecast an increase in tax revenue that is R130.3 million, mainly due to collection of VAT, due to a growth in the tourism sector. Our forecast for business tax has increased by R9.7 million and we are still collecting CSR tax. But after our audits, we are expected to collect a sum of R7.1 million,” explained Mr Hassan.

The minister said it has also seen a reduction on collection of taxes mainly on salaries and excise tax, which has decreased by R57.7 million and R90.8 million respectively.

However, with regard to non-tax, government has seen an improvement by a sum of R184 million for the first half of the year as it collected R262.2 million in dividend from Nouvobanq and R40.6 million from ‘Seychelles Cable System Company’.

The minister’s statement was followed by questions and clarifications from members of the National Assembly.

Motion for a supplementary budget will be presented next week and it will be followed by a debate by the National Assembly.

Patsy Canaya